Happy New Year and Welcome to the January Issue of Fidelity's Form

Happy New Year and welcome to the January issue of Fidelity s Regulatory Legislative Brief* This month to roll or not to roll a look at new notices focused on providing explanation to plan participants about their rollover options. Next President signs a new law allowing for extensions of the COBRA subsidy. The Department of Health and Human Services issued an interim final rule to conform the HIPAA enforcement regulations to the statutory revisions made by the Health Information Technology for Economic and Clinical Health Act. Finally a number of updates from the IRS including guidance under IRC Section 409A the 2010 covered compensation tables and an extension of the remedial amendment period for some PPA requirements. To Roll or Not to Roll. New Notices Help Participants Answer That Question* In September 2009 the Internal Revenue Service published Notice 2009-68 containing new safe harbor explanations regarding rollover options for participants and beneficiaries who will be receiving eligible rollover distributions. Extension of COBRA Subsidy On December 19 2009 the President signed into law the Department of Defense Appropriations Act 2010 H. R* 3326 allowing for a two month extension of the eligibility period for subsidized COBRA coverage and a six-month extension of the maximum duration of the COBRA premium subsidy period. HITECH Act Enforcement Interim Final Rule On October 30 2009 the Department of Health and Human Services HHS issued an interim final rule to conform the HIPAA enforcement regulations to the statutory revisions made by the Health Information Technology for Economic and Clinical Health Act HITECH Act. IRS Issues Guidance Under IRC Section 409A The Internal Revenue Service has issued guidance on the application of Internal Revenue Code section 409A to changes made to nonqualified deferred compensation plans designed to comply with an advisory opinion of the Office of the Special Master for TARP Executive Compensation* 2010 Covered Compensation Tables Issued The IRS issued Revenue Ruling 2009-40 containing tables of covered compensation under Internal Revenue Code section 401 l 5 E for the 2010 plan year. IRS Extends Remedial Amendment Period for Some PPA Requirements The IRS extended the deadline for amending qualified retirement plans to meet certain requirements of the Internal Revenue Code that were added by the Pension Protection Act of 2006 PPA 06 and subsequently modified by the Worker Retiree and Employer Recovery Act of 2008 WRERA. For plan sponsor use only. The content of Fidelity s Regulatory Legislative Brief is not intended to be or provided as legal advice. Plan sponsors and employers should consult with legal advisers. Fidelity Brokerage Services LLC Member NYSE SIPC 900 Salem Street Smithfield RI 02917 Copyright 2004-2010 FMR LLC All rights reserved* 540703. 1. 0 By Amy Wainio Eligible Rollover Distributions. The Notice contains new safe harbor explanations that plan administrators may use to satisfy the requirements under Internal Revenue Code 402 f to provide participants and beneficiaries who will be receiving eligible rollover distributions a written easily understood explanation of The principal purpose of the changes in the new explanations is to simplify the presentation and description There are two explanations in the Notice - one for distributions from a designated Roth account and one for distributions that are not from a designated Roth account - but much of the content is the same. The Notice does not require plan administrators to use the safe harbor explanations. A plan administrator or payor can satisfy 402 f by providing an explanation that is different from a safe harbor explanation as long as it contains the information required by 402 f and is written in a manner designed to be easily understood. Previous safe harbor explanations under Notice 2002-3 appropriately modified to reflect statutory changes since that notice was published ceased to be considered safe harbor explanations as of January 1 2010. Fidelity has updated the standard 402 f notices it distributes on behalf of plan administrators to incorporate the simplified presentation and description of rollover options and to allow efficient delivery to your plan participants and beneficiaries. Amy Wainio is a director with PWI Risk Compliance at Fidelity Investments. By Christine Clauson H. R* 3326. Section 1010 of the Act amended the American Recovery and Reinvestment Act of 2009 ARRA and allows for the following A two-month extension of the eligibility period for subsidized COBRA coverage from December 31 2009 to February 28 2010 and A six-month extension of the maximum duration of the COBRA premium subsidy period from 9 months to 15 months. Because the extension was enacted after the subsidy ended for some individuals the bill addressed the issue of retroactivity of the subsidy. Individuals who dropped COBRA coverage between their original subsidy end-date and the date of enactment can make retroactive premium payments within 60 days from the date of enactment or if later 30 days from the date of notification to have their coverage reinstated* Those individuals who paid the full COBRA premium should be reimbursed the amount in excess of the subsidized premium* Employers can apply the amount as a credit against future COBRA premiums as long as the amount is used within 180 days of receipt of the full COBRA premium* If that is not feasible then a refund check should be processed for the difference within 60 days. As was the case with the original subsidy the extension contains significant notice requirements. A notice describing the new provisions must be sent within 60 days of the date of enactment to any individual who was assistance eligible or who experiences a termination of employment event on or after October 31 2009. Information about the new provisions must also be sent to individuals who had a COBRA qualifying event after the date of enactment and should be mailed consistent with the general timing requirements for COBRA notices. In addition a notice describing the new provisions and the right to make retroactive payments to have coverage reinstated must be sent to any individual who was dropped from coverage for failure to make payment or who paid the full COBRA premium* The new legislation is effective immediately. For your convenience attached is a link to the provision http //frwebgate. access. gpo. gov/cgi-bin/getdoc*cgi dbname 111congbills docid f h3326enr. Txt. pdf By Lois Simpson The HITECH Act which was enacted as part of the American Recovery and Reinvestment Act of 2009 ARRA includes provisions that increase the civil monetary penalties for violations of HIPAA s privacy and security rules. The HITECH Act established four categories of violations that reflect increasing levels of culpability four corresponding tiers of penalty amounts and set a maximum penalty amount of 1. 5 million for all violations of an identical provision* In addition the HITECH Act eliminated the previous bar on the imposition of penalties if the covered entity did not know of and with the exercise of reasonable diligence would not have known of the violation* Such violations are now punishable under the lowest tier of penalties and provided a prohibition on the imposition of penalties for any violation that is corrected within a 30 day time period as long as the violation is not due to willful neglect. These revisions not only significantly increase the penalty amounts the Secretary may impose for violations of the HIPAA rules but also encourage prompt corrective action* The interim final rule which is effective November 30 2009 amends HIPAA s enforcement regulations to incorporate the HITECH Act s revisions that are currently in effect. However the interim final rule specifically does not make amendments with respect to those enforcement provisions of the HITECH Act that are not yet effective. Provisions. The remaining provisions which have yet to become effective will be addressed in the next few months in forthcoming rulemakings. Fidelity will continue to track any new regulatory guidance and provide updates as appropriate. http //www. Hhs. gov/ocr/privacy/hipaa/administrative/enforcementrule/enfifr. pdf Lois Simpson is a director with the Risk and Compliance group at Fidelity Investments. December 11 2009 provides that a delay or acceleration of the payment of nonqualified deferred compensation to comply with such advisory opinion pursuant to the Emergency Economic Stabilization Act of 2008 and the regulations thereunder will not cause the plan to violate the requirements of 409A. One example provided was the conditioning of a payment on satisfaction of a requirement related to the Troubled Asset Relief Program TARP such as repayment of the financial assistance granted under TARP. Notice 2009-92 was published in IRB 2009-52 on December 28 2009. for each year in the 35-year period ending with the year in which the employee attains social security retirement age. For purposes of determining covered compensation for the 2010 year the taxable wage base is 106 800. Defined benefit plans whose formula is integrated with Social Security will want to make sure the new tables are used to determine contributions and permitted disparity. Certain requirements of the Internal Revenue Code that were added by the Pension Protection Act of 2006 PPA 06 and subsequently modified by the Worker Retiree and Employer Recovery Act of 2008 WRERA. Notice 2009-97 released on December 11 extended the deadline for the following requirements The deadline for amending single-employer defined benefit plans to meet the requirements of 401 a 29 and 436 relating to funding-based limits on benefits and benefit accruals under single-employer plans meaning of 411 a 13 C to meet the requirements of 411 a 13 other than 411 a 13 A and 411 b 5 relating to vesting and other special rules applicable to these plans and 401 a 35 E to meet the requirements of 401 a 35 relating to diversification requirements for certain defined contribution plans. The extension is until the last day of the first plan year that begins on or after January 1 2010. The extension does not affect the original PPA deadline i*e* the last day of the first plan year that begins on or after January 1 2009 for any PPA related change that is not specified in the notice.