Ask the Experts February 16, 2015

(b)lines Ask the Experts – ACP Testing After a Merger

“Our hospital merged with another private tax-exempt hospital last year, and both hospitals are now part of the same controlled group for retirement plan testing purposes.
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“We have confirmed that we are eligible for the transition rule where we are deemed to satisfy the 410(b) coverage and 401(a)(4) general nondiscrimination testing through 2015 (the year following the year of the merger).This transition rule is of great help to us, since the retirement plans of the hospitals have disparate benefits and it will take some time to reconcile this issue.   

“However, is the average contribution percentage (ACP) testing subject to the transition rule as well? Our hospital sponsors an Employee Retirement Income Security Act (ERISA) 403(b) plan with employer match contributions, and we normally run the ACP test for the matching contributions each year, since we are not a safe harbor plan. The hospital with which we are merging does not have a match. Other than the change in the name of the plan sponsor to reflect the merger, nothing has changed in our 403(b) plan as a result of the merger. How is ACP testing affected, if at all? The merger took place mid-year, so do I need to perform two separate tests. Our plan year is calendar.” 

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Michael A. Webb, vice president, Cammack Retirement Group, answers:

Excellent question; and the Experts are glad you are paying attention to the often-overlooked impacts of mergers and acquisitions on retirement plan nondiscrimination testing. The answer to your question lies in the differences between ACP testing and 410(b)/401(a)(4) testing. Unlike 410(b) coverage and 401(a)(4) general nondiscrimination testing, which takes into account all of the retirement plans of a controlled group, ACP testing is plan specific. Thus, the plan formulas of other hospitals in the controlled group have no impact on the ACP testing the plan of a specific hospital within the controlled group. Also, since  ACP testing is plan specific, the transition rule for mergers and acquisitions would also not apply, since that transition rule provides relief for controlled group testing  and ACP testing does not factor in other members of a controlled group.

Thus, you should proceed with normal ACP testing for the full 2014 plan year. For more details, see Revenue Ruling 2004-11.   

Thank you for your question!

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.
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Benefits February 13, 2015

Providing Health Care to a Constantly Changing Work Force

Like employers in other industries, production company employers in the entertainment industry were forced by health care reform to consider offering health care benefits to employees or pay a penalty, but the work force is complicated.
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Entertainment Partners (EP) is a provider of management resources to production companies in film and television.

Joe Scudiero, senior vice president and chief labor counsel for EP, located in Burbank, California, explains, “We are a co-employer for production workers we payroll in the industry. As production companies rely on us for compliance support, we wanted to assist in providing health care insurance for the nonunion employee segments that have previously not received coverage. But the production companies are really the plan sponsors for Employee Retirement Income Security Act [ERISA] and Patient Protection and Affordable Care Act [ACA] purposes.”                     

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He adds that many production companies are established only for a limited period of time, and there is no ongoing infrastructure for them to invest in or administer health insurance. In addition, production workers constantly move from one job to another; they could be in a job for weeks, a day, several months or a year. EP is a co-employer for tens of thousands of nonunion employees and decided to provide a program for production companies to use to meet their ACA obligations.

It is easy to see why offering health insurance in this industry is complicated. But the ACA’s mandate for employers to provide affordable insurance to a substantial number of full-time employees forced EP to look for options that would work. “Besides wanting a solution to facilitate the offering of health care benefits for production companies, we wanted a solution that would be portable for workers,” Scudiero tells PLANSPONSOR. EP realized a traditional group plan offering would be inadequate, so it worked with a benefits broker to build a private exchange from which employees could choose health insurance.

The private health care exchange was custom built for EP and is named EP Cares. An advantage for employees is that if they leave one production company and go to another that has subscribed to EP Cares, their health benefit may be maintained. Also, if an employee leaves for good, he may choose to continue to have insurance through the same carrier at employer group rates under COBRA (the Consolidated Omnibus Budget Reconciliation Act).

Once the private exchange was built, EP looked for a firm to partner with for administration of the benefit. Scudiero says PlanSource, provider of a cloud-based health exchange and benefits engagement platform, was most attractive because its platform could handle the uniqueness of the production industry. PlanSource began supporting EP’s health care exchange as of January 1, 2014.

Shannon Osborne, manager of implementation at PlanSource in Orlando, Florida, notes that the platform is branded for EP; an employee logs on to the EP Cares URL, and when he is done using the platform, he receives confirmation of the health care benefit selected. Scudiero adds that PlanSource’s enrollment platform also offers benefit selection help; an employee logs in, completes demographic information and gets suggestions for which plans would meet his situation.

Nonunion production company employees now have health benefits that meet their needs, and production companies served by EP have a benefit offering that satisfies requirements of the ACA. “From my standpoint, it was mandated by law, but we discovered that the industry wanted it, and many companies felt it was the right thing to offer competitive benefits to nonunion workers,” Scudiero says. “Thousands of workers now are eligible for health insurance who previously didn’t have insurance.”

 

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