KEYWORD:

EMPLOYEE BENEFITS MEMORANDUM

Date:	November 22, 1996
Re:	Further Employee Benefit Issues

As a follow up to our earlier summary on the Health Insurance Portability and Accountability Act of 1996, we are writing to alert you to two additional developments in the employee benefits area that are related to, or have grown out of, the new employee benefits laws that President Clinton signed in August.

1. First, before the ink was dry on the new health care legislation, Congress passed -- and the President signed -- still another law affecting employer sponsored health benefit plans.

   The new law is the Veterans Administration-Housing and Urban Development appropriations bill. The effective date of the employee benefits provisions was originally going to be January 1, 1997. But the appropriations committee delayed the effective date of the changes until January 1, 1998. The reason for this delay? According to The Bureau of National Affairs, Inc. (BNA), the appropriations committee recognized that the employee benefits provisions of the bill were "outside [its] expertise and jurisdiction." So the committee extended the effective date to allow other committees time to study the changes before they become law.

   We leave any editorializing about this exercise of legislative wisdom and restraint to you.

   So what are the changes?

   • Beginning January 1, 1998, employer-sponsored health plans must allow 48-hour hospital stays for normal deliveries of newborn children and 96-hour stays for cesarean section deliveries. There is a similar state law that went into effect in Alabama as of September 24 of this year, but as to self-insured employers the state law should be preempted by ERISA.
   • Beginning January 1, 1998, employer-sponsored health plans may not apply different annual or lifetime caps with respect to mental and nervous benefits than the plans apply with respect to medical and surgical benefits. Note that, for this purpose, mental and nervous benefits do not include benefits for substance abuse or chemical dependency. The mental health parity rules also do not apply to employers who, on average, employed 50 or fewer employees during the preceding year. Finally, it should be noted that there is a sunset provision to these changes, which will no doubt be extended, of September 30, 2001.
2. Second, on October 7 the IRS issued a notice and model amendment that employers may adopt in order to bring their plans into compliance with the Uniformed Services Employment and Reemployment Rights Act of 1994 ("USERRA"). The purpose of USERRA is to protect veterans from loss of benefits during periods of absence related to active duties in the armed services. Although USERRA became effective as of December 12, 1994, qualified plans were given until October 13, 1996, to begin complying, retroactively, with the new law. Although the IRS model amendment need not be adopted until 1998 -- along with any other changes required by the Small Business Job Protection Act of 1996 -- the point to keep in mind is that your qualified plans are now required to have complied with USERRA from December 12, 1994, forward.