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Cybersecurity & Employee Benefit-Plan Fiduciary Duties: Going Beyond HIPAA
It seems as though we hear about new cybersecurity issues every day — from traditional hacking incidents to the increasingly sophisticated phishing, malicious apps and websites, social engineering, and ransomware attacks. Employee-benefit plan sponsors likely have a fiduciary duty to ensure participant information and plan assets are protected from the growing number of cyber threats […]
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It seems as though we hear about new cybersecurity issues every day — from traditional hacking incidents to the increasingly sophisticated phishing, malicious apps and websites, social engineering, and ransomware attacks. Employee-benefit plan sponsors likely have a fiduciary duty to ensure participant information and plan assets are protected from the growing number of cyber threats (to the extent possible, given the ever-changing cybersecurity landscape), and, perhaps more importantly, that there is a plan in place to respond to a data breach and mitigate any associated damages.
For many years now, health-plan sponsors have been subject to a variety of privacy and security rules under the Health Insurance Portability and Accountability Act of 1996, as amended (HIPAA). Health-plan sponsors are (among other things) required to enter into contracts with third-party administrators (TPAs) and other service providers called “business associate agreements” that spell out the parties’ obligations under HIPAA in connection with the plan’s HIPAA-protected information (PHI.)
Notwithstanding HIPAA’s broad scope, it is important to note that HIPAA only establishes the floor (i.e., the bare minimum requirements) regarding privacy and security of PHI. Health-plan sponsors also should consider including references to state data-breach notification laws and cyber-liability insurance in business-associate agreements (or related services agreements) in addition to the HIPAA minimums.
Although HIPAA does not extend to retirement plans, and retirement-plan sponsors are not required to enter into specific agreements with TPAs governing the privacy and security of participants’ personally identifiable information (PII), ERISA’s fiduciary duties nonetheless likely apply. Although the Department of Labor has yet to weigh in on fiduciary duties raised by cybersecurity issues, retirement-plan sponsors should consider including both “HIPAA-like” and expanded cybersecurity provisions in contracts with TPAs that govern the privacy and security of participants’ PII and plan assets.
Examples include, but are not limited to, provisions that: (1) address the TPA’s data-security policies and procedures; (2) restrict the use of and access to PII; (3) explain the TPA’s obligations in the event of a data breach or security incident (i.e., investigation, notification of the plan sponsor and participants, mitigation, remediation, etc.); (4) specify liability for cybersecurity incidents, including the requirement to maintain adequate cyber-liability insurance; and (5) provide for the ability to terminate the applicable services agreement, without additional or early termination fees, in the event of a data breach or other security incident, at the discretion of the plan sponsor.
Finally, in recognition of the fact that participant information also needs to be protected while in the hands of the plan sponsors (including from their employees as well as external cyber threats), plan sponsors should include any plan-related HIPAA-protected information or participants’ personally identifiable information in their organizational cybersecurity efforts.
Lisa Christensen is senior counsel at Syracuse–based Bond Schoeneck & King, PLLC. Her practice includes handling legal matters in health and welfare benefit-plan administration, retirement and executive compensation, and the employee-benefit plan implications of mergers and acquisitions. This viewpoint article is drawn from the firm’s New York Labor & Employment Law Report blog. Contact Christensen at lchristensen@bsk.com or call (315) 218-8279.
START-UP NY program stalls on reporting results
On April 1, the state faced a deadline to release a report enumerating the results of the START-UP NY program, [which sets up tax-free areas for businesses associated with colleges and universities]. But no such report has been released, which is not surprising considering the abysmal track record this governor has demonstrated with transparency and
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On April 1, the state faced a deadline to release a report enumerating the results of the START-UP NY program, [which sets up tax-free areas for businesses associated with colleges and universities]. But no such report has been released, which is not surprising considering the abysmal track record this governor has demonstrated with transparency and information sharing. A 2015 report by Comptroller Tom DiNapoli showed an underwhelming 76 jobs were created as a result of the governor’s signature economic-development proposal, despite millions of taxpayer dollars spent in advertisements to promote the program.
Frankly, a plan that is so narrowly targeted was never going to raise New York from its place as a national model for high taxes and onerous regulations. To attract businesses to the state, we have to do more than making a handful of college campuses attractive places in which to operate a business. We have to make the entire state appealing to new and existing businesses.
Unless the 2016 report, which is still inexcusably a secret, shows drastic and substantial improvement (and I sincerely hope that it does), it’s time to re-think the START-UP gimmick and put a greater emphasis on reforms that will truly make the Empire State a desirable business environment.
Small businesses need more than a ceremonial panel
The newly enacted budget will do little to help small businesses overcome New York’s terrible business climate. For small-business owners, things just went from bad to worse. A ludicrous $15 per hour minimum wage and a new paid family-leave program represent two crushing mandates that will force job-creators to cut staff or raise prices.
Time and again, New York is ranked as one of the worst business climates, yet broad tax cuts and deregulation, which have a proven record of success for boosting economic activity, are nowhere to be found. Each year the story is the same — businesses are fleeing for greener pastures. We are well past the time for gimmicks.
My Small Business Full Employment Act (A.5898-A) addresses many of the challenges faced by businesses by lowering taxes, curtailing regulatory burdens, incentivizing job creation, and lessening the effects of New York’s longstanding “Tax-Fine-Harass” mentality. This legislation will facilitate real, sustained improvements to our toxic economic climate, and represents a commitment that the business community deserves.
In typical Albany fashion, the governor and leaders of the Senate and Assembly empaneled a “Business Regulation Council” to look at the cost of doing business in New York. As if a ceremonial panel will calm the anger and anxiety of business owners, farmers, and nonprofits that were left to navigate through the most anti-business state budget I’ve seen in 15 years as an Assembly member.
The state legislature is coming down the home stretch of the 2016 session. It is imperative that over the coming months we provide the necessary relief that small businesses deserve. It’s going to take more than a toothless panel. It needs to be more comprehensive than economic-development gimmicks that don’t apply to 99 percent of New York’s businesses. It needs to be more sustainable than competitive grant programs where purse strings are controlled by a single elected official.
If nothing else, the “Business Regulation Council” is an admission that our economic climate is abysmal and that dramatic change is sorely needed. Like the START-UP NY program, New Yorkers have waited long enough to see results.
Brian M. Kolb (R,I,C–Canandaigua) is the New York Assembly Minority Leader and represents the 131st Assembly District, which encompasses all of Ontario County and parts of Seneca County. Contact him at kolbb@assembly.state.ny.us
**PULL QUOTE: We have to make the entire state appealing to new and existing businesses.
It’s Getting Harder to Govern, And It’s Not Just Politicians’ Fault
We may not know who our next President of the United States is going to be, but here’s one thing that’s almost certain: he or she will take office with roughly half of the electorate unhappy and mistrustful. What happened to the notion that the U.S. President speaks for a broad coalition of Americans who
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We may not know who our next President of the United States is going to be, but here’s one thing that’s almost certain: he or she will take office with roughly half of the electorate unhappy and mistrustful. What happened to the notion that the U.S. President speaks for a broad coalition of Americans who are willing to set aside their differences on behalf of a compelling new vision for the country? It has vanished.
I’ve spent a lot of time pondering where it went, and though I still haven’t found an answer, I do know this: it’s not only Washington’s — or even the political class’s — fault.
Let’s start with a lament I hear frequently about this year’s crop of presidential candidates: “Is this the best we can do?” I used to believe that the popular argument that the best among us do not seek political office was wrong — that there were plenty of standout Americans who went into politics. And there are. But there are also a lot of talented people — the kind who could lead us beyond our tired political discourse — who take a look at politics and turn the other way these days.
I’ve known a lot of very good people in politics, who were motivated by a true interest in improving the country and saw politics as a competition of ideas, not a mean-spirited clash of ideologies. I see less of this today. Many politicians seem genuinely not to like one another. They see a victory by the other party as a threat to the well-being of the nation.
This is a departure from the past, and it’s not a healthy one. There was a time when the parties and other organizations that brought disparate voters together — charitable institutions, unions — helped build a unity of effort in the government. But groups like that are weaker now.
That is a shame in a year like this, when voters are angry, distrustful, and worried by economic insecurity. They don’t have much appetite for the substance and complexity of policy, seem to relish the clashes that this year’s campaigning has produced, and are uninterested in talk of finding common ground.
It’s a campaign year, of course, so a certain amount of this is to be expected. But if the voters’ surly mood and mistrust carry over after November, it’s going to be very hard for the next president — and politicians in general — to govern effectively.
Lee Hamilton is director of the Center on Congress (www.centeroncongress.org) at Indiana University (IU), distinguished scholar at the IU School of Global and International Studies, and professor of practice at the IU School of Public and Environmental Affairs. Hamilton, a Democrat, was a member of the U.S. House of Representatives for 34 years, representing a district in south central Indiana.

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