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Preparing for the End of the COVID-19 Emergency: Tri-Agencies Issue FAQs to Assist Plans and Issuers

by Jacob Mattinson, Sarah Raaii, Alden Bianchi and Teal Trujillo | Apr 5, 2023 | Employee Benefits, Health and Welfare Plans

The Biden administration has announced its intention to end the COVID-19 National Emergency (NE) and the COVID-19 Public Health Emergency (PHE) on May 11, 2023 (read our series introduction for more information).

On March 29, 2023, the US Departments of Labor, Health and Human Services, and Treasury (the Departments) issued a set of Frequently Asked Questions (available here), which answered questions from stakeholders relating to the various laws, regulations and other guidance enacted or adopted in connection with the NE and PHE. The FAQs include eight questions related to the anticipated end of the “Outbreak Period” on July 10, 2023, which is 60 days after the end of the NE and PHE on May 11 (rules regarding the Outbreak Period are set forth in our earlier articles here and here). Below are the highlights:

Following the end of the PHE, plans and issuers can impose cost-sharing, prior authorization or other medical management requirements for COVID-19 diagnostic tests, although the Departments encourage plans not to do so.
Plans and issuers are encouraged to notify plan participants of changes regarding COVID-19 diagnosis, testing and treatment. Special rules apply under which Summaries of Benefits and Coverage (SBCs) need not be amended mid-year.
While plans and issuers will no longer be required to post prices for diagnostic tests furnished after May 11, they are nevertheless encouraged to do so.
Plans must continue to cover vaccines that qualify as preventive services, without cost-sharing, when provided in-network.
The FAQs provide examples relating to the application and termination of extended time periods for elections under the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the Health Insurance Portability and Accountability Act (HIPAA).
In what is a welcome surprise, the FAQs confirm that individuals covered by a High-Deductible Health Plan (HDHP) will remain Health Savings Account (HSA)-eligible until further notice even if the HDHP in which they are enrolled provides medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the HDHP’s applicable minimum deductible.

To keep employers apprised of the rules and to assist with providing notice to plan participants of the changes that will accompany the end of the NE and PHE, the Department of Labor has issued two blog posts, which are available here and here.

Action Items: We urge plan sponsors to pay particular attention to notifying employees of the upcoming changes that will accompany the end of the PHE and NE and to ensure that participants covered under an HDHP understand that they may continue to contribute to their HSAs. Employers should consider communicating these changes to their employees.

For any questions regarding the end of the PHE and/or NE, please contact your regular McDermott lawyer or one of the authors.

Prescription Drug Data Reporting: What the “Good Faith Compliance” Extension Really Means for Self-Funded Group Health Plans

by Jacob Mattinson, Sarah Raaii and Alden Bianchi | Jan 11, 2023 | Employee Benefits, Executive Compensation, Health and Welfare Plans, Retirement Plans

We recently reported on an FAQ issued December 23, 2022 (FAQ About Affordable Care Act and Consolidated Appropriations Act, 2021 Implementation Part 56) by the US Departments of Labor, Health and Human Services and the Treasury (collectively, the Departments). The FAQ provides limited, albeit welcome, relief by extending the time for reporting information under the prescription drug data collection (RxDC) rules, which were enacted by Section 204 of Title II of Division BB of the Consolidated Appropriations Act, 2021.

Under the statute, the first RxDC reports for the 2020 calendar (or reference) year, were due to be filed by December 27, 2021. However, in response to concerns expressed by stakeholders, enforcement was pushed back a full year to December 27, 2022, at which time the reports for both the 2020 and 2021 reference years were due. The RxDC reporting process required the submission of one or more “plan lists,” a series of eight data files (files D1 through D8) and an accompanying narrative response. (The contents of the plan lists, data files and narrative responses are comprehensively explained here (the Instructions).)

Access the full article.

DOL Proposes Significant Changes to VFCP Program

by Jennifer Hill, Jacob Mattinson and Patrick Ryan | Dec 22, 2022 | Employee Benefits, Retirement Plans

On November 21, 2022, the US Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) released a proposed amendment and restatement of the Voluntary Fiduciary Correction Program (VFCP), along with a proposed amendment to the Prohibited Transaction Exemption (PTE) 2002-51.

The VFCP allows plan sponsors to voluntarily correct certain fiduciary breaches to avoid civil enforcement actions and civil penalties imposed under the Employee Retirement Income Security Act of 1974 (ERISA) and its accompanying regulations. The most relevant components of the proposed changes for plan sponsors relate to delinquent contributions of participant deferrals and loan repayments as these tend to occur more frequently than other issues corrected through the VFCP. Importantly, the proposed amended and restated VFCP would add a new self-correction feature, clarify existing transactions currently eligible for correction and simplify certain administrative or procedural requirements for participation in and correction of transactions under the VFCP. This would be the first time the DOL has allowed self-correction under VFCP. The proposed changes are intended to encourage greater VFCP participation by providing for more efficient and less costly corrections.

Access the full article.

New IRS Guidance for Tax-Qualified Pension Plans with Rehired Retirees Due to COVID-19

by Diane Morgenthaler | Dec 9, 2021 | Employee Benefits, Employment, Fiduciary and Investment Issues, Retirement Plans

The Internal Revenue Service (IRS) recently updated its guidance for retiree distributions under a defined benefit plan. Specifically, the new IRS guidance addresses rehires following a bona fide retirement due to COVID-19.

As a background, a defined benefit plan may make distributions to a retiree only in the case of a “bona fide retirement,” which is a facts and circumstances analysis. In prior rulings, the IRS indicated that retiree distributions without a bona fide retirement can cause a defined benefit plan to lose its tax-qualified status, where both all contributions and earnings become immediately taxable.

According to the IRS, a rehire due to COVID-19-related “unforeseen circumstances” generally would not disqualify an individual’s prior retirement from being considered a bona fide retirement under a defined benefit plan. However, the IRS cautioned that such a rehire cannot include any prearrangement to rehire the individual prior to the individual’s retirement. Such a prearrangement still yields a retirement that is not “bona fide.”

Finally, although the IRS issued this guidance in question and answer format primarily for defined benefit plans, plan sponsors should be able to apply the same rationale to distributions from defined contribution plans. In short, the new IRS guidance provides welcome relief to plan sponsors and employers who are looking to rehire retirees in a tight job market.

Expect More Difficulty Obtaining Fiduciary Insurance

by McDermott Will & Emery | Dec 7, 2021 | Employee Benefits, Employee Stock Ownership Plans (ESOPs), Fiduciary and Investment Issues, Privacy and Data Security, Retirement Plans

Increasing retirement plan-focused litigation has put insurance carriers and fiduciary service providers in difficult positions. In this article published in PLANSPONSOR, McDermott Partner Erin Turley said such litigation continues to be a “major focus” in the fiduciary insurance marketplace.

“It is a challenging market right now, to the point that we are looking at trying to think about ways that insurance products might be differently structured, to address what we hope will only be a short-term tightening in the market.”

Access the article.

IRS Announces 2021 Employee Benefit Plan Limits

by Jeffrey Holdvogt, Jacob Mattinson and Brian Tiemann | Oct 28, 2020 | Employee Benefits, Employee Stock Ownership Plans (ESOPs), Health and Welfare Plans, Retirement Plans

The Internal Revenue Service (IRS) recently announced the cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans for 2021. Nearly all of the dollar limits currently in effect for 2020 will remain the same, with only a few amounts experiencing minor increases for 2021.

Access the article.

Finally SECURE: Opportunities in the 2019 SECURE Act for Plan Sponsors

by Jeffrey Holdvogt, Lisa Loesel and Sarah L. Engle | Jan 9, 2020 | Employee Benefits, Employment, Health and Welfare Plans, Retirement Plans

The SECURE Act—the most significant piece of retirement plan legislation in more than a decade—is now law. Plan sponsors should immediately start considering how changes included in the SECURE Act could impact their retirement and health and welfare plans in 2020 and beyond.

Access the full article.

IRS Announces 2020 Employee Benefit Plan Limits

by Brian Tiemann, Jeffrey Holdvogt and Jacob Mattinson | Nov 6, 2019 | Employee Benefits, Health and Welfare Plans, Retirement Plans

Recently the Internal Revenue Service (IRS) and the Social Security Administration announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans and the Social Security wage base for 2020. In the article linked below, we compare the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2019 and 2020.

Access the full article.

Big ERISA Decisions on the Horizon—SCOTUS to Review Third ERISA Case this Term

by Brigid McCarthy, Brian Tiemann, J. Christian Nemeth and Richard J. Pearl | Jul 23, 2019 | Benefit Controversies, Employee Benefits, Fiduciary and Investment Issues, Retirement Plans

The US Supreme Court recently agreed to review the Eighth Circuit’s decision in Thole v. US Bank, in which the Eighth Circuit held that participants in an overfunded defined benefit pension plan lack standing to sue for fiduciary breaches under ERISA. The Supreme Court’s decision in this case—the third ERISA case accepted by the court this term—could have significant implications for plan sponsors and plan fiduciaries. Many believe that if the Supreme Court rules that the plaintiffs have standing to bring suit, it could encourage a proliferation of litigation against plans where there is no actual impact on participants’ benefits.

Access the full article.

Hardship Distribution Changes: What’s Next?

by Maggie McTigue and Stephen Pavlick | Jul 16, 2019 | Employee Benefits, Retirement Plans

In 2018, the Treasury Department and the IRS issued new hardship distribution rules applicable to defined contribution plans, and many plans have begun administering these new rules. While plan sponsors may want to wait for further IRS guidance before amending their plans, they should take steps now to inform employees of changes in hardship distribution administration.

Access the full article.

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