The US Departments of Labor, Health and Human Services, and the Treasury recently released Frequently Asked Questions (FAQs) regarding the implementation of certain reporting provisions of the Affordable Care Act (ACA). The FAQs were released to provide clarity on the required drug price disclosures identified in the Transparency in Coverage final rule (the Rule) issued on October 29, 2020. As described in this SHRM article, employers are responsible for making sure that these disclosures are ready and available.
McDermott Will & Emery’s Andrew C. Liazos, Michael B. Kimberly and Charlie Seidell recently filed an amicus brief in the US Court of Appeals for the 10th Circuit on behalf of the ERISA Industry Committee (ERIC). McDermott filed the brief in response to a US Department of Labor (DOL) amicus brief that advanced a novel interpretation of its regulations which, if adopted through litigation, would change longstanding procedures for benefit determinations under self-funded medical plans sponsored by large employers. The amicus brief focuses on key arguments against the DOL’s attempted regulatory reinterpretation, including that:
DOL may not rewrite its regulations outside of notice-and-comment rulemaking;
DOL’s interpretation of its own regulations is inconsistent with the plain text of the regulations;
There are good policy reasons underlying differential treatment of healthcare and disability benefits determinations; and
DOL’s interpretation of the regulations in its amicus brief is not entitled to deference under the Supreme Court decision in Kisor.
As the popularity of cryptocurrency continues to grow, what do employee benefits lawyers need to know about this emerging investment option? McDermott Partners Andrew Liazos, Andrea Kramer and Brian Tiemann recently offered their perspectives about cryptocurrencies and how they relate to Employee Retirement Income Security Act of 1974 (ERISA) plans, individual retirement accounts (IRAs) and incentive awards in an American Bar Association virtual event.
The Internal Revenue Service (IRS) is strategically working to execute the statutory changes that were outlined by the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) of 2019. However, the IRS’s efforts to streamline the required minimum distribution (RMD) requirements for Internal Revenue Code (IRC) Section 403(b) plans with Section 401(a) qualified plans, such as 401(k) plans, may have unforeseen challenges and risks.
A proposed rule was published on February 24, 2022, in the Federal Register. The preamble of the rule indicates that the IRS and US Department of the Treasury are considering changes to conform the treatment of Section 403(b) plans more closely with that of Section 401(a) qualified plans for RMDs. Section 403(b) plans are currently treated the same as individual retirement accounts (IRAs) for purposes of applying the RMD rules. As a result, RMDs are not required to be automatically made from Section 403(b) plans like they are from Section 401(a) retirement plans. The IRS’s proposed rule would require any nonprofit organized under IRC Section 501(c)(3) (i.e., hospitals, public schools and churches) with retirement plans to make RMDs going forward.
Though the proposed rule presents the opportunity to simplify and align the treatment of Section 403(b) plans and Section 401(a) qualified plans, it poses administrative difficulties and potential conflicts with state law. Section 403(b) plans can be invested in a variety of funds, including annuity contracts—group and individual contracts—with insurance companies, custodial accounts or retirement income accounts for certain church workers. For individual annuity contracts, this could create a contractual issue. Employers are not a party to individual contracts between plan participants and investment firms, which would limit the ability of employers to compel RMDs. (Note that distributions could still be forced from group annuity contracts between employers and investment firms.) Regardless of the type of annuity contract, every contract will have to be reviewed to ensure it can comply with the proposed rule. To the extent any changes need to be made to these contracts, state-level approval may be required as insurance companies are governed by state law requirements.
In addition, the proposed rule does not take into consideration the effect of the prospective changes on Section 403(b) plans that are exempt from ERISA because of the safe harbor offered by the US Department of Labor (DOL) in 1979 (29 C.F.R. § 2510.3-2(f)). One of the conditions for meeting the safe harbor is that the employer involvement be limited to certain specific activities. If an employer is required to actively negotiate with insurance providers or choose a provider to administer the RMD requirement for participants, it might be violating this restriction and inadvertently subject its program to ERISA. The IRS and DOL will need to coordinate on the impact of this rule in such cases.
The IRS is taking this proposed rule under review and has asked for feedback specifically related to administrative concerns, notable differences in the structure or administration of Section 403(b) plans compared to qualified plans that might affect RMDs, and [...]
The Federal Civil Penalties Inflation Adjustment Act of 2015 directs the US Department of Labor (DOL) to make annual inflation adjustments to specified Employee Retirement Income Security Act (ERISA) violations. The increased penalties generally apply to reporting and disclosure failures if the penalty is assessed after January 15, 2022, and if the violation occurred after November 2, 2015.
US employers have grown increasingly interested in identifying incentives that increase COVID-19 vaccination among employees. The US Departments of Labor, Treasury and Human and Human Services recently issued guidance regarding the application of the Health Insurance Portability and Accountability Act (HIPPA) wellness rules to vaccine-related premium surcharges and discounts, clarifying that employers may charge vaccine premium incentives if they adhere to the requirements of activity-only health-contingent programs. In this Employee Benefit Plan Review article, McDermott Partner Judith Wethall and McDermott Associate Sarah G. Raaii outline what this HIPPA guidance means for employers.
Even though the US Supreme Court blocked the US Occupational Safety and Health Administration’s (OSHA) vaccinate-or-test mandate for most employers, there is still confusion around who covers the cost for employee COVID-19 tests. In this Law360 article, McDermott’s Dawn Peacock outlines what employers need to know.
The Biden administration’s January guidance that group health plans and insurers cover the costs of at-home COVID-19 tests has rattled insurers and employers. According to this SHRM article, insurers’ data processing systems have had difficulty paying for tests purchased by consumers at pharmacies, and self-insured employers have struggled to identify the best way to pay for tests. McDermott’s Jacob Mattinson, Teal Trujillo and Judith Wethall recently advised plan administrators to work with their third-party administrators to develop a process for coverage of over-the-counter COVID-19 tests and to develop procedures to reduce the risk of participant fraud.
In response to a directive from the White House, based on provisions of the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief and Economic Security (CARES) Act that eliminated cost sharing for COVID-19 diagnostic testing, three federal government departments—the US Department of Health and Human Services (HHS), the US Department of Labor (Labor) and the US Department of the Treasury (Treasury)—issued guidance in the form of frequently asked questions (FAQs) that states group health plans and insurers must also cover over-the-counter (OTC) COVID-19 diagnostic testing. This guidance is effective beginning January 15, 2022.
In addition, the Health Resources and Services Administration (HRSA) updated the Affordable Care Act’s (ACA) comprehensive preventive care and screening guidelines for women and children to cover additional services and supplies without a copay or deductible, effective 2023.
COVID-19 AT-HOME TESTING COVERAGE
On January 10, 2022, HHS, Labor and the Treasury together issued FAQs that elaborated on prior guidance and indicated that group health plans and insurers are required to cover OTC COVID-19 diagnostic tests without cost sharing. Because of the recent spike in COVID-19 cases resulting from the rapid spread of the Omicron variant, the guidance will continue for the duration of the public emergency.
Most consumers with private health coverage will be able to buy OTC COVID-19 tests and either have the cost covered upfront or be reimbursed later by submitting a claim to their health plan. The new requirement only applies to “diagnostic” OTC COVID-19 testing. It does not include the treatment of COVID-19 or testing that is for employment purposes.
The guidance provides that health plans and insurers must cover at least eight OTC COVID-19 diagnostic tests per covered individual per a 30-day period. Insurers will be able to set up networks of preferred suppliers to provide OTC COVID-19 tests directly to participants without upfront costs. Insurers must still reimburse OTC COVID-19 tests purchased outside the direct coverage program, however, the reimbursable amount is limited to $12 per test if the health plan also provides tests through its preferred pharmacy network and through a direct-to-consumer shipping program without upfront costs.
Besides the risk of increasing the average cost of OTC COVID-19 tests, the new initiative raises concerns over fraud and abuse. For health plans and insurers to protect themselves, the FAQs provide several examples of permissible activities to prevent fraud and abuse, like requiring proof of purchase or an attestation that the test was purchased for proper purposes (i.e., is being used by the covered individual, is not being reimbursed by another source, is not being resold and is not for employment purposes).
HRSA UPDATES ACA PREVENTIVE HEALTHCARE GUIDELINES
On January 11, 2022, HRSA announced that it updated the preventive health and screening guidelines for women, infants, children and adolescents. Under the ACA, certain group health plans and insurers must provide coverage with no out-of-pocket costs for preventive health services within these HRSA-endorsed comprehensive guidelines.
HRSA accepted the updates recommended by the Women’s Preventative [...]
Over the past year, the regulatory backdrop around environmental, social and governance (ESG) investing has shifted. As McDermott Partner Brian J. Tiemann explains in these slides, the US Department of Labor (DOL) under the Trump administration dropped ESG terminology and set a high standard for considering factors other than purely financial projections for investment alternatives. However, the Biden administration’s DOL has said that it will not enforce Trump-era regulations or pursue enforcement actions against plan fiduciaries for failure to comply with those regulations.
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