As discussed in our prior blog posts, available here, here, and here, an employer must maintain documentation demonstrating that its group health plan is compliant with mental health and substance use disorder parity rules. The DOL has made compliance with these rules a high priority, and DOL enforcement efforts have begun. Employers should follow up with their medical, network, prescription drug, and other third-party service providers to define expectations and set deadlines for the production of information that employers need for the required reporting. Given the amount of detail, effort, and coordination that this compliance documentation requires, employers should ensure that a compliant report can be timely provided if there is a DOL inquiry.
ERISA Lawsuit Alleging Worker Misclassification Is A Reminder to Employers to Monitor Their Employee Classifications
A plaintiff recently filed suit against Yum! Brands, Inc. (“Yum”), Taco Bell Corp. (“Taco Bell,” together with Yum referred to herein as, the “Employers”), and various other defendants under ERISA over the alleged misclassification of his employment status. The complaint states that common law employees were eligible to participate in certain retirement plans maintained by the Employers (collectively, the “Plans”) pursuant to the Plans’ governing documents. The plaintiff alleges he met the common law test for employee status but was classified as an independent contractor, instead of an employee, during his 25 years of employment. Specifically, the plaintiff alleges that during the relevant employment periods, the Employers controlled the work he performed and the manner and means by which he performed his work, such as by directing the specific order and sequence of his work and requiring him to attend employee-only events and meetings. The plaintiff further alleges that other… Continue Reading
In Revenue Procedure 2021-30 (“Rev. Proc. 2021-30”), the IRS made certain updates to the Employee Plans Compliance Resolution System (“EPCRS”), including updates to the Self-Correction Program (“SCP”) and the Voluntary Correction Program under EPCRS. Among other updates, Rev. Proc. 2021-30 expands the correction methods for benefit overpayments by adding (i) the “funding exception correction method,” which provides an exception to corrective payments for plans that meet certain funding requirements, and (ii) the “contribution credit correction method,” which prescribes the amount of overpayments required to be repaid to the plan under certain circumstances. Further, Rev. Proc. 2021-30 (i) expands the circumstances under which plan sponsors may correct operational failures under the SCP by plan amendment, and (ii) extends, by one year, the end of the SCP correction period for significant failures. Rev. Proc. 2021-30 is available here.
As employers prepare group health plans, SPDs, and other employee benefits materials for 2022, they need to consider the new surprise medical billing requirements under the No Surprises Act of the Consolidated Appropriations Act of 2021. Interim final rules were recently released for these new requirements, which are generally effective for plan years beginning on or after January 1, 2022. Provisions that may need to be changed include those regarding: (i) coverage of emergency services, including the definitions of emergency services and emergency medical conditions, how benefit payments are calculated, and coverage for out-of-network, independent freestanding emergency departments; (ii) network cost-sharing for out-of-network providers at network facilities who do not obtain consent for non-emergency services; and (iii) coverage of out-of-network air ambulance services. In addition, there is a new notice required that must be made publicly available, posted on a public website of the plan, and included in the plan’s… Continue Reading
In Notice 2020-46, the IRS provided guidance regarding cash payments made by employers to certain charitable organizations for the relief of COVID-19 victims under employer-sponsored, leave-based donation programs (see our prior blog post about Notice 2020-46 here). Under such donation programs, an employee could elect to forgo paid vacation, sick, or personal leave in exchange for cash payments made by his or her employer to qualifying charitable organizations for the relief of COVID-19 victims, without having such amounts being included in his or her taxable gross income. Under Notice 2020-46, such cash payments had to be made before January 1, 2021; however, in Notice 2021-42, the IRS extended this relief period to include qualifying cash payments that are made after December 31, 2020 and before January 1, 2022. Notice 2021-42 is available here.
IRS Further Extends Temporary Relief from Physical Presence Requirement for Certain Retirement Plan Consents
As we previously reported here, in June 2020, the IRS issued Notice 2020-42 (available here) which provided temporary relief from the physical presence requirements for certain participant and beneficiary elections under qualified retirement plans. The IRS recently issued an advance version of Notice 2021-40 (available here) which extends the temporary relief for an additional year, through June 30, 2022. Under this extended relief, participant elections, including spousal consents, that require a signature to be witnessed in the physical presence of a notary public will meet the ?Ç£physical presence?Ç¥ requirement if remote notarization is done through live audio-video technology that otherwise satisfies the requirements of Treasury Regulations ?º 1.401(a)-21(d)(6) and is compliant with state law applicable to notaries. Participant elections, including spousal consents, that require a signature to be witnessed in the physical presence of a plan representative will meet the ?Ç£physical presence?Ç¥ requirement if (i) the person signing the participant… Continue Reading
Departments Solicit Comments regarding Consolidated Appropriations Act of 2021 Prescription Drug Reporting Requirements
Under the Consolidated Appropriations Act of 2021 (the ?Ç£CAA?Ç¥), employer-sponsored group health plans will be required to submit to the DOL and/or Treasury Department a new annual report containing information pertaining to plan participation and prescription drug coverage provided under the plan during the previous plan year (the ?Ç£Rx Report?Ç¥). Among other items, the Rx Report must include information regarding (i) claims paid under the plan for the 50 most frequently dispensed brand prescription drugs (?Ç£Claims Paid Items?Ç¥), (ii) annual spending for the 50 most costly prescription drugs (?Ç£Spending Items?Ç¥), and (iii) rebates, fees, and other remuneration paid by drug manufacturers to the plan, its administrators, or service providers (?Ç£Rebate Items?Ç¥). The first Rx Report is due by December 27, 2021, and each subsequent Rx Report is due by each June 1. Recently, the DOL, Treasury Department, and HHS (the ?Ç£Agencies?Ç¥) jointly issued a ?Ç£request for information?Ç¥ (the ?Ç£RFI?Ç¥) seeking public… Continue Reading
On June 17, 2021, the U.S. Supreme Court in California v. Texas rejected a challenge to the Affordable Care Act (the ?Ç£ACA?Ç¥) by holding the plaintiffs lacked standing to bring suit. In 2018, Texas, along with a coalition of over a dozen states and two individuals, brought suit challenging the constitutionality of the individual mandate under the ACA after the penalty for failing to comply was set to zero dollars in 2017. The Supreme Court held that, because the individual mandate is unenforceable, the plaintiffs lacked standing because they had not shown a past or future injury that is fairly traceable. Notably, the Supreme Court did not rule on the constitutionality of the ACA. California v. Texas, 593 U.S. ___ (2021) is available here.
DOL Rules that Audio Recordings and Transcripts of Telephone Conversations with Plan?ÇÖs Insurer may have to be Disclosed
The DOL recently issued Information Letter 06-14-2021 addressing whether the claims procedure regulations under ERISA require plan fiduciaries to provide, upon request, the audio recording and transcript of a telephone conversation between a claimant and a representative of the plan?ÇÖs insurer relating to an adverse benefit determination. The claims regulations under ERISA provide that a document, record, or other information is relevant to a claim for benefits, and therefore must be provided to a claimant upon request, if it (i) ?Ç£was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination?Ç¥ or (ii) ?Ç£demonstrates compliance with the administrative processes and safeguards.?Ç¥ The DOL concluded that a recording or transcript of a conversation between a claimant and a plan?ÇÖs insurer would not be excluded from the ERISA disclosure requirements on the… Continue Reading
Among the new requirements that are, or soon will be, imposed on employer-sponsored group health plans subject to ERISA (?Ç£GHPs?Ç¥) by the Consolidated Appropriations Act of 2021 (the ?Ç£CAA?Ç¥) are compensation disclosure requirements which apply to GHPs and certain of their third-party service providers. Background ERISA contains prohibitions on certain transactions between an employee benefit plan, including a GHP and a party-in-interest, such as a third-party service provider.?á Section 408(b)(2) of ERISA provides an exemption from the prohibited transaction rules for reasonable contracts entered into by a plan and a service provider for necessary plan-related services (?Ç£Contract?Ç¥), provided that no more than reasonable compensation is paid for such services (the ?Ç£Prohibited Transaction Exemption?Ç¥). The relevant fiduciary of the plan under ERISA (the ?Ç£Fiduciary?Ç¥) is responsible for determining whether compensation to be paid under the Contract is reasonable in order to comply with the Prohibited Transaction Exemption. Disclosure Requirement under the… Continue Reading