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IRS Issues Updated Guidance Regarding Substantially Equal Periodic Payments

The IRS recently issued Notice 2022-6 (the “Notice”), which provides guidance regarding how to determine whether a series of payments from a qualified retirement plan is considered a series of substantially equal periodic payments and is thus exempt from the 10% excise tax under Code Section 72(t). Payments are exempt from that excise tax if they are made in accordance with one of the following methods: (i) the required minimum distribution method, (ii) the fixed amortization method, or (iii) the fixed annuitization method. The Notice provides an updated life expectancy table that can be used to determine distribution periods for the required minimum distribution method and the fixed amortization method. In addition, the Notice modifies the existing minimum interest rate that may be used to apply the fixed amortization method and the fixed annuitization method (which is 120% of the federal mid-term rate) to add a 5% floor. The guidance… Continue Reading

DOL Increases Civil Monetary Penalties for Certain ERISA Violations

The DOL recently issued a final rule that adjusts for inflation the amounts of civil monetary penalties assessed or enforced in its regulations, including for certain ERISA violations. The adjusted penalty amounts apply to penalties assessed after January 15, 2022 and for which the associated violations occurred after November 2, 2015. Some of the penalties that were increased include the following:  The maximum penalty for failing to properly file a pension or welfare benefit plan’s annual Form 5500 increased from $2,259 per day to $2,400 per day. The maximum penalty for failing to provide notices of blackout periods or of the right to divest employer securities increased from $143 per day to $152 per day (each statutory recipient is a separate violation). The maximum penalty for failing to provide employees the required Children’s Health Insurance Program, or CHIP, coverage notices increased from $120 per day to $127 per day (each… Continue Reading

New Plan Audit Standards Shift Burdens to Plan Fiduciaries

In an effort to address shortcomings in auditing procedures and reporting raised by the DOL, in July 2019, the Auditing Standards Board of the American Institute of Certified Public Accountants issued a revised Statement on Auditing Standards No. 136 entitled, “Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA” (“SAS 136”). SAS 136 applies to plan financial statement periods ending on or after December 15, 2021. The updated audit standards imposed by SAS 136 add new audit procedures and significantly shift the burden for producing many plan-related documents to the plan sponsor. The new requirements will make it essential for plan sponsors to be able to produce quality, error-free records that demonstrate compliance in areas like compensation, deferrals, distributions, and vendors’ fees. Even before these new standards went into effect, it was often difficult for plan sponsors to produce such documentation, particularly when it… Continue Reading

Upcoming Deadlines: Annual Reporting and IRS Filings for ISO Exercises and ESPP Stock Transfers

Employers sponsoring equity incentive plans or tax-qualified employee stock purchase plans (“ESPP”) must fulfill certain year-end information reporting requirements under Section 6039 of the Code with respect to company stock that is either (i) issued to current or former employees upon exercise of an incentive stock option (“ISO”), or (ii) transferred under an ESPP.  The two IRS forms used to satisfy those requirements are: Form 3921, which is required when an individual exercises an ISO. Form 3922, which is required when an individual acquires stock under an ESPP when either the purchase price of the shares (i) was less than the stock’s fair market value on the date of grant, or (ii) was not fixed or determinable on the date of grant. For ISO exercises and ESPP transfers occurring in the 2021 calendar year, employers should file Copy A of the applicable forms with the IRS no later than February… Continue Reading

Action Item for Employers with HSA-Eligible Health Plans in Oklahoma

Beginning November 1, 2021, a new Oklahoma state insurance law requires health insurers providing pharmacy benefits and pharmacy benefit managers (“PBMs”) to count any amount paid on behalf of a participant towards that participant’s out-of-pocket maximum, deductible, copayment, coinsurance, or other cost-sharing arrangement. The law appears to be intended to apply only to pharmacy benefits. Counting such third-party payments, such as a prescription drug manufacturer’s coupon, towards a participant’s deductible could cause the participant to be ineligible for a health savings account (“HSA”). The Oklahoma Insurance Department has stated it is seeking clarification from the Oklahoma legislature regarding the conflict between the state statute and the federal rules governing HSA eligibility. Employers may want to contact their health insurers and PBMs (i) to determine whether any third-party payments are being applied toward the deductible under an HSA-eligible health plan and (ii) to communicate any relevant information to participants who may be affected. This new law… Continue Reading

DOL Issues Temporary Enforcement Policy and Clarifications regarding Required Group Health Plan Disclosures under the CAA

In a recent Field Assistance Bulletin No. 2021-03 (the “FAB”), the DOL announced its temporary enforcement policy (the “Enforcement Policy”), as well as certain clarifications, regarding the new required group health plan service provider disclosures under Section 408(b)(2)(B) of ERISA (the “Disclosure Requirement”). The Disclosure Requirement, which was implemented by the Consolidated Appropriations Act of 2021 (the “CAA”), requires certain persons or entities that provide brokerage or consulting services to group health plans (each, a “Service Provider”) to disclose specified information to a responsible plan fiduciary about the direct and indirect compensation the Service Provider expects to receive in connection with its services to the plan. Links to our prior blog posts about the Disclosure Requirement are available here and here.  With respect to the Enforcement Policy, the FAB provides that, pending further guidance, the DOL will not treat a Service Provider as having failed to make required disclosures to… Continue Reading

New Requirement for Group Health Plans and Insurance Companies to Cover At-Home COVID-19 Testing Costs Effective Saturday, January 15th

Beginning January 15, 2022, insurance companies and group health plans will be required to cover the cost of over-the-counter, at-home COVID-19 tests authorized by the Food and Drug Administration (“OTC Tests”) that are purchased on or after that date. Health plans and insurance companies must provide coverage for up to eight individual OTC Tests per month for each enrolled individual (e.g., a family of four will be covered for up to 32 OTC Tests per month). If the health plan or insurer sets up a network of preferred locations for participants to obtain OTC Tests with no up-front cost, then the health plan and/or insurer may limit the amount it reimburses for OTC Tests purchased outside such network to $12 per test (or the actual cost of the OTC Test, if lower). Otherwise, the health plan and/or insurer must reimburse the full cost of the OTC Test. FAQs issued by… Continue Reading

DOL Supplements Prior Information Letter on Private Equity in Designated Investment Alternatives

The DOL recently published a supplement statement (the “Supplement Statement”) relating to its June 3, 2020 Information Letter (the “Letter”) regarding the use of private equity investments in designated investment alternatives for individual account retirement plans. The Letter stated that a plan fiduciary would not violate the fiduciary duties under ERISA solely due to the plan fiduciary’s offering of a professionally managed asset allocation fund with a private equity component as a designated investment alternative, subject to the conditions set forth in the Letter. The DOL noted that the Letter was not an endorsement of such private equity investments and that plan fiduciaries must determine whether such an investment is prudent and made solely in the interests of plan participants and beneficiaries. Our prior blog post regarding the Letter is available here. The Supplement Statement clarified that plan fiduciaries should not misread the Letter “as saying that [private equity]—as a… Continue Reading

HHS Announces Final 2023 Cost-Sharing Maximums under the Affordable Care Act

Last year, HHS issued its final “Notice of Benefit and Payment Parameters for 2022” providing that, beginning with the 2023 benefit year, HHS will publish the maximum annual limit on cost-sharing in guidance issued by January of the year preceding the applicable benefit year, using the most recent National Health Expenditure Accounts income and premium data that is available at the time of publication. HHS recently issued a CMS notice (the “CMS Notice”) providing these annual limits for 2023. The 2023 maximum annual limit on cost sharing is $9,100 for self-only coverage (increased from $8,700 for 2022) and $18,200 for other than self-only coverage (increased from $17,400 for 2022). The CMS Notice is available here. 

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