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Benefit Compliance Tip: Be Sure to Sign on the Dotted Line

Benefit plan administration can be complicated and challenging, but sometimes it is not the complex issues that cause the biggest problems; it’s the simplest, such as remembering to ensure plan documents and amendments are actually signed. Far too often, when new plans or plan amendments are adopted, the board or a plan committee will adopt resolutions approving the new plan or amendment, but the actual documents are never signed. Unfortunately, this area of non-compliance may go unnoticed until an IRS or DOL audit or the sale of the plan sponsor, where signed documents are requested but the plan sponsor cannot find them. To avoid being caught with unsigned plan documents, plans sponsors should: Adopt procedures so that immediately after new plans or amendments are adopted, the documents are signed and dated by an authorized signer; After documents are signed, maintain the executed documents in an easy to find location, and… Continue Reading

Federal District Court Rules that Cross-Plan Offsetting Violates ERISA

Cross-plan offsetting is a practice that is used by third-party administrators (“TPAs”) of employer-sponsored group health plans as a means of recouping a benefit payment that was purportedly overpaid to an out-of-network health care provider under one plan by reducing the benefit payment owed to the same provider under another entirely separate plan. This practice has raised fiduciary compliance issues under ERISA and has frequently been the subject of litigation. Recently, in Lutz Surgical Partners, PLLC, et al. v. Aetna, Inc., et al.¸ a federal district court in New Jersey held that Aetna’s use of cross-plan offsetting violated ERISA. Under ERISA, a plan fiduciary may not, “in his individual or in any other capacity act in any transaction involving the plan on behalf of a party (or represent a party) whose interests are adverse to the interests of the plan or the interests of its participants or beneficiaries.” In addition, ERISA… Continue Reading

Hardship Withdrawal and Tax Filing Relief Due to Recent Disaster Declarations

In 2019, the IRS updated the safe harbor rules for hardship withdrawals from a retirement plan to permit such withdrawals for expenses and losses incurred by a participant due to a natural disaster declared by the Federal Emergency Management Agency (“FEMA”), provided the participant’s principal residence or principal place of employment at the time of the disaster was located in an area designated by FEMA for individual assistance related to that disaster. FEMA has issued a series of disaster declarations as a result of recent catastrophes across the country, including Hurricane Ida, the wildfires in California, and the severe storms and flooding in Tennessee. A list of counties designated by FEMA for individual assistance associated with these incidents can be found on FEMA’s website here. These disaster declarations mean that affected participants may be eligible for hardship distributions from their 401(k) plan accounts. Plan sponsors with participants who live or… Continue Reading

IRS Releases New Issue Snapshots

Periodically, the IRS will release guidance that highlights compliance issues that are either common issues found on audits or current concerns of the IRS. The IRS recently issued the following Issue Snapshots highlighting certain compliance issues for retirement and deferred compensation plans: IRC Section 457(b) Eligible Deferred Compensation Plan – Written Plan Requirements, Application of IRC Section 415(c) When a 403(b) Plan is Aggregated with a Section 401(a) Defined Contribution Plan, Church Plans, Automatic Contribution Arrangements, and the Consolidated Appropriations Act, 2016, and Preventing the Occurrence of a Nonallocation Year under Section 409(p). If your company currently sponsors an employee benefit plan that could be impacted by the issues highlighted in these snapshots, these snapshots are a good reminder to make sure your plan is in compliance.  The Issue Snapshots are available here.

Departments Release FAQs about the No Surprises Act and Other Transparency Provisions for Group Health Plans

The DOL, HHS, and Treasury (collectively, the “Departments”) jointly released FAQs addressing the implementation of certain requirements under the No Surprises Act of the Consolidated Appropriations Act of 2021 (the “CAA”), which are generally effective for plan years beginning on or after January 1, 2022, and other transparency provisions of the Affordable Care Act (the “ACA”) and CAA. The FAQs address the following topics: Transparency in Coverage Machine-Readable Files, Price Comparison Tools, Transparency in Plan or Insurance Identification Cards, Good Faith Estimate, Advanced Explanation of Benefits, Prohibition on Gag Clauses on Price and Quality Data, Protecting Patients and Improving the Accuracy of Provider Directory Information, Continuity of Care, Grandfathered Health Plans, and Reporting on Pharmacy Benefits and Drug Costs. Notably, the Departments state in the FAQs that enforcement of the requirement that plans publish machine-readable files relating to certain in-network and out-of-network information will be deferred until July 1, 2022… Continue Reading

As Plan Administrator, the Employer is Liable – Not the Service Provider (i.e., What Kind of Indemnification Are You Getting?)

The plan administrator of an employee benefit plan (employee welfare or retirement) has the general fiduciary responsibility under ERISA to ensure the operational and documentary compliance of the plan. Under ERISA, the sponsoring employer is the plan administrator unless another person or entity is named in the plan. This generally means the employer retains ultimate responsibility and liability for legal compliance even though the employer may rely heavily on the plan’s third-party service providers. One way to mitigate this liability is to obtain indemnification from a service provider for the service provider’s errors, for which the employer (as plan administrator) would still be legally liable. The default language in third-party service provider contracts often provides indemnification only for the service provider’s “gross negligence”, but not its “ordinary negligence”, thus leaving the employer responsible for correcting (and paying for) errors caused by the service provider that do not amount to “gross negligence” or “intentional… Continue Reading

DOL and UnitedHealthcare Reach Settlement for Mental Health Parity Violations

The DOL and UnitedHealthcare (“UHC”) recently reached a settlement agreement for UHC’s alleged violations of the Mental Health Parity and Addition Equity Act (the “MHPAEA”). Under the MHPAEA, employer-sponsored group health plans and health insurance issuers that provide mental health or substance use disorder (“MH/SUD”) benefits are prohibited from imposing less favorable benefit limitations on those benefits than on medical/surgical benefits. In its investigation, the DOL found that UHC, among other things, “systematically reimburse[d] participants and beneficiaries for out-of-network mental health services in a more restrictive manner than for out-of-network medical and surgical services.” This case is another indication that MHPAEA enforcement is a high priority for the DOL. As discussed in our prior blog posts here and here, the MHPAEA requires employer-sponsored group health plans that impose nonquantitative treatment limitations (“NQTLs”) on MH/SUD benefits to perform and document a comparative analysis of the design and application of NQTLs. This… Continue Reading

Reminder: Upcoming Deadline to Provide COBRA Subsidy Expiration Notice

The American Rescue Plan Act of 2021 (the “ARPA”) provides a 100% COBRA premium subsidy (the “COBRA Subsidy”) to certain COBRA qualified beneficiaries, which we previously reported on here, here, and here. Under the ARPA, the COBRA Subsidy is set to expire on September 30, 2021. The APRA requires that certain notices be sent to affected qualified beneficiaries regarding the COBRA Subsidy, including a notice of the upcoming expiration of their premium assistance. This expiration notice must be sent no fewer than 15 days and no more than 45 days before an individual’s COBRA Subsidy expires. The DOL has released a model “Notice of Expiration of Period of Premium Assistance” that plans may use to satisfy the notice requirement. Because the COBRA Subsidy is set to expire on September 30, 2021, the deadline to send out the expiration notices is quickly approaching. Employers are reminded to contact their third-party COBRA administrators,… Continue Reading

IRS Explains Certain Plans Retroactively Adopted After the End of Plan Year Are Not Required to File a Form 5500 for 2020

The IRS recently explained in an announcement that certain retirement plans adopted after the close of the employer’s taxable year will not be required to file a Form 5500 for 2020. Specifically, under the SECURE Act, an employer may adopt a retirement plan after the close of the employer’s taxable year (by the due date, including extensions, for filing its tax return for the taxable year) and elect to treat the plan as having been adopted as of the last day of the taxable year. This provision of the SECURE Act only applies to plans adopted for taxable years beginning after December 31, 2019. In its announcement, the IRS explained that if an employer adopted a plan during the employer’s 2021 taxable year, by the specified deadline, and elected to treat the plan as having been adopted as of the last day of the employer’s 2020 taxable year, then the… Continue Reading

Additional Guidance on Claiming Employee Retention Tax Credit for Q3 and Q4 of 2021

The IRS recently released Notice 2021-49 (the “Notice”), which provides additional guidance for employers who are claiming the employee retention tax credit for the third and fourth quarters of 2021 based on enhancements to the tax credit enacted in the American Rescue Plan Act of 2021 (the “ARPA”). The ARPA extended the employee retention tax credit for “qualified wages” paid to employees between July 1st and December 31st of 2021, and the Notice clarifies that the rules applicable to claiming the enhanced employee retention tax credit under the ARPA are generally the same as those for claiming the credit under the CARES Act. The Notice provides additional guidance on several miscellaneous issues with respect to the credit and also responds to questions received by the IRS related to the credit, including, among others: The definition of full-time employee and whether that definition includes full-time equivalents; The treatment of tips as… Continue Reading

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