DOL Announces Temporary Enforcement Policy in Response to Fifth Circuit Decision Invalidating New Fiduciary Rule
On May 7, 2018, the DOL issued Field Assistance Bulletin 2018-02 (“FAB 2018-02”), in which it announced a temporary policy related to enforcement of its new fiduciary duty rule and related exemptions (collectively, the “Fiduciary Rule”) in advance of an expected order to be issued by the U.S. Court of Appeals for the Fifth Circuit vacating the entire Fiduciary Rule (for more information on the Fifth Circuit’s decision to vacate the Fiduciary Rule, please see our prior blog post). Effective as of June 9, 2017, and until the DOL issues additional regulations, exemptions, or other applicable administrative guidance, the DOL will not pursue prohibited transaction claims against fiduciaries who provide investment advice so long as the fiduciary is working diligently and in good faith to comply with guidance previously issued by the DOL under the Fiduciary Rule, such as the best interest contract exemption or principal transactions exception. The DOL… Continue Reading
The DOL recently released Field Assistance Bulletin (“FAB”) No. 2018-01, which provides guidance on earlier-issued Interpretive Bulletins 2015-01 and 2016-01 (the “IBs”) regarding how ERISA plan fiduciaries may exercise shareholder rights and the extent to which such fiduciaries may take into account environmental, social, or corporate governance (“ESG”) considerations when making plan investments. FAB 2018-01 includes additional observations regarding the IBs and cautionary notes for plan fiduciaries regarding (i) treatment of ESG factors as being economically relevant to a particular investment choice, (ii) following guidelines related to ESG factors in a plan’s investment policy statement, (iii) selection of ESG-themed investment alternatives as a plan’s “qualified default investment alternative”, and (iv) incurring significant plan expenses for shareholder engagement activities related to plan investments. View the FAB 2018-01.
The federal Departments of Labor (“DOL”), Health and Human Services, and the Treasury have jointly issued a set of proposed frequently asked questions (“FAQs”) which address nonquantitative treatment limitations (“NQTLs”) and health plan disclosure issues under the Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”). Generally, the MHPAEA prohibits group health plans and issuers from imposing financial requirements or treatment limitations on “mental health benefits” and “substance use disorder benefits” (collectively, “MH/SUD Benefits”) that are more restrictive than the predominant financial requirements and treatment limitations that apply to substantially all medical and surgical benefits (collectively, “Med/Surg Benefits”). With respect to NQTLs, which include medical management, step therapy, and pre-authorization (versus “quantitative treatment limitations”, which are numerical, such as visit limits and day limits), a group health plan cannot impose an NQTL on MH/SUD Benefits in any classification unless, under the terms of the plan as written and in… Continue Reading
While many qualified retirement plans allow for the reimbursement of certain administrative expenses from plan assets, plan fiduciaries must ensure that plan assets are being used only to reimburse reasonable administrative expenses, and not expenses that could be considered personal or business expenses. This issue may arise in a variety of contexts, including, in particular, a plan’s reimbursement of travel expenses. The DOL has taken the position that no personal or business related expenses are payable from plan assets, even if the travel is related to the administration of the plan. The concern with using plan assets to reimburse travel expenses is being able to prove that the travel expenses relate solely to the administration of the plan, and are not merely a personal or business expense.
Employers sponsoring employee plans that provide “disability benefits” are reminded that the new disability benefit claims procedures, as issued by the DOL under ERISA (the “Disability Procedures“), are applicable to disability benefit claims filed after April 1, 2018. According to the DOL, a benefit is a “disability benefit” under ERISA’s claims regulations (including the Disability Procedures) if the plan conditions the availability of the benefit upon evidence of the participant’s disability. The Disability Procedures may thus apply not only to long-term and short-term disability plans that are subject to ERISA, but also to other types of ERISA benefit plans, such as group health plans and qualified and non-qualified retirement plans, if the plan provides benefits that are based upon a determination of disability that is made under the plan. (See our prior blog post for more details regarding impacted plans.) Plan sponsors should ensure that (i) the claims procedures of… Continue Reading
The U.S. Court of Appeals for the Fifth Circuit (whose jurisdiction includes Texas, Louisiana, and Mississippi) vacated the entire final Fiduciary Rule that was issued by the DOL in April 2016. The Fifth Circuit held that the definition of “fiduciary” in the final Fiduciary Rule conflicts with the plain text of ERISA and the common law definition of fiduciary. The Fifth Circuit further held that the DOL overstepped its authority in applying ERISA’s fiduciary standards to individual retirement accounts and that the DOL’s interpretations fail the reasonableness test under the standard set out in Chevron U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837 (1984). In response to the Fifth Circuit’s decision, the DOL announced that it will not be enforcing the rule at this time. Chamber of Commerce of the USA v. U.S. Dep’t of Labor, No. 17-10238 (5th Cir. Mar. 15, 2018).
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 violations of ERISA. The adjusted penalty amounts apply to violations occurring after November 2, 2015, and for which penalties are assessed after January 2, 2018. Below is a list of some of the penalties that were increased: The maximum penalty for failing to properly file a pension or welfare benefit plan’s annual Form 5500 increased from $2,097 per day to $2,140 per day The maximum penalty for failing to provide notices of blackout periods or notices of the right to divest employer securities increased from $133 per day to $136 per day (and each statutory recipient constitutes a separate violation) The maximum penalty for failing to provide employees with the required notices regarding coverage opportunities under the Children’s Health Insurance Program, or CHIP, increased… Continue Reading
The DOL announced that the new claims procedures for disability benefits will apply as of April 1, 2018. As previously discussed here, the DOL had delayed the effective date of the new disability claims procedures until April 1, 2018, to provide additional time for comments and revisions to the regulations. In its announcement, the DOL stated that the comments it received did not establish the need to make any revisions to the regulations. Employers should now proceed with revising their plan documents, summary plan descriptions, and policies and procedures for employee benefit plans subject to ERISA that provide any disability benefits. View the DOL’s announcement.
The DOL recently issued proposed regulations which broaden the criteria under ERISA for determining when a group of employers may join together as a single employer to sponsor a single group health plan under ERISA, in the form of an “association health plan” (“AHP”). Joining an AHP could be a more viable option for many small employers. Various federal and state laws affecting employer-sponsored health coverage, including the Affordable Care Act (the “ACA”), impose requirements that differ based on whether employer-sponsored health coverage is insured or self-funded and, if insured, whether it is offered in the “small group” or “large group” insurance market. The status of coverage as either small or large group coverage generally depends on how many employees the employer has and affects the employer’s compliance obligations under the ACA and other laws. Under current DOL guidance, a group of small employers that want to associate in order… Continue Reading
The DOL has now officially delayed until April 1, 2018 its regulations that amend the claims review and appeal procedures applicable to ERISA-covered employee benefit plans providing disability benefits. Such regulations were originally scheduled to apply to disability benefit claims filed on or after January 1, 2018. We previously commented on the DOL’s proposal to delay these regulations here. The delay gives the DOL time to consider additional comments and data, reassess the impact of the new claims procedures, and revise the regulations as deemed appropriate. Employers should thus expect to receive additional guidance from the DOL before the April 1 effective date. View the final regulations that provide for the delay.