In its recent decision in State of New York v. U.S. Department of Labor, the federal district court for the District of Columbia vacated key provisions of the final regulations issued in 2018 by the DOL under ERISA regarding the establishment of “association health plans” (the “Final Regulations”). The Final Regulations broadened 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 in the form of an association health plan (“AHP”). The Final Regulations were applicable to fully-insured AHPs as of September 1, 2018, to existing self-funded AHPs as of January 1, 2019, and to newly created self-funded AHPs as of April 1, 2019. See our prior blog post for additional information regarding the Final Regulations. In response to the Final Regulations, 11 states and the District of Columbia sued the DOL alleging that (i) key… Continue Reading
When participants in qualified retirement plans are no longer current employees of the plan sponsor, it can be challenging to ensure that the contact information in the plan’s records is up to date and accurate. However, inaccurate contact information in the plan’s records is problematic for a variety of reasons, including causing operational failures when participants do not receive distribution of benefits by the plan’s required distribution date and increasing the possibility of fraud when a participant’s information is sent to the wrong address. Plan administrators should review their procedures for locating missing participants and ensure that they are (1) consistent with available guidance from the IRS and the DOL, (2) appropriate for the plan and its participant population, and (3) being followed consistently by the plan administrator or its delegate. Plan administrators should also document any steps undertaken to locate missing participants. The plan’s procedures should also address how… Continue Reading
The DOL released final regulations expanding the groups of employers that may participate in one ERISA-covered employee group health plan (an “Association Health Plan”). Generally, employers (including working owners with no employees) may participate in an Association Health Plan as long as they are in the same industry, state, or metropolitan area. A major benefit of joining together to participate in one ERISA-covered group health plan, as opposed to being treated as maintaining separate ERISA group health plans, is that the total number of employees participating in the Association Health Plan, from all participating employers, will determine whether the Association Health Plan is treated as “large group,” “small group,” or individual coverage for purposes of the mandates under the Affordable Care Act (the “ACA”). The ACA places a number of requirements on small group and individual coverage that do not apply to large group health plans. An Association Health Plan… Continue Reading
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