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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

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

Keeping Your Wellness Program Healthy

For years, employers have used wellness programs with the hope they would help improve employees’ overall health while simultaneously reducing group health plan costs. The pandemic has presented challenges for wellness programs though, as employees have found it more difficult to meet the requirements for discounts because of lockdowns and fears of COVID-19. To address these challenges, some employers are considering modifications to their programs to allow employees to qualify for discounts if they obtain a flu or COVID-19 vaccine. Before adopting any changes, employers should use caution, as wellness programs are subject to numerous legal requirements, including requirements under the ACA, ERISA, HIPAA, and the Americans with Disabilities Act. By carefully evaluating changes and considering the myriad of legal requirements applicable to wellness programs prior to implementing any changes, plan sponsors can avoid jeopardizing the legal health of their wellness programs.  Our prior blog posts regarding wellness program compliance… Continue Reading

New COBRA Subsidy Guidance Addresses Outstanding Issues

The IRS recently issued Notice 2021-46 (the “Notice”), which provides new guidance in the form of FAQs regarding the application of the COBRA premium assistance provisions of the American Rescue Plan Act of 2021 (the “COBRA Subsidy”). The Notice supplements the IRS’s prior Notice 2021-31 regarding the COBRA Subsidy and addresses additional matters. Issues addressed in the Notice include, among others, (i) the availability of the COBRA Subsidy in situations where an individual is entitled to notify the plan administrator, but has not yet done so, of his or her eligibility for an extended COBRA coverage period due to a disability determination or the occurrence of a second COBRA qualifying event, (ii) the loss of an individual’s entitlement to the COBRA Subsidy with respect to dental and vision coverage when he or she becomes eligible to enroll in other group health plan coverage or Medicare that does not provide dental… Continue Reading

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

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

Group Health Plan Service Contracts Trigger Compensation Disclosures

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

Reminder – Employers Must Maintain Mental Health/Substance Abuse Parity Documentation

As discussed in our prior blog post here, effective as of February 10, 2021, employer-provided group health plans that impose nonquantitative treatment limitations (?Ç£NQTLs?Ç¥) on mental health or substance use disorder benefits (?Ç£MH/SA Benefits?Ç¥) must have documentation demonstrating that the NQTLs satisfy the mental health and substance use disorder parity rules (?Ç£Compliance Documentation?Ç¥). As discussed in another one of our prior blog posts here, the DOL has identified particular NQTLs on which it will focus its enforcement efforts. The DOL also clearly communicated that general statements to the effect that the plan has compliant processes will not meet the Compliance Documentation requirements. We have noted that some third party administrators are producing reports and other documents that fail to satisfy the Compliance Documentation requirements. For example, such documents may refer to the administrator?ÇÖs internal policies or procedures without adequately describing them, or they may simply incorporate internal policies by reference… Continue Reading

IRS Issues Additional Guidance Regarding COBRA Premium Subsidy

As we previously reported here, the American Rescue Plan Act of 2021 (?Ç£ARPA?Ç¥) provides a 100% COBRA premium subsidy to any qualified beneficiary who is entitled to COBRA coverage due to an involuntary termination of employment or reduction in hours of employment. Employers will receive a tax credit for the cost of COBRA premiums for April 1 to September 30, 2021. The IRS recently issued FAQs addressing many issues related to the subsidy, including: (i) subsidy eligibility, (ii) what qualifies as a reduction in hours or an involuntary termination of employment, (iii) the type of coverage eligible for the subsidy, (iv) when the subsidy period begins and ends, (v) the extended election period, (vi) coordination with the extended deadlines due to the COVID national emergency (?Ç£Outbreak Period Extensions?Ç¥), (vii) payments to insurers, (viii) application to state continuation coverage, and (ix) calculation and claiming of the subsidy tax credit. One of… Continue Reading

HHS Announces Final 2022 Cost-Sharing Maximums under the Affordable Care Act

HHS recently issued its final ?Ç£Notice of Benefit and Payment Parameters for 2022?Ç¥ (the ?Ç£Notice?Ç¥), which includes the maximum annual limitations on cost-sharing that will apply to ?Ç£essential health benefits?Ç¥ in 2022 under non-grandfathered group health plans subject to the Affordable Care Act. For this purpose, cost-sharing generally includes deductibles, coinsurance, copayments, and other required expenditures that are qualified medical expenses with respect to essential health benefits available under the plan. The 2022 limitations are (i) $8,700 for self-only coverage and (ii) $17,400 for other than self-only coverage. The Notice is available here.

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