Agencies Issue FAQs Clarifying Wellness Program and Other Health Plan Requirements Related to COVID-19 Vaccines
The DOL, Treasury Department, and HHS have jointly issued a set of FAQs that provide helpful clarifications regarding certain requirements under the CARES Act, the HIPAA nondiscrimination rules (the “Nondiscrimination Rules”), and the Affordable Care Act (the “ACA”) related to COVID-19 vaccines (“Vaccines”). Wellness Programs under the Nondiscrimination Rules Among other items, the FAQs provide guidance under the Nondiscrimination Rules regarding an employer’s imposition of a premium discount under a wellness program for an individual’s receipt of a Vaccine. If the wellness program is itself, or is part of, a group health plan that is not otherwise exempt from the Nondiscrimination Rules, the FAQs confirm that a premium discount would constitute a “health-contingent, activity-only” wellness program that must, among other requirements, offer a “reasonable alternative standard” to qualify for the discount for individuals for whom it is unreasonably difficult due to a medical condition, or medically inadvisable, to receive the… Continue Reading
Employee Benefits Regulations Potentially Impacted by the Biden Administration?ÇÖs Regulatory Freeze
On January 20, 2021, the Biden Administration issued a memorandum (the ?Ç£Memo?Ç¥) announcing a regulatory freeze on regulations that have not taken effect as of the date of the Memo. Specifically, the Memo recommends postponing the effective date of any regulation that has been issued, but has not taken effect, for 60 days from the date of the Memo. The Memo further directs that regulations not yet published in the Federal Register be immediately withdrawn for review. Listed below are some of the proposed and final regulations related to employee benefits that may be subject to withdrawal or postponement under the Memo: Prohibited Transaction Exemption 2020-02 ?Çô Improving Investment Advice for Workers & Retirees. Final Rule. Application of the Employer Shared Responsibility Provisions and Certain Nondiscrimination Rules to Health Reimbursement Arrangements and Other Account-Based Group Health Plans Integrated with Individual Health Insurance Coverage or Medicare. Final Rule. Pension Benefit Statements-Lifetime… Continue Reading
Employee benefits rarely drive corporate transactions, but if the benefits of a target company are not reviewed carefully, they can sometimes derail the transaction. Even some of the most routine facets of benefit plan administration can result in significant potential financial exposure (e.g., additional employer contributions, taxes, penalties, and fees as well as fees associated with the preparation and filing of IRS and DOL correction program applications) that could negatively affect the overall value of the target company. By identifying issues early in the transaction, the seller can prevent costly purchase price reductions and identify issues that need correction, while the buyer can avoid overpaying for a target and ensure that representation and warranty insurance will be available to cover potential claims. Some of those routine compliance issues include, but are not limited to, the following: Failing to timely file an annual Form 5500. The DOL can assess a penalty… Continue Reading
The IRS recently published an updated Operational Compliance Checklist (the ?Ç£Checklist?Ç¥), which lists changes in qualification requirements that became effective during the 2016 through 2020 calendar years. Examples of items added to the Checklist for 2020 include, among other things: Final regulations relating to hardship distributions; Temporary nondiscrimination relief for closed defined benefit pension plans; Penalty-free withdrawals from retirement plans for individuals in cases of birth or adoption; and Increase in age for required beginning date for mandatory distributions. The Checklist is only available online and is updated periodically to reflect new legislation and IRS guidance.?á The Checklist does not, however, include routine, periodic changes, such as cost-of-living increases, spot segment rates, and applicable mortality tables, which can instead be found on the IRS?ÇÖs Recently Published Guidance webpage here. The Checklist is available here.
Health and Welfare Issues and COVID-19: Reminder: Decrease in Pay/Hours Does Not Permit Dropping Health Plan Coverage If There is No Loss of Eligibility
As many employers reduce employees?ÇÖ work hours, employers should consider that employees will remain responsible for their health plan contributions even though their pay is decreasing. As long as eligibility for coverage does not change, an employee is not permitted to change his or her health plan elections due solely to the decrease in pay or hours. One exception to this general rule is a change in status event created in connection with the Affordable Care Act, which provides that, in certain circumstances, an employee with reduced work hours may drop health plan coverage if the employee enrolls in other health plan coverage. Because the reduced pay may not cover all payroll deductions, employers should consider adopting a priority order for payroll deductions (e.g., health plan deductions are made before 401(k) plan deductions). In addition, an employer may want to consider a waiver of premiums, which is permitted if done… Continue Reading
In Notice 2019-60, the IRS granted additional nondiscrimination relief for certain ?Ç£closed?Ç¥ defined benefit plans (i.e., plans frozen as to new participants before December 13, 2013, but that provide ongoing benefit accruals for existing participants). This relief is in addition to the relief originally provided in Notice 2014-5, which permits employers who sponsor both a ?Ç£closed?Ç¥ defined benefit plan and a defined contribution plan to demonstrate that the aggregated plans comply with the nondiscrimination requirements of Code Section 401(a)(4) on the basis of equivalent benefits, even if the aggregated plans do not satisfy the current conditions for testing on that basis. The new nondiscrimination relief provides that these closed defined benefit plans will also be deemed to satisfy the nondiscrimination requirements that relate to plan benefits, rights, and features (such as optional forms of benefits and certain ancillary benefits) that were provided under the plan at the time it was… Continue Reading
Possible Year-End Deadline for Retirement Plans of Plan Sponsors Involved in a 2017 Corporate Transaction
Generally, employee benefit plans of members of the same controlled group must satisfy certain requirements of the Internal Revenue Code on an aggregated basis (e.g., retirement plan nondiscrimination and coverage testing). Following a corporate transaction, such as a merger or a stock or an asset sale, the benefit plans of the buyer and seller may differ significantly. In order for plan sponsors to have a period of time post-closing to determine how best to structure their benefit plans going forward, Code Section 410(b)(6)(C) provides transition relief by permitting the plans to choose to be operated and tested separately, if certain requirements are met, such as coverage under the plan not being materially modified during a transition period. The transition period begins on the transaction?ÇÖs closing date and, generally, ends on the last day of the first plan year beginning after the year in which the transaction occurred or, if earlier,… Continue Reading
In Notice 2017-45, the IRS extended the temporary nondiscrimination relief that it provided in Notice 2014-5 for plan years beginning before 2019. Notice 2014-5 permits certain employers that sponsor a ?Ç£closed?Ç¥ defined benefit plan and a defined contribution plan to demonstrate that the aggregated plans comply with the nondiscrimination requirements of Section 401(a)(4) of the Internal Revenue Code on the basis of equivalent benefits, even if the aggregated plans do not satisfy the current conditions for testing on that basis. A ?Ç£closed?Ç¥ defined benefit plan for purposes of these Notices provides ongoing accruals but was amended before December 13, 2013, to limit those accruals to some or all of the employees who participated in the plan as of a certain date (i.e., is frozen to new participants). View IRS Notice 2017-45. View IRS Notice 2014-5.
In May, we provided information about the release of final HHS regulations implementing ACA Section 1557 and their potential effects on healthcare providers, insurers, and employer-provided healthcare coverage. Chris Beinecke wrote an article discussing these implications in greater detail. A link to this article, which was recently published in the Dallas Business Journal, is available?áhere.
Section 1557 of the Affordable Care Act (the ?Ç£ACA?Ç¥) prohibits discrimination in certain health care programs and activities on the basis of race, color, national origin, sex, age, or disability. HHS recently issued final rules under Section 1557, which specify gender identity discrimination and sexual stereotyping as forms of sex discrimination. However, these rules only apply to ?Ç£covered entities?Ç¥ as defined for this purpose. The term ?Ç£covered entity?Ç¥ includes health care systems or providers that accept Medicare Part A or Medicaid and insurance carriers and/or third party administrators (?Ç£TPA?Ç¥) that receive federal funding through participation in the public insurance marketplace, which will also have to comply with respect to benefits offered to their own employees. While HHS interprets the rule to impact an insurance carrier?ÇÖs and/or a TPA?ÇÖs entire book of business, a TPA is not responsible for discrimination due to a plan sponsor?ÇÖs self-insured plan design decisions beyond the… Continue Reading