Yael Kalman, Author at Spotlight on Benefits

DOL Issues Long Awaited Mental Health Parity Guidance

Plan sponsors, insurers, and third-party administrators should pay close attention to the new guidance to facilitate health plan compliance with complex nonquantitative treatment limitation comparative analyses requirements.

On July 25, 2023, the Department of Labor (DOL), Department of the Treasury (Treasury), and Health and Human Services (HHS) (the Departments) issued a proposed rule on how to comply with the nonquantitative treatment limitations (NQTL) comparative analyses requirements enacted under the Consolidated Appropriations Act, 2021 (CAA). The requirement for health plans to perform and document their comparative analyses of the design and application of NQTLs became effective February 10, 2021, and the DOL has been aggressively enforcing the requirement through extensive, multi-year health plan investigations over the last few years. In addition to the proposed rule, the new guidance issued also includes:

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IRS Issues Interim Guidance on SECURE 2.0 Self-Correction Expansion

The IRS recently issued Notice 2023-43 (Notice) to provide interim guidance on Section 305 of SECURE 2.0 Act of 2022 (SECURE 2.0), which significantly expanded self-correction under the Employee Plans Compliance Resolution System (EPCRS). The Treasury Department was directed under SECURE 2.0 Section 305 to issue an updated version of EPCRS (most recently set forth in Rev. Proc. 2021-30) by December 29, 2024. The Notice is intended to provide some answers to plan sponsors in advance of the update to Rev. Proc. 2021-30.

In general, Section 305 of SECURE 2.0 broadened the scope of self-correction by permitting any eligible inadvertent failures (EIFs) to be self-corrected within a reasonable period after the failure is identified. SECURE 2.0 defines the self-correction period as indefinite, with no last day, so long as the IRS does not identify the failure before the plan sponsor takes action demonstrating a specific commitment to implement a self-correction to the failure.

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SECURE 2.0 Expansion of Self-Correction Program and Plan Loan Error Corrections

The SECURE 2.0 Act of 2022 (SECURE 2.0), the follow-up legislation to the Setting Every Community Up for Retirement Enhancement Act of 2019 (now known as SECURE 1.0) (previously discussed here and here), includes many important legal changes affecting retirement plans. SECURE 2.0 is intended to expand access to retirement plans, encourage additional retirement savings and ease certain administrative burdens on retirement plan sponsors.

In a measure that substantively affects plan sponsors and alters retirement plan correction practices, SECURE 2.0 significantly expands the availability of self-correction by widening the range of operational failures for which self-correction is available, including plan loan errors.

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Temporary Reinstatement of Relief for Telemedicine Coverage in HDHPs

The Consolidated Appropriations Act 2022 (“CAA 2022”), signed by President Biden on March 15, 2022, reinstated temporary relief for high deductible health plans (“HDHPs”) to provide pre-deductible coverage of telehealth services from April 1 through December 31, 2022, without impacting HDHP participants’ eligibility to contribute to their health savings accounts (“HSAs”).

In general, HDHP coverage of telehealth services at no or low cost before the participant satisfies the minimum HDHP deductible (in 2022, $1,400 for single-only coverage and $2,800 for family coverage) would cause HDHP participants to become ineligible to make HSA contributions.

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Preview of 2022 Required Changes for Retirement Plans

As 2022 begins, retirement plan sponsors and service providers should keep in mind deadlines for required plan changes in 2022. In particular, retirement plan changes under the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) and Coronavirus Aid Relief and Economic Security Act (CARES Act) must be adopted by amendment by December 31, 2022, for calendar year plans. In addition, retirement plans must comply with new SECURE Act disclosure requirements beginning later this year.

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Last Call: Don’t Forget Your Retirement Plan’s Required Year-End Amendments for 2021

As 2021 winds down, retirement plan sponsors should confirm that their plan documents are amended by December 31, 2021, to comply with certain plan changes:

Hardship Distributions. 401(k) plans and 403(b) plans must be amended, as applicable, to comply with the final regulations updating the hardship distribution rules. For hardship distributions made on or after January 1, 2020, plans must be amended by December 31, 2021, to: (i) eliminate the suspension of elective deferrals following a hardship distribution; and (ii) require employees requesting hardship distributions to represent that they have insufficient cash or other liquid assets reasonably available to satisfy the need.Additionally, plans that made changes to their hardship distribution provisions that were (i) permitted under the regulations, and/or (ii) took effect on or before January 1, 2020 (such as eliminating the requirement to exhaust all available loans before taking a hardship distribution, or permitting amounts contributed as qualified nonelective contributions (QNECs) or qualified matching contributions (QMACs) and earnings to be made available for hardship distributions), must adopt such changes by December 31, 2021.
PBGC Rates. Defined benefit plans that refer to the Pension Benefit Guaranty Corporation (PBGC) immediate rate may need to be amended to reflect that the PBGC stopped publishing monthly rates at the end of 2020. Such amendment would need to be effective January 1, 2021 (which, for calendar year plans, would require adoption of an amendment by December 31, 2021).
Collectively Bargained Cash Balance/Hybrid Defined Benefit Plans. Cash balance/hybrid defined benefit plans maintained pursuant to a collective bargaining agreement ratified on or before November 13, 2015 must be amended by December 31, 2021, to comply with requirements regarding market rate of return and other cash balance/hybrid plan requirements that first applied to such plans generally on or after January 1, 2017.
Discretionary Amendments. If a retirement plan implements discretionary changes during the 2021 plan year, retirement plan sponsors must adopt an amendment to that effect by the last day of the 2021 plan year (December 31, 2021, for a calendar year plan).

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New DOL FAQs Provide Guidance Regarding Lifetime Income Illustrations for Defined Contribution Plans

On July 26, 2021, the Department of Labor (Department) issued frequently asked questions (FAQs) regarding the interim final rule (IFR) on lifetime income illustrations (LIIs) that must be included in participants’ pension benefit statements for defined contribution plans on an annual basis. The IFR on LIIs, which we previously discussed in a client alert, will become effective on September 18, 2021. The FAQs respond to comments received in response to the IFR regarding the applicability date of the rules and method for furnishing benefit statements.

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Disclosure of Claims-Related Audio Recordings

Claims-related audio recordings may need to be disclosed to claimants upon request, according to an information letter dated June 14, 2021 (“Information Letter”), issued by the Department of Labor’s (“DOL”) Employee Benefits Security Administration (“EBSA”). Although DOL information letters are not binding, as a result of the Information Letter, claimants may start to request audio recordings of conversations relating to benefit denials. Plan sponsors and claims administrators should be prepared for these requests and should train personnel handling telephone calls with claimants accordingly.

The Information Letter addresses whether ERISA and DOL claims procedures regulations thereunder require a plan fiduciary to provide, upon a claimant’s request, a copy of an audio recording and transcript of a telephone conversation between the claimant and a representative of the plan’s insurer regarding a benefit denial. The request at issue in the Information Letter was denied by the claims administrator on the basis that “recordings are for ‘quality assurance purposes,’” and “are not created, maintained, or relied upon for claim administration purposes, and therefore are not part of the administrative record.” The claims administrator maintained that the actual recording is distinct from the notes made available to the claimant, which contemporaneously documented the content of the recorded conversation, and which became part of the “claim activity history through which [the insurer] develops, tracks and administers the claim.”

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Rehiring Employees by End of 2020 Could Prevent Partial Plan Terminations

In our May 2020 client alert, we addressed the possibility that COVID-19 layoffs could inadvertently cause a partial termination of a company’s qualified retirement plan. Recently issued IRS guidance provides that if participating employees whose employment was terminated due to COVID-19 are rehired by the end of 2020, the IRS generally will not deem a partial plan termination to have occurred. However, rehiring employees by the end of 2020 will not guarantee that employers will avoid a partial plan termination.

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New Guidance on Health Coverage Issues Relating to COVID-19

On June 23, 2020, the Department of Labor, Department of Health and Human Services (HHS), and Department of the Treasury (the Departments) issued new frequently asked questions (FAQs) regarding coverage for COVID-19 testing under the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The FFCRA and the CARES Act generally require employer health plans to provide coverage for COVID-19 testing without imposing any cost sharing (including deductibles, copayments and coinsurance), prior authorization or certain other medical management requirements. Prior FAQs were issued on April 11, 2020 (FAQs Part 42).

The June 23, 2020, FAQs provide additional guidance on health coverage issues for sponsors of group health plans during the COVID-19 pandemic, and are particularly relevant for employers considering return-to-work policies.

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