Federal District Court Invalidates Some Surprise Billing Rules: What It Means for the No Surprises Act

On February 23, 2022, the United States District Court for the Eastern District of Texas invalidated portions of Part II of the interim final rule (“IFR”) issued by the U.S. Departments of Health and Human Services, Labor, and Treasury (“Tri-Agencies”), implementing the dispute resolution provisions of the No Surprises Act (“NSA”).  While the ruling in the case, Texas Medical Association v. U.S. Department of Health & Human Services, may impact medical plan costs, it does not substantively affect the consumer protections against surprise medical billing added by the NSA, which took effect in 2022.

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Selling an LLC? Don’t Forget About 280G!

Internal Revenue Code Section 280G (280G) (commonly referred to as the golden parachute provision) is intended to discourage the payment of excessive compensation to certain shareholders, officers and highly compensated service providers of companies undergoing a change in control. In general, when transaction-related payments or benefits to a covered individual equal or exceed three times the individual’s average compensation for the previous five years, the individual may be subject to a 20% excise tax, and the company’s deduction for such payments or benefits may be disallowed (in each case, with respect to amounts in excess of the average compensation).

280G commonly applies when a C-corporation undergoes a corporate transaction. However, in certain circumstances, 280G can also apply when the only entity being sold is an LLC. Note: Although this post focuses on the applicability of 280G to LLCs, 280G can also apply to the sale of a partnership in the circumstance described in #2 below.

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New COVID-19 Guidance: Government Requires Health Plans to Cover At-Home COVID-19 Tests

On January 10, 2022, the Departments of Health and Human Services, Labor and Treasury issued guidance addressing a group health plan’s obligation to cover the cost of over-the-counter, at-home COVID-19 tests starting January 15, 2022.  The new coverage requirement means that enrolled individuals can go online or to a pharmacy and buy an over-the-counter FDA-approved COVID-19 diagnostic test and either have it paid for up front by their health plan or be reimbursed by submitting a claim without any cost-sharing requirements (such as deductibles, co-payments or co-insurance).  The guidance provides that beginning January 15, 2022 through the end of the declared public health emergency, plans must cover at least eight (8) over-the-counter at-home tests per enrolled individual per 30-day (or calendar-month) period without an assessment or provider involvement.  This does not affect the obligation to provide coverage for COVID-19 tests with a provider’s involvement or prescription.

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Department of Labor Proposal Would Encourage Consideration of ESG Factors for Plan Investments

On October 13, 2021, the Department of Labor (DOL) released a new proposed regulation under ERISA that would replace the previous administration’s “pecuniary factors” rule – which is widely viewed as discouraging the use of environmental, social, and governance (ESG) factors when selecting plan investments – with one that would encourage their consideration and provide a clearer pathway for plan fiduciaries to do so.

Background

Over the years, the DOL’s stated position on the consideration of ESG and other “social” factors when selecting plan investments has toggled back and forth, largely along party lines.

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Revised IRS Correction Procedures (EPCRS) Include Helpful Changes

On July 16, 2021, the Internal Revenue Service (“IRS”) published an updated version of its correction procedures for qualified retirement plans, Revenue Procedure 2021-30, the Employee Plans Compliance Resolution System (“EPCRS”).

The revisions to EPCRS include a number of changes that are intended to help simplify and provide additional flexibility for correcting certain retirement plan failures. Below is a summary of the major changes:

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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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Part One of Surprise Medical Billing Regulatory Guidance Outlines Specific Required Changes to Group Health Plan Payment Calculations

The No Surprises Act (the “NSA”), which was signed into law at the end of 2020 as part of the Consolidated Appropriations Act, is designed to protect consumers from unexpected medical bills.  The NSA generally applies to group health plans, healthcare providers, and health insurance issuers.  The NSA is expected to have significant and far-reaching impacts on the health industry, so it is imperative that group health plan sponsors take steps to implement regulatory guidance on the NSA as it is issued.

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PBGC Issues Interim Regulations on Special Financial Assistance for Multiemployer Pension Plans

Multiemployer pension plans are collectively bargained defined-benefit employee benefit plans that are funded by several unrelated employers for the benefit of unionized employees. In recent years, the crisis of significantly underfunded multiemployer plans has continued to grow. In response, Congress enacted the American Rescue Plan Act of 2021 (ARPA), which was signed into law on March 11, 2021. ARPA amended ERISA to establish a new program within the Pension Benefit Guarantee Corporation (PBGC) to offer “special financial assistance” (SFA) to multiemployer plans in danger of becoming insolvent; in contrast to other assistance offered by the PBGC, plans are not required to repay the SFA.

ARPA directed the PBGC to issue regulations or other guidance to prescribe the application requirements for SFA payments and for how funds are to be invested and to impose conditions on plans that receive SFA payments. On July 9, 2021, the PBGC issued this guidance in the form of interim regulations.

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More Employees Will Be 162(m) Covered Employees under the American Rescue Plan Act

The American Rescue Plan Act (ARPA), passed by Congress and signed into law on March 11, 2021, expands the definition of “covered employee” under Internal Revenue Code Section 162(m), requiring the inclusion of an additional top five highest paid employees (beyond those officers already counted).

Section 162(m) imposes a $1 million deduction limit on remuneration paid to a covered employee. Currently, covered employees for a particular tax year include the principal executive officer, the principal financial officer, and the next three most highly compensated officers (the Five Officers). The 2017 Tax Cuts and Jobs Act (TCJA) changed the Section 162(m) rules for tax years after December 31, 2016, so that an individual’s status as a covered employee will continue even if he or she is no longer among the five highest paid officers (e.g., for purposes of compensation paid after he or she terminates from employment with the public company). Therefore, today the list of covered employees includes the Five Officers and anyone who was one of the Five Officers for tax years beginning after December 31, 2016.

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Department of Labor Confirms It Will Not Enforce Controversial “Pecuniary Factors” Rule for ERISA Plan Investments

On March 10, 2021, the Department of Labor’s Employee Benefits Security Administration (EBSA), the agency charged with interpreting and enforcing ERISA, announced that it will not enforce the Trump-era “Financial Factors in Selecting Plan Investments” rule, which has been perceived as potentially discouraging retirement plan fiduciaries from selecting investment alternatives which emphasize environmental, social, and governance factors (commonly referred to as “ESG investments”).

The rule, which was finalized in November 2020 and technically became effective on January 12, 2021, does not prohibit ESG investments.  However, it has been widely criticized as fostering a misapprehension that ESG investments may be subjected to a higher degree of fiduciary scrutiny than others.  Following the election, EBSA’s announcement of its non-enforcement policy comes as no surprise, as the Biden administration had already identified the rule on its “List of Agency Actions for Review.”

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