On September 1, 2019, the IRS reopened its determination letter program for two types of individually designed retirement plans: statutory hybrid plans and merged plans. For a detailed review of this limited expansion of the determination letter program, see our client alert, “IRS Announces Limited Expansion of the Determination Letter Program for Individually Designed Plans.”
In our next installment of ERISA at 45, Kim Jones and Sarah Bassler Millar discuss how the landscape of health and welfare plan litigation has changed over the past 45 years, and identify new trends in litigation involving excessive fees, mental health parity, cross-plan offsetting, and pharmacy benefit managers.
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In Notice 2019-45 (the Notice) the IRS expands the definition of preventive care available under a high deductible health plan (HDHP) to include additional medical services and items for an individual with certain chronic conditions. This Notice was issued in response to President Trump’s June 2019 Executive Order on “Improving Price and Quality Transparency in American Healthcare to Put Patients First.” This Order directed regulatory agencies to issue guidance on a number of initiatives as a means to promote health care price transparency and enhance consumer-driven health care, such as health savings accounts (HSAs). The Notice responds to the Order’s directive that the IRS provide guidance expanding the definition of preventive care for participants with chronic conditions.
Individuals may contribute to a HSA if they are covered by a HDHP and have no disqualifying health coverage. To qualify as a HDHP, a health plan generally may not provide benefits, except for preventive care services, for any year until the participant satisfies the minimum deductible for that year. The Notice specifically expands the definition of preventive care that may be covered by a HDHP to include certain medical care services and items for chronic conditions. Based on the guidance, plan sponsors may amend their HDHPs to cover additional medical services and items for an individual with certain chronic conditions before the individual meets the HDHP deductible. Note that this expanded definition only applies for purposes of HDHPs and does not affect the definition of preventive care as used under the Affordable Care Act (ACA) rule prohibiting cost-sharing for network preventive care.
On August 26, 2019, the Internal Revenue Service (IRS), Department of Labor (DOL), and Department of Health and Human Services (HHS), collectively the “Agencies,” issued a joint FAQ announcing their intent to delay enforcement of a recent HHS final rule that would require group health plans and issuers of health insurance coverage to count certain drug manufacturer coupons toward the maximum annual out-of-pocket cost-sharing limit under the Affordable Care Act (the maximum out-of-pocket or MOOP limit). For plan years beginning in 2020, the MOOP limit on cost sharing is $8,150 for self-only coverage and $16,300 for other than self-only coverage. Drug manufacturers’ “coupons” are a form of cost-sharing assistance that offsets the amount of a participant’s copayment or coinsurance for a brand name drug.
The MOOP limit under ERISA and the Internal Revenue Code incorporates the HHS rule, thereby applying it to all non-grandfathered group health plans, self-funded or insured. The HHS rule states that plans and issuers are permitted to exclude the value of such coupons for specific prescription brand drugs from counting toward MOOP limits when a medically appropriate generic equivalent is available. However, based on language in the preamble to the HHS rule, health plans would have to count coupons toward MOOP limits when a medically appropriate generic drug is not available.
The Ninth Circuit’s recent decision forcing a 401(k) plan mismanagement lawsuit into arbitration is a significant ruling for plan sponsors. But it also leaves lingering questions about the enforceability of arbitration clauses written into plan documents. See Dorman v. Charles Schwab Corp., No. 18-15281, 2019 WL 3939644 (9th. Cir. Aug. 20, 2019).
Dorman is a putative class action involving allegations that the Schwab defendants breached their fiduciary duties by including Schwab-affiliated investment alternatives in its 401(k) plan, despite the funds’ alleged poor investment returns. Dorman, a former plan participant, sought monetary and other equitable relief on behalf of the plan under ERISA §§ 502(a)(2) and (a)(3). Schwab’s plan document included a mandatory arbitration provision for claims related to the plan and a waiver of class action lawsuits. Schwab filed a motion to compel arbitration, which was denied by the Northern District of California.
In this series premiere, Brad Campbell and Sarah Bassler Millar discuss the evolution of ERISA over the last 45 years, efforts at the Federal and State levels to increase participation in retirement savings plans, potential changes in legislation and what to expect from regulatory agencies in the coming years.
Visitors can also download the podcast
Missed last month’s Benefits & Breakfast meeting on the latest developments in welfare plans in Chicago, Los Angeles and Philadelphia? We have you covered!
Listen to recordings for each meeting, where we covered the following topics:
- New Health Reimbursement Account (HRA) Regulations – Will a standalone HRA work for you?
- Recent Welfare Plan Litigation – Are you prepared to defend a lawsuit based on your current plan documentation and procedures?
- Privacy – Are changes to the HIPAA Privacy Rule in the future? Will new California privacy rules affect you?
- Health Plan Executive Order – What is coming for HSAs, FSAs, and health care price transparency initiatives?
The DOL’s newly released final regulation on “Association Retirement Plans” (ARPs) will make it easier for groups and associations of employers to jointly sponsor a combined 401(k) or other defined contribution plan. (These plans are also referred to as multiple employer plans or “MEPs.”) In recent years, there has been a push to permit service providers to create “Open MEPs,” which are plans of unrelated employers having no business connection, or what the DOL refers to as “commonality” (i.e., a relationship unrelated to employee benefits). The hope is that these plans will provide small businesses with a cost-efficient and minimally burdensome avenue for offering retirement savings opportunities to workers.