As noted in several recent blog posts, the year-end Consolidated Appropriations Act (CAA) included a number of employee benefits-related changes. One set of changes represents an effort to further strengthen protections under the Mental Health Parity and Addiction Equity Act (MHPAEA). These new provisions will require group health plans and health insurance issuers (collectively, “group health plans”) that provide both medical and surgical (M/S) benefits and mental health or substance use disorder (MH/SUD) benefits and that impose nonquantitative treatment limitations (NQTL) on MH/SUD benefits to perform comparative analyses to demonstrate compliance with mental health parity requirements. Plans will also be required to provide that comparative information to the DOL, HHS or applicable State authority upon request (DOL for ERISA-governed group health plans). These new requirements go into effect February 10, 2021 (45 days after enactment of the CAA).
Buried in the year-end Consolidated Appropriations Act (CAA) is a provision that requires group health plan brokers and consultants to make comprehensive fee disclosures similar to those that apply to retirement plans. As discussed further below, the new fee-disclosure requirements will result in additional compliance obligations for group health plan sponsors, brokers, and consultants, starting in December 2021.
As background, ERISA generally prohibits transactions between an ERISA plan and a party-in-interest, such as a service provider to the plan. However, a statutory exemption (known as the ERISA 408(b)(2) exemption) allows such transactions so long as the plan pays only reasonable compensation to a party-in-interest to provide necessary services to the plan. In 2012, the Department of Labor (DOL) issued regulations under which the ERISA 408(b)(2) exemption is available for a retirement plan only if a covered service provider makes a number of fee and service disclosures to the plan’s fiduciary to enable the fiduciary to make a determination as to whether the fees are reasonable. These are generally referred to as the 408(b)(2) fee disclosures. The DOL regulations implementing this fee-disclosure requirement specifically omit health and welfare plans.
The Consolidated Appropriations Act, 2021, enacted on December 27, 2020 (the CAA), includes limited relief pertaining to the partial termination of a qualified retirement plan that may have been inadvertently triggered by employer-initiated severances during the COVID-19 pandemic. Generally, as discussed further in our May 2020 post, the determination as to whether a partial plan termination has occurred depends on the facts and circumstances; however, there is a rebuttable presumption of a partial plan termination if, during the applicable period, the employee turnover rate is at least 20 percent. The employee turnover rate is the number of participating employees who had an employer-initiated severance divided by the total number of participating employees. A partial plan termination triggers 100% vesting for affected participants.