Month: December 2020

On December 9, 2020, the IRS issued Notice 2020-86 addressing certain provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) affecting certain safe harbor plans. This notice provides guidance in the form of questions and answers with respect to Sections 102 and 103 of the SECURE Act, and it is intended to assist employers while the Treasury Department and IRS develop regulations to fully implement these provisions. Below is a high-level overview of Sections 102 and 103 of the SECURE Act and some of highlights of the guidance included in Notice 2020-86.

Section 102 of the SECURE Act generally increases the maximum automatic elective deferral percentage under an automatic enrollment safe harbor plan from 10% to 15%. With respect to Section 102, this Notice includes the following guidance:

• A qualified automatic contribution arrangement (QACA) safe harbor 401(k) plan is not required to increase the maximum elective deferral percentage provided under the plan in order to maintain its qualified plan status.
• A plan that incorporates by reference the maximum elective deferral percentage under the Internal Revenue Code may needed to be amended to provide an explicit maximum percentage, if the employer does not intend to use the new 15% maximum. The amendment deadline is generally December 31, 2022 for non-governmental plans, and December 31, 2024 for governmental or collectively bargained plans.

Section 103 of SECURE Act eliminates certain safe harbor notice requirements for plans that provide safe harbor nonelective contributions and adds new provisions for the retroactive adoption of safe harbor status for those plans. With respect to Section 103, this Notice includes the following guidance:

• The SECURE Act did not alter the notice requirements for plans that use safe harbor matching contributions.
• To retain the ability to reduce or suspend safe harbor nonelective contributions during the plan year, a plan must still satisfy the requirements outlined in the Treasury regulations, include providing some type of notice to employees.
• An amendment to adopt a nonelective contribution safe harbor design can be adopted any time before the last day for distributing excess contributions for the plan year, if the nonelective contributions are at least 4% of each employee’s compensation.

The full text of IRS Notice 2020-86 is available at https://www.irs.gov/pub/irs-drop/n-20-86.pdf.

“To make fully informed decisions about their health care, patients must know the price and quality of a good or service in advance.”[1]

New rules published last month likely require your employer health plan to phase-in certain disclosures over a three-year period beginning in one year:

1. January 1, 2022 (three files must be disclosed): For plan years beginning on or after January 1, 2022, non-grandfathered group health plans will be required to make available to the public three separate machine-readable files that include detailed pricing information (standardized format and updated monthly):

• • File #1 (in-network providers): The first file must show the negotiated rates for all covered items and services between the plan and in-network providers, except prescription drugs (see File #3 below).
  • File #2 (out-of-network providers): The second file must disclose the historical payments to, and billed charges from, out-of-network providers.
  • File #3 (prescriptions): The third file must disclose the in-network negotiated rates and historical net prices for all covered prescription drugs.

2. January 1, 2023 (online shopping tool required for 500 items): For plan years beginning on or after January 1, 2023, non-grandfathered group health plans must make available to participants, beneficiaries, and enrollees (or their authorized representative) personalized out-of-pocket cost information, and the underlying negotiated rates, for 500 identified covered health care items and services through an internet-based self-service tool, and in paper form, upon request.  (Note:  This is intended to give consumers real-time and accurate estimates of their cost-sharing liability for health care items and services from different providers in real time, allowing them to both understand how costs are determined and also to shop and compare health care costs before receiving care.)

3. January 1, 2024 (online shopping tool for everything): For plan years beginning on or after January 1, 2024, non-grandfathered group health plans must make available to participants, beneficiaries, and enrollees (or their authorized representative) personalized out-of-pocket cost information, and the underlying negotiated rates, for all covered health care items and services, including prescription drugs, through an internet-based self-service tool, and in paper form, upon request.

These disclosures are radical.  Network providers and third-party administrators will be working hard and spending a lot of money over the next 12 months to try to comply with these new requirements.  Ultimately, employers are likely responsible for ensuring compliance so you might check with your service providers to find out their plan and make sure you have an understanding of their timeline (which is likely just starting to develop).

[1]              Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First (June 24, 2019).

As many have likely heard, multiple COVID-19 vaccine candidates have rapidly reached the final stages of development and are showing extraordinary effectiveness. The vaccines are beginning to be submitted to the FDA for emergency approval before hitting the market. This means that employers need to start thinking about how this will affect their workplace benefit plans now.

As my colleague Charlie Plumb recently wrote, employers are generally permitted to implement mandatory vaccine policies that require employees to be vaccinated before returning to the workplace. Assuming no disability or religious exception applies, the next question is this: Who has to pay for it?

Surprisingly, the answer is pretty simple: Employer-sponsored group health plans (whether fully- or self-insured) will be required to pay the full cost of the vaccine for employees covered under the plan with no cost-sharing (copay, coinsurance, deductible) to the employee.

A. GENERAL PREVENTIVE SERVICE RULES

As employee benefits professionals and insiders are inevitably aware, the Affordable Care Act (the “ACA”) already requires group health plans and insurers to cover certain “preventive care” items with no cost-sharing (also called first-dollar coverage), such as the flu vaccine. These items are generally listed on the HealthCare.gov website.

The typical process for an item to be classified as a “preventive service” starts with certain governmental groups, such as the CDC or the United States Preventive Services Task Force making a “recommendation” (although it is not as much a recommendation as a requirement) that an item should be classified as a preventive service. The item must then receive first-dollar coverage under a group health plan or policy starting with the first plan year that begins one year after the date the recommendation is made. Also, first-dollar coverage is generally only required when participants receive care from an in-network provider.

B. ACCELERATED COVERAGE TIMELINE FOR COVID-19 VACCINE

Because of the ensuing pandemic, Congress found this timeline unacceptable. The CARES Act modified the preventive service rules for the COVID-19 vaccine in early March before any sign of a vaccine was in sight. The CARES Act requires group health plans to provide first-dollar coverage of COVID-19 vaccines within 15 business days after the vaccine receives an “A” or “B” rating from the United States Preventive Services Task Force or receives a recommendation from the Advisory Committee on Immunization Practices of the CDC.

Just to reemphasize, plans generally have at least a year after a new item is added to the preventive services list to provide first-dollar coverage. But now, first-dollar coverage for a COVID-19 vaccine is required within 15 business days after the applicable governmental recommendations are made. Therefore, plan sponsors need to keep an eye out for these recommendations to ensure that their health plans are being administered properly (and are properly amended to reflect this requirement).

C. FULL COVERAGE REQUIRED FOR OUT-OF-NETWORK VACCINE

Also distinct from the traditional ACA preventive care rules, group health plans and insurers must pay the full cost of COVID-19 vaccines regardless of whether administered in- or out-of-network. In a joint interim final rule published by the Departments of Treasury, Labor, and Health and Human Services, plans and insurers are required to pay out-of-network providers a “reasonable” reimbursement rate in order to provide a “meaningful” benefit to participants and, presumably, to entice enough providers to administer the vaccine. A reasonable rate is generally the prevailing market rate, the Departments say. The Departments deem the amount paid under Medicare to be reasonable. Finally, providers who are participating in the CDC COVID-19 Vaccination Program are prohibited from balance billing (also known as surprise billing) vaccine recipients.

D. THE BOTTOM LINE

The big implication of these rules is that employers will have to bear the full cost of the vaccine for each employee covered under its health plan. To the extent an employer is going to mandate employees to become vaccinated before returning to the workplace, employers will have to weigh the cost of requiring employees to become vaccinated (when some employees might not have gotten the vaccine otherwise) against the costs of possible continued loss in productivity due to an ill workforce or employees working from home.