And The Hits Just Keep on Coming: New DOL Guidance on Cybersecurity

Today, the DOL announced new guidance for plan sponsors, plan fiduciaries, record keepers and plan participants on best practices for maintaining cybersecurity, including tips on how to protect retirement benefits.  This is the first time the department’s Employee Benefits Security Administration (EBSA) has issued cybersecurity guidance.

Below is what they released today with web links – and some quick-read bullet points for you below:

  1. Tips for Hiring a Service Provider with Strong Cybersecurity Practices
    • Plan sponsors should use service providers that follow strong cybersecurity practices.
    • Look for service providers that follow a recognized standard for information security and use an outside (third-party) auditor to review and validate cybersecurity.
    • Ask the service provider how it validates its practices, and what levels of security standards it has met and implemented. Look for contract provisions that give you the right to review audit results demonstrating compliance with the standard.
    • Find out if the service provider has any insurance policies that would cover losses caused by cybersecurity and identity theft breaches (including breaches caused by internal threats, such as misconduct by the service provider’s own employees or contractors, and breaches caused by external threats, such as a third party hijacking a plan participants’ account).
    • When you contract with a service provider, make sure that the contract requires ongoing compliance with cybersecurity and information security standards – and beware of contract provisions that limit the service provider’s responsibility for IT security breaches.  You should check to make sure you know what requirements your recordkeeper puts on plan participants in order for the participant’s account to be made whole by the recordkeeper if there is a theft (e.g., do they require two-factor authentication in order for the recordkeeper’s “guarantee” to apply?).
    • They identified a list of contractual provisions that your contract with service providers should contain.
    • I would go over this at your next plan committee meeting with your recordkeeper and any other service providers – and document the review in your minutes.
  2. Cybersecurity Program Best Practices
    • ERISA-covered plans often hold millions of dollars or more in assets and maintain personal data on participants, which can make them tempting targets for cyber-criminals. Responsible plan fiduciaries have an obligation to ensure proper mitigation of cybersecurity risks.
    • States that plan service providers should “conduct prudent annual risk assessments” and “[h]ave a reliable annual third party audit of security controls.”
    • Outlines what makes a prudent, well-documented cybersecurity program.
    • Again, ask your recordkeeper to provide a summary of how their program meets these standards – so your plan committee can be aware of that and document it for their minutes.
  3. Online Security Tips for Retirement Plan Participants
    • I would consider having your recordkeeper send tip sheet to plan participants asap.
  4. DOL Press Release

DOL Issued FAQs and Four Model COBRAs Yesterday – Take Action Right Now

Yesterday (April 7), the Department of Labor issued a series of frequently asked questions (“FAQs”) regarding the COBRA provisions of the American Rescue Plan of 2021 (“ARP”) – along with four model COBRA notices.  The FAQs clarify a number of issues.  Employers need to take action right now.

You might recall that on March 11, 2021, President Biden signed the ARP, which subsidizes the full COBRA premium for certain individuals for periods of coverage from April 1, 2021 through September 30, 2021.  To qualify for this free COBRA, individuals must: (1) have a COBRA-qualifying event that is a reduction in hours or an involuntary termination of employment; (2) elect COBRA coverage; (3) not be eligible for Medicare; and (4) not be eligible for coverage under any other group health plan (e.g., their new employer’s plan or their spouse’s plan).  As discussed in our March 15th blog post, this free coverage is also available to qualifying individuals who already lost coverage and who could have had COBRA coverage during the period from April 1, 2021 to September 30, 2021 (“Expired COBRA Participants”).  Expired COBRA Participants likely include individuals who lost coverage going all the way back to November 2019.

The ARP also imposes new related notice obligations and deadlines on employers.  The model notices issued yesterday are intended to help employers meet their obligations.

You might also recall that in late February, before the ARP, the Department of Labor released EBSA Disaster Relief Notice 2021-01 (“Notice 2021-01”), which extended (among other things) the deadlines for individuals to elect COBRA and pay for COBRA – by essentially giving every COBRA qualified beneficiary their own one-year period to make such an election or payment.  And that notice also has different notice obligations.

All of these rules, requirements, and notices make all of this way too complicated right now.  The following is an attempt to provide a quick summary and some recommendations:

  1. Employees Have One Year to Elect and Pay for COBRA

Notice 2021-01 provides disaster-related relief that extends, among other things, the deadline for qualified beneficiaries to elect and pay for COBRA.  Normally, qualified beneficiaries generally have 60 days to elect COBRA coverage.  For the period beginning March 1, 2020 through the end of the National Emergency (which is ongoing and we have no idea when it will end), Notice 2021-01 disregards the normal 60-day election period, and gives qualified beneficiaries until the earlier of (a) one year from the date they would normally have to elect COBRA, or (b) 60 days after the announced end of the National Emergency (the end of the “Outbreak Period”).  For example, if a qualified beneficiary would have been required to make a COBRA election by March 1, 2020 (the end of the normal 60-day election period), Notice 2021-01 delays that requirement until February 28, 2021, which is the earlier of one year from March 1, 2020 or the end of the Outbreak Period.

This extension works the same way with the COBRA premium payment deadline – and certain other deadlines like the normal 30-day deadline (under HIPAA special enrollment) to notify a plan and elect coverage due to a marriage, birth, or adoption.

  1. You Should Notify Affected Individuals of the One-Year COBRA Extension

For any individual who could benefit from the one-year extension described above, Notice 2021-01 states that plan administrators may need to revise their previously-issued COBRA election notice that was given to the individual before the recent extension – so that affected individuals are aware of their rights.  Thus, you likely need to determine who lost coverage and qualified for COBRA on or after March 1, 2020 and determine who needs to be sent a revised/updated notice that explains the one-year extension.

You need to do the same thing for anyone who could benefit from the same extended deadline to pay their COBRA premiums.

On a related note, Notice 2021-01 also indicates that plans should consider ways to ensure that participants who are losing coverage under their group health plans are made aware of other coverage options that may be available to them, including the opportunity to obtain coverage through the Health Insurance Marketplace in their state.

  1. You Should Consider Sending a General Notice to All Participants Explaining the One-Year Extension

You should consider sending a general notice to all plan participants explaining the one-year extension under Notice 202101 – so that participants understand their rights as it relates to HIPAA special enrollment, COBRA, and claims and appeal deadlines (which also have the same one-year extension).  You likely do not know all of the potential HIPAA special enrollment events that your employees may have already experienced, or will experience, so a general notice would notify a broader group than the targeted COBRA notices mentioned above under #2.

  1. Free COBRA Applies to All Group Health Plans – Except FSAs

The FAQs issued yesterday confirm that the free COBRA applies to all group health plans (except FSAs), including excepted benefits (e.g., dental).

  1. For Those Losing Coverage Between April 1, 2021 – September 30, 2021, You Need to Give Them a Notice Regarding the Free COBRA

The ARP requires employers to send a general notice to all qualified beneficiaries who have a qualifying event that is a reduction in hours or an involuntary termination of employment from April 1, 2021 through September 30, 2021.  This notice may be provided separately or with the COBRA election notice following a COBRA qualifying event.  There are specific requirements regarding what the notice must contain.

The DOL provided a model election notice for this yesterday, which you can find here:

  1. You Need to Send A Notice by May 31, 2021 to Qualifying Individuals Who Had A COBRA Event Before April 1, 2021 – Including Expired COBRA Participants

As mentioned above, certain Expired COBRA Participants – who lost coverage prior to April 1, 2021 and who either did not elect COBRA when it was first offered or who elected COBRA but then dropped the coverage – are also entitled to the free COBRA provided by the ARP.  These Expired COBRA Participants must receive a notice of the extended COBRA election period informing them of this free coverage opportunity.

For anyone else who qualifies for the free COBRA and who had a qualifying event before April 1, 2021, they too must receive a notice of their right to the free COBRA.

The notice must be provided to these individuals by May 31, 2021.  These individuals then have 60 days after the notice is provided to elect the free COBRA.

The DOL also provided a model notice for this, which you can also find at

  1. Free COBRA Reimbursed Directly to the Employer

Individuals who qualify for the free COBRA coverage do not have to pay any of the COBRA premium for the period of coverage from April 1, 2021 through September 30, 2021.  The premium is reimbursed directly to the employer through a COBRA premium assistance credit.

  1. No One-Year Extension of Deadline to Elect Free COBRA

For the individuals described above under #6, as mentioned they have 60 days after receiving the required notice to elect free COBRA.  The guidance issued yesterday makes it clear that this 60-day deadline is a real 60-day deadline, i.e., the one-year extension described above under #1 does not extend the 60-day deadline to elect free COBRA under the ARP.

  1. Don’t Forget to Amend Your Plan for All of the Above

You likely need to amend your plan to reflect all of the above, i.e., the one-year extension and the free COBRA.  Also, please don’t forget that you likely need to amend your plan to provide that COVID vaccinations are provided free with no cost sharing.  We have seen several plans lately that amended their terms last year to reflect free COVID testing but have not yet been amended to reflect the required free COVID vaccine benefit.

COBRA is Now Free and Very Complicated

Late last week, President Biden signed the American Rescue Plan Act of 2021 (“ARPA”), which makes COBRA continuation coverage free for certain qualifying-individuals and their families from April 1, 2021 to September 30, 2021.  This free coverage is available to those who lose group health plan coverage because either:

  1. they are terminated (not including resignations); or
  2. their hours are reduced.

So, all you have to do is remember this for those who become eligible for COBRA for one of these two reasons from April 1, 2021 to September 30, 2021, right?  No, it is not that easy.  This free coverage is also available to those who already lost coverage because of one of these two reasons and who could have had COBRA coverage during the period from April 1, 2021 to September 30, 2021 (“Expired COBRA Participants”).  Expired COBRA Participants would include those who either failed to elect COBRA coverage during their normal 60-day (but now-expired) election period and those who elected COBRA coverage but discontinued that coverage before April 1, 2021.  Expired COBRA Participants would likely include individuals going all the way back to November of 2019.

New Election Period.  Expired COBRA Participants have a new 60-day election period that begins April 1, 2021 to newly-elect COBRA, but this does not extend their normal COBRA period (e.g., if they were entitled to 18 months of COBRA because of a termination of employment that occurred in November of 2019, their coverage would still expire April 2021).

New Notice Requirement.  Employers are required to notify the individuals described above of this new free coverage and its availability, including Expired COBRA Participants.  The ARPA requires the federal government to issue a model notice for this purpose by April 10, 2021.

Bottom Line.  We suggest you immediately get with your COBRA administrator and make sure they are on top of these new rules.  You will want to identify individuals who could have been entitled to COBRA (because of job loss or reduction in hours) during the period from April 1, 2021 to September 30, 2021 – including Expired COBRA Participants – because you are going to have to give them a new notice and a new election period.  Given the very complicated guidance (DOL Notice 2021-01) we received a few weeks ago that basically gives every COBRA-qualifying individual their own one-year extended period to elect COBRA coverage, and that guidance’s own notice requirements (in addition to that described above), COBRA is now free and very complicated.

If you have any questions, including any questions about how the subsidy will be paid to the plan or plan sponsor, please let us know.

New IRS Guidance Provides Even More Flexibility for Cafeteria Plans, FSAs, and DCAPs

You might recall that in December 2020, Congress passed the year-end funding bill known as the Consolidated Appropriations Act, 2021 (“CAA”), which contained provisions that provide significant flexibility for flexible spending accounts (“FSAs”) and dependent care assistance plans (“DCAPs”) in 2020 and 2021.  Last week, on February 18, 2021, the IRS released Notice 2021-15 to clarify certain aspects of the CAA and to provide even more flexibility than that provided in the CAA.  Here is a brief overview of both the CAA and Notice 2021-15:


  1. 2020 FSA/DCAP CARRY OVER. For plan years ending in 2020, FSAs and/or DCAPs can allow participants to carryover any unused benefits for contributions remaining from 2020 in to the 2021 plan year.
  2. 2021 FSA/DCAP CARRY OVER. For plan years ending in 2021, FSAs and/or DCAPs can allow participants to carry over any unused benefits or contributions remaining from 2021 into the 2022 plan year.
  3. EXTENDED FSA/DCAP GRACE PERIOD. Employers can extend the FSA or DCAP grace period for the plan years ending in 2020 and/or 2021 to 12 months after the end of the year, with respect to unused benefits/contributions remaining at the end of the year. (This extends the permissible period for incurring claims.)
  4. POST-TERMINATION FSA REIMBURSEMENTS. Employers can allow an employee who ceases participation in the plan during calendar year 2020 or 2021 to continue to receive reimbursements from unused benefits or contributions through the end of the plan year when participation ceased (including any grace period).
  5. SPECIAL DCAP CARRY FORWARD. Typically, expenses may only be reimbursed under a DCAP for a qualifying child who has not attained age 13. Instead of the normal age 13 age limit, the CAA pushes the age limit to age 14 – during the plan year where the end of the regular enrollment period was on or before January 31, 2020 (i.e., enrollment period for 2020 plan year would have been in 2019). AND if there was an unused balance at the end of 2020, age 14 can be used in the 2021 plan year.
  6. PROSPECTIVE MODIFICATION FOR 2021 PLAN YEAR. For the plan year ending in 2021, an FSA or DCAP can allow an employee to make an election to prospectively modify the amount of employee contributions to the arrangement without regard to any change in status.
  7. PLAN AMENDMENT REQUIREMENT. A plan amendment must be adopted by the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective (i.e., if amendment is effective 12/31/20, must adopt an amendment by 12/31/21).

  IRS Notice 2021-15

 IRS Notice 2021-15 restates and clarifies certain aspects of the CAA, and it also provides additional flexibility.  The following outlines most, but not all, of the Notice 2021-15 guidance.

  1. NEW CAFETERIA PLAN FLEXIBILITY. In addition to the CAA changes, this notice provides additional relief for mid-year elections for plan years ending in 2021.  Thus, a plan can allow employees to:
    • NEW ELECTION. Make a new election on a prospective basis, if the employee initially declined to elect coverage.
    • REVOKE ELECITON AND MAKE NEW ELECTION. Revoke an existing election and make a new election to enroll in different coverage prospectively.
    • REVOKE ELECTION IF OTHER COVERAGE. Revoke an existing election on a prospective basis if attest in writing that the employee is enrolled, or immediately will enroll, in other health coverage not sponsored by the employer.  Employer must get attestation.
  2. CAN LIMIT FSA/DCAP CARRYOVER. For the carryover authorized by the CAA (described above), an employer may limit the carryover to an amount less than all unused amounts and may limit the carryover to apply only up to a specified date during the plan year.
  3. EVEN IF HISTORICALLY NO CARRY OVER OR GRACE PERIOD. Even if the plan does not typically allow a carry over or have a grace period, it can be amended to add them, per the discussion above.
  4. IMPACTS HSA ELIGIBLITY. The Internal Revenue Code allows eligible individuals to establish and contribute to health savings accounts (“HSAs”).  To be an eligible individual, the individual must (among other requirements) not be covered under any health plan that is not a high-deductible health plan (“HDHP”).  Notice 2021-15 clarifies that the carryover of unused amounts to the 2021 plan year or the 2022 plan year is an extension of coverage by a plan that is not a HDHP. Thus, an individual cannot make HSA contributions during a month in which the individual participates in a general purpose FSA to which unused amounts are carried over.
  5. CAN ALLOW EMPLOYEES TO OPT OUT OF CARRYOVER. Employers may amend their plans to allow employees, on an individual basis, to opt out of the carryover or grace period to preserve HSA eligibility.
  6. CAN LIMIT GRACE PERIOD. Employer can adopt an extended grace period for incurring claims that is less than 12 months and may choose to adopt a period that ends before the last day of the plan year.
  7. CAN LIMIT POST-TERMINATION AMOUNT. For reimbursements that can occur post-termination (see #4 above under CAA discussion), the employer can limit the reimbursement available to only those salary reduction contributions made from the beginning of the plan year to the date the employee ceased to be a participant.
  8. GRACE PERIOD AND POST-TERMINATION. An employer that adopts the extended grace period may also allow employees who ceased participation earlier in the year (see #4 above under CAA discussion) to further extend the period for incurring claims, e.g., John terminated employment in 2020 and his employer extends the grace period for 2020 to the end of 2021 – which would allow John to also incur claims through the end of the extend grace period. But if the employer instead adopted the carryover (and not the extended grace period), John could not take advantage of the carryover.
  9. NORMAL RULES APPLY FOR CARRYOVERS AND GRACE PERIODS IN 2022 OR LATER. After 2022, the normal rules apply for carryovers and grace periods, e.g., the most that an employee may carryover from the 2022 plan year to 2023 is $550.

More Details on Transparency Rules That Apply in 2022 and Beyond

On December 6, 2020, we posted an article on this blog titled “RADICAL New Transparency Rules Likely Apply to Your Health Plan in One Year.”  The regulations are a little more than 150 pdf pages long.  The following is intended to provide a condensed but more comprehensive summary of the requirements described in our December 6, 2020 article.

A. January 1, 2022 – Three Files Disclosed

  • For plan years beginning on or after January 1, 2022
  • Applies to Non-Grandfathered Health Plans
  • Public Disclosure
  • In-Network Provider Rates for Covered Items and Services
  • Out-of-Network Allowed Amounts
  • Billed Charges for Covered Items and Services
  • Negotiated Rates and Historical Net Prices for Covered Prescription Drugs
  • Must Be Made Available on an Internet Website
  • Three Machine-Readable Files – Standardized Format & Updated Monthly
  • Date Most Recently Updated Clearly Indicated
  • Accessible to Any Person Free of Charge
  • No Conditions – Cannot Require Establishing of User Account, Password, or Other Credentials, or Submission of Personally-Identifiable Information to Access the File
  1. 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). The file must include: (a) For each coverage option offered, the name and 14-digit Health Insurance Oversight System (HIOS), or, if the 14-digit HIOS identifier is not available, the 5-digit HIOS identifier, or if no HIOS identifier is available, the Employer Identification Number (EIN); (b) A billing code, in the case of prescription drugs must be an NDC (National Drug Code), and a plain language description for each billing code for each covered item or service under each coverage option offered by the plan; and (c) All applicable rates, which may include one or more of the following (1) Negotiated rates, (2) Underlying fee schedule rates, or (3) Derived amounts
  1. File #2 (out-of-network providers): The second file must disclose the historical payments to, and billed charges from, out-of-network providers. The file must include: (a) For each coverage option offered, the name and the 14-digit HIOS identifier, or, if the 14-digit HIOS identifier is not available, the 5-digit HIOS identifier, or, if no HIOS identifier is available, the EIN; (b) A billing code, for prescription drugs an NDC, and a plain language description for each billing code for each covered item or service under each coverage option offered by a plan or issuer; and (c) Unique out-of-network allowed amounts and billed charges with respect to covered items or services, furnished by out-of-network providers during the 90-day time period that begins 180 days prior to the publication date of the machine-readable file, except a plan or issuer must omit such data in relation to a particular item or service and provider when compliance with this bullet would require the plan or issuer to report payment of out-of-network allowed amounts in connection with fewer than 20 different claims for payments under a single plan or coverage.
  1. File #3 (prescriptions): The third file must disclose the in-network negotiated rates and historical net prices for all covered prescription drugs. This file must include: (a) For each coverage option offered, the name and the 14-digit HIOS identifier, or, if the 14-digit HIOS identifier is not available, the 5-digit HIOS identifier, or, if no HIOS identifier is available, the EIN; (b) The NDC and the proprietary and non-proprietary name assigned to the NDC by the Food and Drug Administration (FDA) for each covered item or service that is a prescription drug under each coverage option offered by a plan or issuer; (c) The negotiated rates which must be: (1) Reflected as a dollar amount, with respect to each NDC that is furnished by an in-network provider, including an in-network pharmacy or other prescription drug dispenser; (2) Associated with the NPI, TIN, and Place of Service Code for each in-network provider, including each in-network pharmacy or other prescription drug dispenser; and (3) Associated with the last date of the contract term for each provider-specific negotiated rate that applies to each NDC; and (4) Historical net prices.

B.  January 1, 2023 – Online Shopping Tool For 500 items (and January 1, 2024 for ALL covered items and services)

  • For plan years beginning on or after January 1, 2023 (for the identified 500 items and services) (these have already been identified in the regulations)
  • For plan years beginning on or after January 1, 2024 (for all covered items and services)
  • Establishes Price Transparency Requirements
  • Applies to Non-Grandfathered Health Plans
  • Does Not Apply to HRAs or Other Account-Based Group Health Plans
  • Does Not Apply to Short-Term, Limited-Duration Insurance
  • Intended to Give Consumers Real-Time and Accurate Estimates of Their Cost-Sharing Liability
  • Must Be Available in Plain Language
  • Cannot Require Subscription or Other Fee
  • Must Be Available Through a Self-Service Tool on an Internet Website
  • Must Provide Real-Time Responses Based on Accurate Cost-Sharing Information
  1. Required Disclosures to Participants and Beneficiaries. At the request of a participant or beneficiary who is enrolled in a group health plan, the plan must provide certain information in a certain format:
  • Required Cost-Sharing Information:
    • Estimate. An estimate of the participant’s or beneficiary’s cost-sharing liability for a requested covered item or service by a provider(s) that is calculated based on the information required in the paragraphs that follow below:
      • Accumulated Amounts
      • In-Network Rate – comprised of the following:
        1. Negotiated rate, reflected as a dollar amount, for in-network providers, even if it is not the rate the plan uses to calculate cost-sharing liability
        2. Underlying fee schedule rate, reflected as a dollar amount, to the extent it is different from the negotiated rate
      • Out-of-Network Allowed Amount – or any other rate that provides a more accurate estimate of an amount the group health plan will pay for the requested covered item or service, reflected as a dollar amount if the item or service is provided by an out-of-network provider, however in circumstances that a plan reimburses an out-of-network provider a percentage of the billed charge, the out-of-network allowed amount will be that percentage.
      • Bundled Arrangements – if a request is made for an item or service subject to a bundled payment arrangement, a list of the items or services included in the bundled payment arrangement for which cost-sharing information is being disclosed.
      • Subject to a Prerequisite – if applicable, notification that coverage of a specific item or service is subject to a prerequisite.
      • Notice in Plain Language – a notice that includes the following, in plain language:
        1. A statement that out-of-network providers may bill for the difference between a provider’s billed charges and the sum of the amount collected from the plan and from the participant in the form of a copayment or coinsurance amount (difference is balance billing) and the cost-sharing provided does not account for these potential additional amounts. This statement is only required if balance billing is permitted under state law;
        2. A statement that the actual charges for a covered item or service may be different from an estimate of cost-sharing liability provided, depending on the actual items or services received at the point of care;
        3. A statement that the estimate of cost-sharing liability for a covered item or service is not a guarantee that benefits will be provided;
        4. A statement disclosing whether the plan counts copayment assistance and other third-party payments in the calculation of the participant’s or beneficiary’s deductible and out-of-pocket maximum;
        5. For items and services that are recommended preventive services under 2713 of the PHS Act, a statement that an in-network item or service may not be subject to cost-sharing if it is billed as a preventive service if the plan or issuer cannot determine whether the request is for preventive or non-preventive; and
        6. Any additional information, including other disclaimers, that the plan determines is appropriate, provided the additional information does not conflict with the information required here.
  • Required Methods and Formats for Disclosure.
    • Internet-Based Self-Service Tool. Information disclosed per the requirements above must be made available in plain language, without subscription or other fee, through a self-service tool on an internet website that provides real-time responses based on cost-sharing information that is accurate at the time of the request. Plans must ensure that the self-service tool allows users to:
      • Search for cost-sharing information for an item or service provided by a specific in-network provider or by all in-network providers by inputting:
        • A billing code (such as CPT code 87804) or descriptive term (such as “rapid flu test”), at the option of the user;
        • The name of the in-network provider, if seeking information to a specific provider; and
        • Other factors utilized by the plan that are relevant for determining the applicable cost-sharing information, such as location of service, facility name, or dosage.
      • Search for an out-of-network allowed amount, percentage of billed charges, or other rate that provides a reasonably accurate estimate of the amount a plan will pay for a covered item or service provided by out-of-network providers by inputting:
        • A billing code or descriptive term, at the option of the user; and
        • Other factors utilized by the plan that are relevant for determining the applicable out-of-network allowed amount of other rate, such as the location a covered item or service will be sought or provided.
      • Refine and reorder search results based on geographic proximity of in-network providers, and the amount of the participant’s or beneficiary’s estimated cost-sharing liability for the covered items or services, to the extent the search returns multiple results.
    • Paper Method. Information disclosed per the requirements above must also be made available in plain language, without a fee, in paper form at the request of the participant or beneficiary. In responding to the request, the plan may limit the number of providers with respect to which cost-sharing information for covered items or services is provided to no fewer than 20 providers per request. The plan is required to:
      • Disclose the applicable provider-per-request limit to the participant or beneficiary;
      • Provide the cost-sharing information in paper form pursuant to the individual’s request;
      • Mail the cost-sharing information in paper form no later than two business days after a request is received;
      • If request is for other than paper, (for example, by phone or email), the plan may provide the disclosure through another means, provided the participant or beneficiary agrees and is fulfilled at least as rapidly as required for the paper method
    • Special Rule to Prevent Unnecessary duplication. A plan may satisfy the requirements by entering into a written agreement in which another party, such as a pharmacy benefit manager or other third party, provides the information required. Notwithstanding the preceding sentence, if a plan chooses to enter into such an agreement and the party with which it contracts fails to provide the information, the plan violates the transparency disclosure requirements.

Last Week’s Government Funding Bill = Significant New Benefit Plan Rules

On December 27, 2020, the Consolidated Appropriations Act, 2021 (the “Act”) was signed into law.  The Act imposes significant new requirements on employee benefit plans.  Coupled with other rules and legal developments already set to go into effect, the Act will create significant compliance obligations for employers and their benefit plans.[1]

Here is a summary of some, but not all, of the new requirements.

Health & Welfare Plans

  1. 2021 – New Flexibility for FSAs. Under the Act, employers have new flexibility related to their flexible spending accounts, including the option to allow:
    • FSA Carryovers. Any unused funds for 2020 or 2021 may be carried over to the next plan year.
    • FSA Extended Grace Period. For FSAs that have a grace period, the grace period can be extended for up to 12 months (instead of 2.5 months).
    • Terminated Employees. If an employee terminates participation in the FSA in 2020 or 2021, the plan may reimburse expenses through the end of that year (plus any grace period).
    • Change in Status. For plan years ending in 2021, employees may make any prospective changes in their FSA contributions without regard to a change in status.
  2. 2021 – Group Health Plans Cannot Agree to Gag Clauses. The Act requires health plans to ensure they have access to certain cost and quality-of-care information.  Plans may not agree to restrictions in contracts (e.g., network contracts) that would prevent them from accessing cost and quality of care information and providing that information to participants.  This includes provider-specific cost and quality-of-care data.
  3. 2021 – Mental Health – Nonquantitative Treatment Limitations. Beginning next month, group health plans that provide mental health or substance use disorder benefits that impose non-quantitative treatment limitations on such benefits are required to perform and document comparative analysis of the design and application of these limitations, and make these available to the DOL, HHS, or IRS upon request.
  4. 2022 – Broker and Consultant Disclosure of Compensation. The Act imposes significant new fee disclosure requirements on health brokers and consultants.  For many years now retirement plan service providers have been required to disclose every source of direct and indirect compensation, while the health plan industry has in many ways been the wild west.  The Act imposes new disclosure requirements on health plan brokers and consultants, which should give employers better information to ensure no conflicts of interest.
  5. 2022 – Pharmacy Benefit and Drug Cost Reporting. Group health plans will be required to annually report certain information related to prescription drugs to the secretaries of HHS, DOL, and Treasury.  For example, plans will be required to report the top 50 brand prescription drugs paid for by the plan and the total number of paid claims for each such drug.  Initially, the report will be required within one year of December 27, 2020, but then it will be required each year by June 1.
  6. 2022 – Identification Card Cost-Sharing Disclosure. For plan years beginning January 1, 2022, plans must include certain information on any  identification card issued to participants and beneficiaries, including any deductible or out-of-pocket maximum.
  7. 2022 – “No Surprises Act” = New Surprise Billing Rules. For plan years beginning January 1, 2022, the Act imposes significant new surprise-billing requirements that apply to group health plans, including self-funded plans.  Surprise billing often occurs when the patient (a) receives care from an out-of-network provider at an in-network facility; or (b) receives care at an out-of-network facility, such as in an emergency.
    • Emergency Services. In emergency situations, the Act is generally intended to ensure that patients (i) have the same cost-sharing responsibility for services, regardless of whether the provider is in-network; and (ii) receive credit towards any applicable in-network deductible or out-of-pocket maximums for these payments.  Under the Act, if a group health plan covers any benefits with respect to services in an emergency department of a hospital or emergency services in an independent freestanding emergency department, the plan must cover the emergency services:
      1. without the need for prior authorization;
      2. regardless of whether the provider is a participating provider or a participating emergency facility; and
      3. if the services are provided by an out-of-network provider or facility, (a) the services will be provided without any extra prior-authorization requirements, (b) the cost-sharing requirement cannot be greater than the requirement that would apply if the services were provided by a participating provider or facility, (c) the cost-sharing requirement is calculated as if the total amount had been charged by a participating provider or facility, (d) initial payment must be made within 30 days after receiving the bill, and then total payment must be made within certain timing rules, (e) any cost-sharing payments made by the participant must be counted toward any in-network deductible or out-of-pocket maximums, in the same manner as if they were made for services furnished by an in-network provider.
    • Non-Emergency Situations. In non-emergency situations, the facility or provider will have to (i) give the patient a detailed notice and an estimate of charges, generally 72 hours prior to the patient receiving out-of-network services; and (ii) obtain the patient’s consent to receive out-of-network care.  Without this notice and consent, the patient can only be held liable for their in-network cost-sharing amount.
      • Health Plan Disclosure. It appears that plans that receive the provider’s estimate will then have to quickly give the participant a notice with certain information including a good-faith estimate of how much the plan will pay.
    • Air Ambulance Surprise Billing. Surprise billing requirements that are similar to those described above will apply to air ambulance providers.

Retirement Plans

  • Partial Plan Termination Relief. Generally, if the sponsor of a retirement plan terminates 20% of plan participants during a plan year, the plan must 100% vest all affected participants.  The Act provides that a plan will not be treated as having a partial plan termination during any plan year that includes the period beginning March 13, 2020 and ending March 31, 2021, if the number of active participants in the plan covered on March 31, 2021 is at least 80% of the number on March 13, 2020.  Thus, if an employer terminated part of its workforce in 2020 but its business rebounded and the employer rehired participants, such employer’s plan will not have had a partial plan termination.

[1]             The Act is 5,593 pdf pages of new rules, most of which were signed into law on December 27, 2020 (approximately one week ago).  This summary was put together quickly to give us a roadmap of the new requirements and may need to be later corrected or adjusted.

RADICAL New Transparency Rules Likely Apply to Your Health Plan In One Year

“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.
  1. 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.  (NoteThis 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.)
  1. 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).

Oklahoma Employers Healthcare Alliance

Attorney Q&A with Brandon Long

What began as a roundtable discussion to share ideas and best practices has now become a movement. Earlier this year, McAfee & Taft played a key role in establishing a first-of-its-kind coalition of Oklahoma employers. The mission: To act in the collective best interests of employers to promote healthcare quality, cost-effectiveness, transparency and accountability.

In this LINC Q&A video, McAfee & Taft employee benefits lawyer Brandon Long discusses the catalyst of this emerging movement, its purpose and vision, who comprises the coalition, what has already been accomplished, and next steps for those interested in being a part of the alliance.

Under Final Rule, 401(k) Fiduciaries Be Careful About Green Investing

Earlier this year, the United States Department of Labor issued a proposed rule on environmental, social, corporate governance, or other similarly-oriented considerations (collectively, “ESG”) related to the investments in ERISA plans.  The Department appears to have issued the proposed rule out of a concern about the growing emphasis on ESG investing and the potential for some investment products to be marketed to ERISA fiduciaries on the basis of purported benefits and goals unrelated to financial performance.

After receiving a number of comments on the proposed rule, the DOL issued its final rule this past Friday.  The final rule provides that ERISA plan fiduciaries must select investments and investment courses of action based solely on financial considerations relevant to the risk-adjusted economic value of a particular investment or investment course of action.  ERISA fiduciaries can never sacrifice investment returns, take on additional investment risk, or pay higher fees to promote non-pecuniary benefits or goals (including ESG goals).

The final rule states that it makes five changes to the applicable regulation under ERISA:

  1. Evaluate Investments Based Solely on Pecuniary Factors.  The rule adds provisions to confirm that ERISA fiduciaries must evaluate investments and investment courses of action based solely on pecuniary factors – that is, financial considerations that have a material effect on the risk and/or return of an investment based on appropriate investment horizons consistent with the plan’s investment objectives and funding policy.
  2. Can’t Sacrifice Returns to Promote Non-Pecuniary Goals.  The rule includes an express regulatory provision stating that compliance with the exclusive purpose (loyalty) duty in ERISA prohibits fiduciaries from subordinating the interests of participants to unrelated objectives, and bars them from sacrificing investment return or taking on additional investment risk to promote non-pecuniary goals.
  3. Consider Reasonably Available Alternatives.  The rule includes a provision that requires fiduciaries to consider reasonably available alternatives to meet their prudence and loyalty duties under ERISA.
  4. All Things Being Equal.  The rule sets forth required investment analysis and documentation requirements for those circumstances in which plan fiduciaries use non-pecuniary factors when choosing between or among investments that the fiduciary is unable to distinguish on the basis of pecuniary factors alone.
  5. Might Be Okay to Include Fund With Non-Pecuniary Goals, IF. . . .  The final rule expressly provides that, in the case of selecting investment alternatives for an individual account plan that allows plan participants and beneficiaries to choose from a broad range of investment alternatives, a fiduciary is not prohibited from considering or including an investment fund, product, or model portfolio merely because the fund, product, or model portfolio promotes, seeks, or supports one or more non-pecuniary goals, provided that the fiduciary satisfies the prudence and loyalty provisions in ERISA and the final rule, including the requirement to evaluate solely on pecuniary factors, in selecting any such investment fund, product, or model portfolio. However, the provision prohibits plans from adding any investment fund, product, or model portfolio as a qualified default investment alternative, or as a component of such an investment alternative, if the fund, product, or model portfolio’s investment objectives or goals or its principal investment strategies include, consider, or indicate the use of one or more non-pecuniary factors.

Update on Employer Healthcare Coalition

Many of you may recall that last year we created an employer healthcare coalition and hosted a series of luncheons on various healthcare topics.

Earlier this year before COVID, we had planned a meet and greet back in February to formally launch the coalition.  Then, the end of the world happened.

We would like to update you about a few things and request your feedback:

  1. The Coalition is Official.  The coalition is official.  In October of 2019, we filed a certificate of incorporation to create a formal legal entity that will be known as the “Oklahoma Employers Healthcare Alliance” or “OEHA.”
  2. Coalition’s Purpose.  The coalition’s basic purpose is to bring together leaders and decision-makers to share ideas and information and improve healthcare for Oklahoma employers and employees.  The coalition will likely host luncheons and educational seminars, and leverage our collective size to influence positive change.  There are large coalitions in other markets and the OEHA could also network with these other coalitions.
  3. We Have a Logo and a Website.  We have an initial logo and draft of a website, which you can access here:  The logo is at the top of the website.  The website is still in draft form.  (Once it is finalized, the wild apricot references will disappear.)
  4. We Have a Management Company.  We are using and working with the same All-Star management team that manages the Southwest Benefits Association and the DFW Business Group on Health.  These people know what they are doing and they will help us launch and keep the organization moving forward in a positive way.

Are You Interested?  Please send me an email if you are interested in learning more about being a part of the coalition.