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:  www.oeha.org.  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.

Think About How Your 401(k) Policies and Procedures Might Prevent and Discover Fraud

This past week the United States Department of Labor issued a press release involving alleged fraud by a key employee that resulted in theft from her company and her company’s 401(k) plan.

According to the DOL’s press release, the controller for a company in Kentucky allegedly created a scheme whereby she issued unauthorized checks made payable to herself and others.  She also used multiple company debit and ATM cards to withdraw cash and pay her own personal expenses; and made fraudulent payments from the company to an insurance company for the purpose of obtaining and maintaining health insurance for her family.  The controller’s fraud also resulted in a failure to remit 401(k) deferrals into the company’s 401(k) plan totaling $31,882.  The DOL’s press release indicates the controller stole the 401(k) deferrals and fraudulently altered the Company’s bank account statements to make it appear that proper remittances were made to the plan.  Her actions led to a total loss to the company of $633,044.

As a result of her bad actions, the controller was recently sentenced by a federal court to 94 months in prison, 36 months of supervised release, and $838,804 in restitution.

Unfortunately, great employers who try to do the right thing and work hard to properly manage their benefit plans can sometimes still nonetheless become the victim of a bad actor.  If someone wants to intentionally violate the law for their own benefit, it can be very difficult to be aware of this and/or to catch them.

Many employers have a 401(k) plan committee that reviews and monitors the plan’s investments on a quarterly basis, as well as other plan administrative matters.  Perhaps your committee might consider adding to its quarterly review some kind of a report or analysis that compares (a) your payroll information showing 401(k) deferrals and plan contributions; with (b) independent information from your recordkeeper that shows deposit information into the plan.  There may be a better idea.  But you might consider thinking about what policies and procedures you could put in place that might prevent, or at the very least quickly discover, fraud impacting your plan.

On a related note, during this audit season we received a number of questions about how quickly 401(k) deferrals should be deposited into a 401(k) plan’s trust.  The answer is:  As soon as possible.  For annual audit purposes, your auditor might tell you that they only consider 401(k) deferrals late if they are deposited beyond five or seven business days after payroll.  This may be the standard your auditor uses for audit purposes, but the DOL will expect 401(k) deferrals to go in much faster:  basically immediately coinciding with or after payroll.  Please do your best to ensure that 401(k) deferrals and loan repayments are deposited into your plan’s trust on the same day as payroll, or maybe – if you have a good documented reason why – a few business days after payroll.  If you have been depositing 401(k) deferrals later than that (e.g., one week after payroll), you should consider putting earnings into your plan to correct this and you should work to improve your process to get your employees’ money into the plan sooner.

Ask Your Consultant for Mental Health Parity Certification Each Year

If you only read this first paragraph, that is okay. One of the most common issues we face with DOL investigations of employer health plans involves mental health parity compliance.  For those of you who sponsor a qualified retirement plan like a 401(k) plan, you likely receive some kind of a compliance testing report each year from your recordkeeper or third-party administrator that tells you that your plan passed the relevant nondiscrimination tests.  I recommend that you ask your health plan consultant to start providing something like that for you every year – which confirms that your plan passes mental health parity, so that you (a) know your plan complies; and (b) have proof that your plan complies if you ever go through a DOL investigation/audit.  This may require the consultant to involve the network provider and/or the actuary.  Regardless, this is critically necessary, especially for those of you who are self funded.

Here is some background for you:

Group health plans are not required to provide benefits for mental health or substance use disorders, but if they do, the “mental health parity” rules require there to be parity between the plan’s (a) medical/surgical benefits (“Medical Benefits”); and (b) mental health or substance use disorder benefits (“Mental Health Benefits”).

Think of “parity” as generally requiring “equality.” In my opinion, these rules are unnecessarily complicated but they generally require:

  1. Parity as to Financial Requirements. Plans must provide parity between Medical Benefits and Mental Health Benefits as to financial requirements, such as deductibles, copays, coinsurance, and out-of-pocket maximums. For example, if a plan has a $25 copay for a typical doctor office visit but a $50 copay for a mental health office visit, this could violate the parity rules.
  2. Parity as to Quantitative Treatment Limitations. Plans must provide parity between Medical Benefits and Mental Health Benefits as to quantitative treatment limitations, such as number of visits, days, or treatments. Quantitative treatment limitations are limits that can be expressed numerically (e.g., number of covered visits per day, per episode, annually, or during the participant’s lifetime).
  3. Parity as to Nonquantitative Treatment Limitations. Plans must provide parity as to any nonquantitative treatment limitations, such as medical management standards (think non-financial requirements). For example, if a plan required a participant to go through some kind of a pre-certification process for treating anorexia (a mental health condition) that is stricter than the process required for Medical Benefits, this could be a violation of the parity rules. Or if a group health plan required participants to use employer-provided EAP benefits before accessing the plan’s Mental Health Benefits but did not require the same for Medical Benefits, that would likely violate the parity rules.

If you are not asleep yet and are interested in even more details, the parity rules as to the financial requirements and treatment limitations (#1 and #2 above) are particularly complex and often require a series of Wizard-of-Oz math calculations, which are probably impossible for you to run on your own. Generally, to run the testing, the benefits offered by a plan must first be divided into six separate classifications:

  1. inpatient, in-network;
  2. inpatient, out-of-network;
  3. outpatient, in-network (Note: office visits can be placed in a separate subclassification from all other outpatient items and services);
  4. outpatient, out-of-network;
  5. emergency care; and
  6. prescription drugs.

Within each of these classifications, the financial requirements and treatment limitations that apply to Mental Health Benefits must be compared to the financial requirements and treatment limitations that apply to Medical Benefits in that same classification so that they pass the following two tests:

  1. “Substantially All” Test. A financial requirement or treatment limitation must first be demonstrated to be applicable to “substantially all” of the Medical Benefits in a classification. This is a math test that means the requirement or limitation must apply to at least two-thirds of all Medical Benefits in the classification. This calculation is determined based on the dollar amount of all plan payments for Medical Benefits in the classification that are expected to be paid under the plan for the plan year.  For example, if we were looking at the copay structure of your health plan, we might need to determine if the plan requires a copay of any kind for at least two-thirds of the Medical Benefits in the outpatient, in-network classification, before a copay could be imposed on Mental Health Benefits in the outpatient, in-network classification.
  2. “Predominant Level” Test. If and only if a financial requirement or treatment limitation does apply to “substantially all” of the Medical Benefits in a classification, that financial requirement or treatment limitation may be applied to Mental Health Benefits in that classification, but only if the “level” of that requirement or limitation is no more restrictive than the “predominant level” of that requirement or limitation when applied to Medical Benefits. A good example of a “level” would be two copayment levels of $25 and $50.  A financial requirement or treatment limitation is considered to be “predominant” if it is the most common or frequent of such type of limit or requirement – that is, if it applies to more than one half of the Medical Benefits in the classification.  Carrying forward my example above involving a plan’s co-pay structure, if we determined that your plan does require a copay for at least two-thirds of the Medical Benefits in the outpatient, in-network classification (i.e., you pass the “substantially all” test), then we would need to determine what is the permitted/predominant copay level. This is easy if you only have one copay (e.g., $25 for everything). But if you have different copays within the outpatient, in-network classification (e.g., $25 for general and $50 for specialty), we would need to determine what copay level applies to more than half of the Medical Benefits in that classification – and only that copay level could be charged to Mental Health Benefits in that classification.

I have made a number of generalizations here to try to break down the rules and the testing for you, but to me this falls into the category of tasks that you should have someone else do for you (probably your consultant). I would ask them to give you something every year that clearly states that your plan passes mental health parity testing, preferably something signed off on by an actuary.  If they tell you that your plan “passes automatically” because of its design, please ask them to explain that to you (in part to make sure they understand) and put that in writing anyway.  This will save you a great deal of trouble and stress later.

Of course, please let us know if you have any questions.

Thank you,

Brandon

New Guidance Regarding Birth or Adoption Distributions from Retirement Plans

You may recall that the SECURE Act was signed into law last December. The SECURE Act made a number of changes to the rules governing qualified retirement plans.  One change created a new type of a distribution from certain retirement plans, including 401(k) plans, following qualifying births or adoptions.  The SECURE Act allows a plan participant to take a distribution of up to $5,000 following a qualified birth or adoption (“Birth/Adoption Distribution”).

Even though plan sponsors were allowed to add the Birth/Adoption Distribution feature to their plan on or after January 1, 2020, most plan sponsors have not yet added this feature because there were initially too many unanswered questions. Fortunately, the Department of the Treasury and the Internal Revenue Service recently issued additional guidance (Notice 2020-68) that may make plan sponsors more likely to turn on this new feature.  Here is what we now know from the SECURE Act and the recent guidance:

  1. A Birth/Adoption Distribution must be made during the one-year period beginning on the date when a child is born or the legal adoption is finalized.
  2. A Birth/Adoption Distribution may be made from 401(k) plans, profit sharing plans, 403(b) plans, governmental 457(b) plans, IRAs, and certain other plans. They do not apply to defined benefit plans.
  3. An “eligible adoptee” includes any individual who has not attained age 18 or is physically or mentally incapable of self-support. However, an eligible adoptee does not include an individual who is the child of the taxpayer’s spouse.
  4. A Birth/Adoption Distribution is includible in gross income, but is not subject to the 10% excise tax.
  5. Even though a Birth/Adoption Distribution is includible in the participant’s gross income, the plan is not required to withhold the normal 20%.
  6. The individual must include the name, age, and the Taxpayer Identification Number (TIN) of the child or eligible adoptee on the individual’s tax return for the taxable year in which the distribution is made.
  7. Each parent may receive a Birth/Adoption Distribution up to $5,000 with respect to the same child. This means two parents may each take $5,000 from their qualifying retirement plan following the birth or adoption of the same child.
  8. An individual may receive a Birth/Adoption Distribution with respect to the birth of more than one child (e.g., twins). For example, Employee A gives birth to twins in October 2020. Employee A may take a $10,000 distribution from her 401(k) plan in January 2021, assuming she includes the TINs of her twins and other required information on her 2021 tax return.
  9. An individual generally may recontribute a Birth/Adoption Distribution to an applicable eligible retirement plan in which the individual is a beneficiary and to which a rollover can be made.
  10. Plans are not required to permit Birth/Adoption distributions. It is an optional feature for the plan sponsor.
  11. If a plan permits a Birth/Adoption Distribution to a participant, the plan is generally required to accept a recontribution of that same amount from that individual.

Now that we have some additional guidance, I suspect many plan sponsors will turn on this feature and that it will be very popular with plan participants. You might consider discussing this with your recordkeeper and/or third-party administrator.

Please let us know if you have any questions.

Remind Affected 401(k) Plan Participants About August 31 Deadline

Section 401(a)(9) of the Internal Revenue Code requires a qualified retirement plan – including 401(k) plans – to make certain required minimum distributions (RMDs) to plan participants starting by the participant’s required beginning date.

The SECURE Act was signed into law in December of 2019.  The SECURE Act amended section 401(a)(9) of the Code to change the required beginning date applicable to section 401(a) plans and other eligible retirement plans, including IRAs. The new required beginning date for an employee or IRA owner is generally April 1 of the calendar year following the calendar year in which the individual attains age 72 (rather than April 1 of the calendar year following the calendar year in which the individual attains age 70½) and the new required beginning date applies to distributions required to be made after December 31, 2019, with respect to individuals who attain age 70½ after that date.

You may recall that the CARES Act was signed into law back in March.  The CARES Act added section 401(a)(9)(I) to the Code, and provided for a waiver of RMDs for defined contribution plans (including 401(k) plans) and IRAs for 2020. This waiver also applies to the 2019 RMD for an individual who has a required beginning date of April 1, 2020, that was not paid in 2019 (and therefore would have been due to be paid between January 1, 2020 and April 1, 2020).

Before the CARES Act was signed into law, many 401(k) plan participants had already received an RMD in early 2020.  To assist these plan participants, the Treasury Department and the IRS previously extended the 60-day rollover period for any such RMD payments so that the deadline for rolling over such a payment will not be before August 31, 2020. For example, if a participant received a single-sum distribution in January 2020, part of which was treated as ineligible for rollover because it was considered an RMD at that time, that participant has until August 31, 2020, to roll over that part of the distribution.

If you have not already, please get with your recordkeeper or third-party administrator to identify any 401(k) plan participants who received an RMD in 2020 and make sure that someone has reached out to these participants to ensure they are aware of the August 31 deadline next week.

New Guidance Regarding Required, Free COVID-19 Testing

Hi everyone.  Last week, on June 23, 2020, the Department of Labor (DOL), the Department of Health and Human Services (HHS), and the Department of the Treasury (collectively, the Departments) issued new guidance regarding the employee benefits aspects of the Families First Coronavirus Response Act (the FFCRA), the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), and other health coverage issues related to Coronavirus Disease 2019 (COVID-19).

A.  Background

As you know, the FFCRA was enacted on March 18, 2020. The FFCRA generally requires group health plans to provide benefits for certain items and services related to testing for the detection of COVID-19 when those items or services are furnished on or after March 18, 2020, and during the applicable emergency period (the “Free Testing”).  Under the FFCRA, plans must provide this Free Testing without imposing any cost-sharing requirements (including deductibles, copayments, and coinsurance), prior authorization, or other medical management requirements.

The CARES Act was enacted on March 27, 2020. The CARES Act amended the FFCRA to include a broader range of diagnostic items and services that group health plans must cover without any cost-sharing requirements, prior authorization, or other medical management requirements.  The CARES Act generally requires plans providing Free Testing to reimburse any provider of COVID-19 diagnostic testing an amount that equals:

  1. the negotiated rate; or
  2. if the plan does not have a negotiated rate with the provider, the cash price for such service that is listed by the provider on a public website.

The requirement to reimburse the provider an amount that equals the cash price of a COVID-19 test is contingent upon the provider making public the cash price for the test, as required by the CARES Act. If the provider has not complied with this requirement, and the plan does not have a negotiated rate with the provider, the plan may seek to negotiate a rate with the provider for the test. However, the CARES Act is silent with respect to the amount to be reimbursed for COVID-19 testing in circumstances where the provider has not made public the cash price for a test and the plan and the provider cannot agree upon a rate that the provider will accept as payment in full for the test. The Departments note that the CARES Act grants the Secretary of HHS authority to impose civil monetary penalties on any provider of a diagnostic test for COVID-19 that does not comply with the requirement to publicly post the cash price for the COVID-19 diagnostic test on the provider’s website and has not completed a corrective action plan, in an amount not to exceed $300 per day that the violation is ongoing.

Note: If you run into the situation where an out-of-network provider is being unreasonable in setting the cash price, please let us know.

B.        New Guidance

The new guidance clarified the following aspects of the FFCRA and CARES Act Free Testing requirements:

  1. Self-Funded Plans Must Comply. Self-funded health plans must comply with the Free Testing requirements.
  2. What Tests Must Be Covered? Free Testing is generally required for any of the following four tests:
    • Approved Test. A test that is approved, cleared, or authorized under the Federal Food, Drug, and Cosmetic Act. All in-vitro diagnostic tests for COVID-19 that have received an emergency use authorization (EUA) under the Federal Food, Drug, and Cosmetic Act are listed on the EUA page of the Food and Drug Administration (FDA) website, available at https://www.fda.gov/medical-devices/emergency-situations-medical-devices/emergency-use-authorizations#covid19ivd. (At this time, the FDA has not cleared or approved an in vitro diagnostic test for COVID-19 under the other regulatory pathways outlined here.)
    • Emergency Use Requested. A test where the developer has requested, or intends to request, emergency use authorization under the Federal Food, Drug, and Cosmetic Act, unless and until the emergency use authorization request has been denied or the developer of such test does not submit a request under such section within a reasonable timeframe. Available on the FDA website is a list of clinical laboratories and commercial manufacturers that have notified FDA that they have validated their own COVID-19 test and are offering the test as outlined in FDA guidance.
    • State-Authorized Test. A test that is developed in and authorized by a State that has notified the Secretary of HHS of its intention to review tests intended to diagnose COVID–19. States and territories may authorize laboratories within that state or territory to develop and perform a test for COVID-19, as outlined in FDA guidance. States and territories that have notified FDA that they choose to use this flexibility are listed at https://www.fda.gov/medical-devices/emergency-situations-medical-devices/faqs-diagnostic-testing-sars-cov-2#offeringtests
    • Maybe Other Tests. Other tests that the Secretary of HHS determines appropriate in guidance. No other tests have been specified in guidance by the Secretary of HHS at this time.
  3. Which Providers Can Order Free Testing? Free Testing must be provided “when medically appropriate for the individual, as determined by the individual’s attending health care provider.” A health care provider need not be “directly” responsible for providing care to the patient to be considered an attending provider, as long as the provider makes an individualized clinical assessment to determine whether the test is medically appropriate for the individual in accordance with current accepted standards of medical practice. Therefore, an attending provider is an individual who is licensed (or otherwise authorized) under applicable law, who is acting within the scope of the provider’s license (or authorization), and who is responsible for providing care to the patient. A plan, insurance company, hospital, or managed care organization is not an attending provider.
  4. At-Home Testing Must Be Covered. COVID-19 tests intended for at-home testing (including tests where the individual performs self-collection of a specimen at home) must be covered, when the test is ordered by an attending health care provider who has determined that the test is medically appropriate for the individual based on current accepted standards of medical practice and the test otherwise meets the statutory criteria in the FFCRA. This coverage must be provided without imposing any cost-sharing requirements, prior authorization, or other medical management requirements.
  5. No Free Testing For Employer Return-To-Work Programs. The FFCRA requires Free Testing only for diagnostic purposes. Clinical decisions about testing are made by the individual’s attending health care provider and may include testing of individuals with signs or symptoms compatible with COVID-19, as well as asymptomatic individuals with known or suspected recent exposure to SARS-CoV-2, that is determined to be medically appropriate by the individual’s health care provider. However, testing conducted to screen for general workplace health and safety (such as employee “return to work” programs), for public health surveillance for SARS-CoV-2, or for any other purpose not primarily intended for individualized diagnosis or treatment of COVID-19 or another health condition is beyond the scope of the FFCRA.
  6. Free Diagnostic Testing is Unlimited. The Free Testing required under the FFCRA is not limited with respect to the number of diagnostic tests for an individual, provided that the tests are diagnostic and medically appropriate for the individual, as determined by an attending health care provider in accordance with current accepted standards of medical practice.
  7. Facility Fee Related to Free Testing Must Be Covered. A facility fee is a fee for the use of facilities or equipment that an individual’s provider does not own or that are owned by a hospital. If a facility fee is charged for a visit that results in an order for or administration of a COVID-19 diagnostic test, the plan must also cover the facility fee without imposing cost-sharing requirements – to the extent the facility fee relates to the furnishing or administration of a COVID-19 test or to the evaluation of an individual to determine the individual’s need for testing. For example, if an individual is treated in the emergency room and the attending provider orders a number of services to determine whether a COVID-19 diagnostic test is appropriate, such as diagnostic test panels for influenza A and B and respiratory syncytial virus, as well as a chest x-ray, and ultimately orders a COVID-19 test, the plan must cover those related items and services without cost sharing, prior authorization, or other medical management requirements, including any physician fee charged to read the x-ray and any facility fee assessed in relation to those items and services.
  8. Reimbursement Requirements for Diagnostic Testing and Related Items or Services Only. The reimbursement requirements of the CARES Act (i.e., negotiated rate or cash price) do not apply to any items and services other than diagnostic testing for COVID-19.
  9. No Provider Balance Billing. The CARES Act generally precludes balance billing to the patient for COVID-19 testing. However, the CARES Act does not preclude balance billing for items and services not subject to the CARES Act, although balance billing may be prohibited by applicable state law and other applicable contractual agreements.
  10. Interaction of ACA Emergency Payment Rules and Required Free Testing. Under the Affordable Care Act, non-grandfathered group health plans offering non-grandfathered group coverage cannot impose cost sharing (expressed as a copayment or coinsurance rate) on out-of-network emergency services in a greater amount than what is imposed for in-network emergency services. Additionally, the Departments’ regulations provide that a plan satisfies the cost-sharing limitations in the ACA if it provides benefits for out-of-network emergency services in an amount at least equal to the greatest of the following three amounts (adjusted for in-network cost-sharing requirements): (1) the median amount negotiated with in-network providers for the emergency service; (2) the amount for the emergency service calculated using the same method the plan generally uses to determine payments for out-of-network services (such as the usual, customary, and reasonable amount); or (3) the amount that would be paid under Medicare for the emergency service (collectively, minimum payment standards). The minimum payment standards do not prohibit a group health plan from paying an amount for an emergency service that is greater than the amounts specified in the regulations.  Because the Departments interpret the provisions of the CARES Act as specifying a rate that generally protects participants, beneficiaries, and enrollees from balance billing for a COVID-19 test, the requirement to pay the greatest of three amounts under the ACA is superseded by the requirements of the CARES Act with regard to COVID-19 diagnostic tests that are out-of-network emergency services. For these services, the plan must reimburse an out-of-network provider of COVID-19 testing an amount that equals the cash price for such service that is listed by the provider on a public website, or the plan may negotiate a rate that is lower than the cash price.
  11. Can Reduce Expanded Coverage Without 60 Day Advance Notice. The Departments previously announced temporary enforcement relief that allows plans to make changes to coverage to increase benefits, or reduce or eliminate cost sharing, for the diagnosis and treatment of COVID-19 (i.e., the Free Testing) or for telehealth and other remote care services more quickly than they would otherwise be able to under current law. A plan may also revoke these changes upon the expiration of the public health emergency related to COVID-19 without satisfying advance notice requirements. If a plan reverses these changes once the COVID-19 public health emergency or national emergency declaration is no longer in effect, the Departments will consider a plan to have satisfied its obligation to provide advance notice of a material modification with respect to a participant, beneficiary, or enrollee if the plan either (a) had previously notified the participant, beneficiary, or enrollee of the general duration of the additional benefits coverage or reduced cost sharing (such as, that the increased coverage applies only during the COVID-19 public health emergency); or (b) notifies the participant, beneficiary, or enrollee of the general duration of the additional benefits coverage or reduced cost sharing within a reasonable timeframe in advance of the reversal of the changes.
  12. Can Provide Telehealth to Employees Not in Health Plan. In light of the COVID-19 pandemic, a large employer may offer coverage only for telehealth and other remote care services to employees who are not eligible for any other group health plan offered by the employer. This relief is limited to telehealth and other remote care service arrangements that are sponsored by a large employer and that are offered only to employees (or their dependents) who are not eligible for coverage under any other group health plan offered by that employer. Under this temporary relief, the Departments will continue to apply otherwise applicable federal non-discrimination standards.
  13. Mental Health Parity Testing Can Ignore Free COVID-19 Testing. When performing the required mental health parity testing, plans can disregard the Free Testing required under the FFCRA.
  14. Wellness Programs Can Waive Standards. A plan may waive a standard for obtaining a reward (including any reasonable alternative standard) under a health-contingent wellness program if participants or beneficiaries are facing difficulty in meeting the standard as a result of circumstances related to COVID-19. However, to the extent the plan waives a wellness program standard as a result of the COVID-19 public health emergency, the waiver must be offered to all similarly situated individuals.

Additional guidance regarding the CARES Act

Hi everyone. I hope all of you are doing well.

I want to pass along some quick information on a new IRS notice (Notice 2020-50) that was issued last Friday, which provides additional guidance regarding the CARES Act.

You can find the notice here: https://www.irs.gov/pub/irs-drop/n-20-50.pdf.

There are lots of helpful details in the notice, but the key piece that I want to mention is that it expands the list of individuals who qualify for coronavirus-related distributions.

  • Generally. You may recall that the CARES Act generally allows a qualified individual to take a coronavirus-related distribution of up to $100,000 from certain retirement plans, including 401(k) plans. These distributions have special tax treatment. There are specific rules related to these distributions.
  • Prior Rule – Qualified Individual. Under the CARES Act itself, a qualified individual is an individual:
    1. who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act);
    2. whose spouse or dependent is diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act); or
    3. who experiences adverse financial consequences as a result of (a) the individual being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19; (b) the individual being unable to work due to lack of childcare due to COVID-19; or (c) closing or reducing hours of a business owned or operated by the individual due to COVID-19.
  • New Rule – Expands Definition of Qualified Individual. The IRS notice issued on Friday adds to the list of those who qualify, such that a qualified individual now additionally includes an individual who experiences adverse financial consequences as a result of:
    1. the individual having a reduction in pay (or self-employment income) due to COVID-19 or having a job offer rescinded or start date for a job delayed due to COVID-19;
    2. the individual’s spouse or a member of the individual’s household (someone who shares the individual’s principal residence) being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19, being unable to work due to lack of childcare due to COVID-19, having a reduction in pay (or self-employment income) due to COVID-19, or having a job offer rescinded or start date for a job delayed due to COVID-19; or
    3. closing or reducing hours of a business owned or operated by the individual’s spouse or a member of the individual’s household due to COVID-19.

I think the new #5 above will be particularly helpful/interesting to many of you.

Please let me know if you have any questions.

Thank you,
Brandon

Final electronic delivery guidance for plan administrators

Good morning everyone. I hope all of you are doing well, and that your business is hanging in there.

This morning the Department of Labor issued their final rule creating a new, additional method for plan administrators to use to deliver certain benefit plan documents to participants and beneficiaries electronically. I am still studying the rule but here is a very quick overview:

  • New Rule = “Notice and Access” Option. The new rule is optional and allows administrators who satisfy certain requirements to provide participants and beneficiaries with a notice that certain disclosures (e.g., 401(k) plan summary plan description) will be made available on a website, or to furnish disclosures via email. Individuals who prefer to receive disclosures on paper can request paper copies and opt out of electronic delivery.
  • New Rule Effective Date. 60 days after the rule is published in the federal register. This rule has not been officially published yet. I think it will be published on May 27, 2020 – so I think it will likely be effective around July 27, 2020.
  • New Rule Only Applies to “Covered Individuals.” The regulation defines a “covered individual” for purposes of the rule as a participant, beneficiary, or other individual entitled to covered documents and who—when he or she begins participating in the plan, as a condition of employment, or otherwise—provides the “employer, plan sponsor, or administrator (or an appropriate designee of any of the foregoing)” with an electronic address. This includes an email address or internet-connected mobile-computing-device (e.g., smartphone) number, and is intended to be broad enough to encompass new and changing technology.
    • The existence of an electronic address for notification to a covered individual is critical to the effective implementation of a notice-and-access framework, much like a mailing address is critical to delivery of a paper document.
    • The final rule offers plan administrators a variety of ways to comply with the condition to obtain an electronic address for each covered individual. This provision, for example, is satisfied if the company provides plan participants an electronic address because of their employment. This requirement also is satisfied if an employee provides a personal electronic address to the plan administrator or plan sponsor, for example, as part of the job application process or on other human resource documents. In addition, a plan administrator or service provider can request an electronic address in plan enrollment paperwork or to establish a plan participant’s online access to plan documents and account information.
    • New Rule Only Applies to 401(k) and Pension Plan Documents. The new rule can generally be used to furnish any pension benefit plan (which would include 401(k) plans) document that a plan administrator is required to furnish under Title I of ERISA, e.g., summary plan descriptions, summary of material modifications, participant fee disclosures, etc. This means the rule does not apply or help with health and welfare plan disclosures.
    • Prior/Current Electronic Delivery Rule. Currently, plan administrators must use delivery methods reasonably calculated to ensure actual receipt of information, e.g., in-hand delivery, sending by first class mail, etc. Back in 2002, the DOL issued guidance (an optional safe harbor) that also allows plan administrators to send documents to participants and beneficiaries electronically – without their consent – if they are “wired at work,” i.e., they use a computer as part of their job. This prior/current electronic delivery option remains in place and you can continue to use it, but you also have the new option (i.e., notice and access) available now too.
    • New Rule Has Other Requirements. As I mentioned above, the new rule was literally issued this morning so we are still reading/processing, but there are additional requirements beyond those that I’ve stated in this quick summary.

Also, on a completely unrelated note, in case you are interested, attached is the motion for leave to file an amicus brief (with the proposed brief attached) that we filed last week on behalf of the State Chamber and Hobby Lobby in the federal lawsuit challenging the Oklahoma state PBM law. Here is a Law360 article about our filing: https://www.law360.com/benefits/articles/1274328/businesses-urge-court-to-keep-oklahoma-pbm-law-on-ice?nl_pk=9dbd74e0-6519-4827-a68f-4447cf0c9b91&utm_source=newsletter&utm_medium=email&utm_campaign=benefits.

Thank you – have a great day.

Brandon