SubscribeThe US Department of the Treasury and the Internal Revenue Service recently issued proposed regulations on the use of forfeitures by tax-qualified retirement plans. The proposed changes provide welcome clarity for plan sponsors but may require revisions to plan administration and legal plan documents.
US Department of the Treasury
Treasury, DOL and HHS Issue Landmark Mental Health Parity Proposed Rule
The US Departments of the Treasury, Labor, and Health and Human Services (the Departments) recently issued much-anticipated proposed regulations under the Mental Health Parity and Addiction Equity Act (MHPAEA) to better ensure that health plans allow access to mental health or substance use disorder benefits as easily as medical or surgical benefits. The proposed regulations reiterate the Departments’ focus on mental health parity and underscore the importance of compliance for health plan sponsors. They also come after many plans have been subject to audit by the Departments which focused heavily on MHPAEA compliance, leaving plan sponsors frustrated at the lack of guidance and inconsistent application of MHPAEA.
Agencies Issue FAQs on Surprise Billing and Cost-Sharing Rules Coordination
A recent article by the Kaiser Family Foundation (KFF) and National Public Radio (NPR) raised the prospect that patients may still see surprise medical bills despite the enactment of the No Surprises Act (NSA).
The article, entitled A Surprise-Billing Law Loophole? Her Pregnancy Led to a Six-Figure Hospital Bill, reports the story of a woman who was admitted for an extended inpatient hospital stay and follow-up postpartum procedure after experiencing a serious pregnancy complication. According to the article, the plan initially determined that the hospital was a nonparticipating provider, but the specialty clinic at which she was treated was in the carrier’s network. (The clinic’s doctors admitted patients only to the nonparticipating provider hospital.) The result was some $135,000 in uncovered expenses.
There are two relevant statutory provisions at play here:
- The NSA provides protections against surprise medical bills for, among other things, nonemergency services furnished by nonparticipating providers with respect to a visit to a participating healthcare facility.
- The Affordable Care Act (ACA) imposes limits on annual cost sharing, which includes deductibles, coinsurance, copayments or similar charges. Cost sharing does not, however, include balance billing amounts for non-network providers.
A great deal is riding on whether facilities and providers are participating or nonparticipating for NSA purposes, and whether providers are in or out of network for ACA purposes. If it is possible for a nonparticipating facility to have a participating provider, then there would seem to be a gap in the NSA’s protections. In the government’s view, this is not possible, so there is no gap.
The US Departments of Labor, Health and Human Services, and the Treasury (the Departments) weighed in on the issue in Q&As 1 and 2 of recently issued FAQs Part 60. According to the Departments, either:
- The balance billing and cost-sharing protections under the NSA will apply because the items and services are furnished by a nonparticipating provider, emergency facility or provider of air ambulance services; or
- The ACA limits will apply because the items or services are furnished by an in-network provider or provider of air ambulance services.
Under no circumstance, however, can a facility be a “participating” provider for NSA purposes and at the same time claim that they are not subject to the ACA out-or-pocket limits on in-network cost sharing.
The KFF/NPR article does not report the details about the underlying contractual arrangements. This might have been a health maintenance organization or other network-related plan, for example. The article does report that the balance bill was reversed, although no rationale is provided. The lesson here, according to the Departments, is that a plan or carrier cannot be in network for one purpose and out of network for other purposes to evade the surprise billing rules.
Fixing the ACA’s Family Glitch
The “family glitch” was a regulatory oddity of the Affordable Care Act (ACA). It required the affordability of an employer-sponsored health plan to be determined based solely on the cost of the plan to an individual employee, disregarding the costs to add family members to a plan. This resulted in many families being ineligible for marketplace premium subsidies when purchasing their own health insurance on exchanges. In October 2022, the US Department of the Treasury and Internal Revenue Service (IRS) issued a final rule designed to fix the “family glitch.”
In this Bloomberg Law article, Alden Bianchi and Teal Trujillo examine the rationale advanced by the IRS in support of its changed position in the matter of the “family glitch” and consider how the new position of the IRS might fare if challenged in the wake of West Virginia v. EPA.
Copyright 2023 Bloomberg Industry Group, Inc. (800-372-1033) Reproduced with permission.
Preparing for the End of the COVID-19 Emergency: Tri-Agencies Issue FAQs to Assist Plans and Issuers
The Biden administration has announced its intention to end the COVID-19 National Emergency (NE) and the COVID-19 Public Health Emergency (PHE) on May 11, 2023 (read our series introduction for more information).
On March 29, 2023, the US Departments of Labor, Health and Human Services, and Treasury (the Departments) issued a set of Frequently Asked Questions (available here), which answered questions from stakeholders relating to the various laws, regulations and other guidance enacted or adopted in connection with the NE and PHE. The FAQs include eight questions related to the anticipated end of the “Outbreak Period” on July 10, 2023, which is 60 days after the end of the NE and PHE on May 11 (rules regarding the Outbreak Period are set forth in our earlier articles here and here). Below are the highlights:
- Following the end of the PHE, plans and issuers can impose cost-sharing, prior authorization or other medical management requirements for COVID-19 diagnostic tests, although the Departments encourage plans not to do so.
- Plans and issuers are encouraged to notify plan participants of changes regarding COVID-19 diagnosis, testing and treatment. Special rules apply under which Summaries of Benefits and Coverage (SBCs) need not be amended mid-year.
- While plans and issuers will no longer be required to post prices for diagnostic tests furnished after May 11, they are nevertheless encouraged to do so.
- Plans must continue to cover vaccines that qualify as preventive services, without cost-sharing, when provided in-network.
- The FAQs provide examples relating to the application and termination of extended time periods for elections under the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the Health Insurance Portability and Accountability Act (HIPAA).
- In what is a welcome surprise, the FAQs confirm that individuals covered by a High-Deductible Health Plan (HDHP) will remain Health Savings Account (HSA)-eligible until further notice even if the HDHP in which they are enrolled provides medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the HDHP’s applicable minimum deductible.
To keep employers apprised of the rules and to assist with providing notice to plan participants of the changes that will accompany the end of the NE and PHE, the Department of Labor has issued two blog posts, which are available here and here.
Action Items: We urge plan sponsors to pay particular attention to notifying employees of the upcoming changes that will accompany the end of the PHE and NE and to ensure that participants covered under an HDHP understand that they may continue to contribute to their HSAs. Employers should consider communicating these changes to their employees.
For any questions regarding the end of the PHE and/or NE, please contact your regular McDermott lawyer or one of the authors.
District Court Vacates Provisions of No Surprises Act Final Rule
On February 6, a US district court in Texas vacated provisions of the No Surprises Act final rule related to the independent dispute resolution (IDR) process for determining payment for out-of-network services.
The district court granted summary judgment to the Texas Medical Association, which had brought suit against the US Departments of Health and Human Services (HHS), Labor and the Treasury over the IDR process. The district court held that provisions of the final rule were contrary to law and therefore in violation of the Administrative Procedure Act. The order vacated the provisions of the final rule that require IDR entities to look at the qualifying payment amount first and consider other factors only if those other factors are not already accounted for in the qualifying payment amount.
The departments have not yet filed a notice of appeal or amended their sub-regulatory guidance to align with the district court’s order.
Departments Issue Final Rule Implementing Certain No Surprises Act Provisions
On August 19, 2022, the US Departments of Health and Human Services (HHS), Labor and Treasury posted a final rule revising portions of the federal No Surprises Act (NSA). Generally, the rule finalizes three aspects of the two-part interim final rule that the Departments published along with the Office of Personnel Management in 2021. First, the final rule expands the information about the qualifying payment amount (QPA) that plans and issuers (collectively, payers) must disclose to providers and facilities (collectively, providers). Second, it reinterprets the provisions of the NSA that govern the determination of the appropriate out-of-network rate through the federal independent dispute resolution (IDR) process, and prescribes how certified IDR entities are to weigh the QPA and other considerations when selecting one of the parties’ offers. The certified IDR entity must now consider the QPA first, and then give weight to other considerations only if those other considerations are not accounted for in the QPA. Third, the final rule expands the information that a certified IDR entity must provide in its written payment determination to include a statement explaining why the QPA did not already account for other considerations weighed by the IDR entity.
Responsible Financial Innovation Act: Proposed Tax and Reporting for Digital Assets
On June 7, 2022, Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) introduced the highly anticipated Responsible Financial Innovation Act (the bill), which sets out to create the first complete regulatory and bipartisan framework for digital assets. The bill is intended to establish some legal clarity for regulators and the industry and to protect consumers by providing a range of disclosures and clarifying settlement conditions and rights over digital ownership. The bill would also treat all digital assets that are not treated as securities as commodities regulated by the Commodity Futures Trading Commission. This article discusses key tax considerations raised by the bill concerning taxation and reporting requirements for participants in the digital asset industry.
Safe Harbor Issued for Reporting Healthcare Prices Under Transparency Rules
The US Departments of Labor, Health and Human Services, and the Treasury recently released Frequently Asked Questions (FAQs) regarding the implementation of certain reporting provisions of the Affordable Care Act (ACA). The FAQs were released to provide clarity on the required drug price disclosures identified in the Transparency in Coverage final rule (the Rule) issued on October 29, 2020. As described in this SHRM article, employers are responsible for making sure that these disclosures are ready and available.
Proposed IRS RMD Regulations Present Challenges, Risks for 403(b) Plans
The Internal Revenue Service (IRS) is strategically working to execute the statutory changes that were outlined by the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) of 2019. However, the IRS’s efforts to streamline the required minimum distribution (RMD) requirements for Internal Revenue Code (IRC) Section 403(b) plans with Section 401(a) qualified plans, such as 401(k) plans, may have unforeseen challenges and risks.
A proposed rule was published on February 24, 2022, in the Federal Register. The preamble of the rule indicates that the IRS and US Department of the Treasury are considering changes to conform the treatment of Section 403(b) plans more closely with that of Section 401(a) qualified plans for RMDs. Section 403(b) plans are currently treated the same as individual retirement accounts (IRAs) for purposes of applying the RMD rules. As a result, RMDs are not required to be automatically made from Section 403(b) plans like they are from Section 401(a) retirement plans. The IRS’s proposed rule would require any nonprofit organized under IRC Section 501(c)(3) (i.e., hospitals, public schools and churches) with retirement plans to make RMDs going forward.
Though the proposed rule presents the opportunity to simplify and align the treatment of Section 403(b) plans and Section 401(a) qualified plans, it poses administrative difficulties and potential conflicts with state law. Section 403(b) plans can be invested in a variety of funds, including annuity contracts—group and individual contracts—with insurance companies, custodial accounts or retirement income accounts for certain church workers. For individual annuity contracts, this could create a contractual issue. Employers are not a party to individual contracts between plan participants and investment firms, which would limit the ability of employers to compel RMDs. (Note that distributions could still be forced from group annuity contracts between employers and investment firms.) Regardless of the type of annuity contract, every contract will have to be reviewed to ensure it can comply with the proposed rule. To the extent any changes need to be made to these contracts, state-level approval may be required as insurance companies are governed by state law requirements.
In addition, the proposed rule does not take into consideration the effect of the prospective changes on Section 403(b) plans that are exempt from ERISA because of the safe harbor offered by the US Department of Labor (DOL) in 1979 (29 C.F.R. § 2510.3-2(f)). One of the conditions for meeting the safe harbor is that the employer involvement be limited to certain specific activities. If an employer is required to actively negotiate with insurance providers or choose a provider to administer the RMD requirement for participants, it might be violating this restriction and inadvertently subject its program to ERISA. The IRS and DOL will need to coordinate on the impact of this rule in such cases.
The IRS is taking this proposed rule under review and has asked for feedback specifically related to administrative concerns, notable differences in the structure or administration of Section 403(b) plans compared to qualified plans that might affect RMDs, and [...]
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