Review plan documents and adopt all necessary year-end amendments
November 1, 2021
Stephanie A. Smithey and Matthew Hoffman
Holiday season and the end of the year are both quickly approaching, and with the turning of the calendar from 2021 to 2022 come several employee benefit plan amendment deadlines and implementation requirements. Some of these changes are optional for plan sponsors to adopt so now is a good time to discuss and plan for the upcoming year.
For retirement plans, hardship distribution amendments are due by Dec. 31, 2021. For welfare plans, flexible spending account (FSA) amendments are due by Dec. 31, 2021, and a number of the provisions of the Consolidated Appropriations Act, 2021 (CAA, 2021) need to be implemented by the plan year beginning on or after Jan. 1, 2022.
Below is a quick year-end checklist for employee benefit plans.
Retirement Plans: Hardship Distributions
Under Internal Revenue Service (IRS) guidance for qualified retirement plans, the deadline for adopting an amendment conforming to the hardship distribution requirements of the Bipartisan Budget of Act of 2018 and the 2019 final distribution regulations is Dec. 31, 2021. The Bipartisan Budget of Act of 2018 and the final regulations enacted several changes to hardship withdrawal rules for qualified retirement plans, including:
Repeal of the required 6-month suspension of elective deferrals after a hardship distribution.
Permitting amounts contributed as qualified nonelective contributions (QNECs) or qualified matching contributions (QMACs) to be available for hardship distributions.
Elimination of the need to exhaust plan loans prior to taking a hardship distribution.
Allowing a general standard to be used to determine if a hardship distribution is necessary to satisfy the financial needs of a participant.
Permitting hardship distributions to repair a primary residence, even if that repair would not otherwise qualify for a casualty loss deduction.
Plan sponsors also may need to adopt other retirement plan amendments by Dec. 31, 2021, if they made plan changes during 2021.
When preparing the year-end hardship distribution amendment, for efficiency, plan sponsors may want to consider amending their retirement plans for other mandatory amendments that are not yet due. The IRS has provided additional time to adopt the host of retirement plan amendments related to retirement plan provisions of the Setting Every Community Up for Retirement Enhancement (SECURE) Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Although these changes have already become effective, plan sponsors have until the last day of the first plan year beginning on or after Jan. 1, 2022, to adopt plan amendments reflecting those provisions. For calendar year plans, these amendments are due Dec. 31, 2022.
Welfare Plans: Health Care and Dependent Care FSAs
The CAA, 2021 and subsequent IRS notices allow several optional changes to cafeteria plans that offer health care FSAs and dependent care FSAs, including the following:
Allow participants to carry over all or a limited portion of their unused FSA balance from a plan year ending in 2020 or 2021 to a plan year ending in 2021 or 2022 respectively.
Extend the grace period for using unused FSA balances for plan years ending in 2020 or 2021 to up to 12 months after the end of the plan year.
Allow participants to make new FSA and pre-tax premium elections or revoke an existing election mid-year without a status change event for the plan year ending in 2021.
Allow employees who cease participation in a health care FSA to spend down their account for expenses incurred after employment separation through the end of the grace period of the plan year in which the separation occurred.
Increase the maximum age for qualified dependents under the dependent care FSA from 12 to 13 for the 2021 plan year.
Increase the dependent care FSA maximum from $5,000 to $10,500 for the 2021 plan year.
Plan sponsors that have implemented any of these changes must adopt a plan amendment memorializing the changes on or before Dec. 31, 2021.
HIV PreEP Treatment Coverage
As of Sept. 17, 2021, group health plans must cover HIV pre-exposure prophylaxis (PrEP) treatment consistent with the U.S. Preventive Services Task Force (USPSTF) recommendation without cost-sharing. The U.S. Department of Labor (DOL) recently issued answers to frequently asked questions (FAQs) providing that group health plans are required to provide coverage without cost-sharing not just for PrEP, but also for the items and services that the USPSTF recommends for participants prior to being prescribed anti-retroviral medication to determine whether the medication is appropriate, as well as for ongoing follow-up and monitoring (PrEP support services). PrEP support services include HIV testing, hepatitis testing, pregnancy testing, and adherence counseling, among other items and services, as described in detail in the DOL's FAQs. Since this provision has already taken effect, plan sponsors will need to adopt an amendment by year-end reflecting the Sept. 17, 2021, effective date.
No Surprises Act and Transparency in Coverage Rule
Within the past year, the DOL, U.S. Department of Health and Human Services (HHS), and the U.S. Department of the Treasury have issued guidance regarding implementation of the medical pricing and transparency rules of the CAA, 2021 that apply to group health plans. For example, the Transparency in Coverage (TiC) final rule addressed participant access to pricing information through group health plans, requiring such plans to make information regarding in-network rates and out-of-network costs publicly available. The CAA, 2021 further addressed transparency in health plan billing and rules to eliminate surprise billing in group health plans.
Because of the rapidly approaching deadline for implementation of many of the requirements of the CAA, 2021 and the TiC rule, the DOL, HHS, and the Treasury Department have issued guidance addressing, among other things, deadlines and overlap, explanations of benefits (EOBs), and good faith compliance. For example, plans must begin notifying participants of their rights relating to balance billing. The DOL's website has a model DOL notice for posting, distribution, and including on EOBs.
The following CAA, 2021 and TiC rule provisions are required to be implemented for plan years on or after Jan. 1, 2022:
Group health plans that offer coverage for emergency services must provide that coverage (1) without preauthorization; (2) without regard to whether the provider is an in-network or out-of-network provider; (3) with no requirements that would be more restrictive than for in-network services; and (4) with cost-sharing for out-of-network providers no greater than if they were in-network.
Nonemergency services at out-of-network providers
Plans may not impose cost-sharing on coverage for out-of-network services greater than cost-sharing that applies to in-network services.
Gag clauses on price and quality data
Plans are prohibited from entering into an agreement with service providers that would directly or indirectly restrict the plan from: (1) providing provider-specific cost or quality of care information or data to referring providers, the plan sponsor, participants, beneficiaries, or enrollees, or individuals eligible to become participants, beneficiaries, or enrollees of the plan or coverage; (2) electronically accessing de-identified claims and encounter data for each participant, beneficiary, or enrollee; and (3) sharing either type of information, consistent with applicable privacy regulations.
Under interim final rules issued on Oct. 7, 2021, group health plans that cover air ambulance services must limit the participant's cost-sharing for out-of-network services to the same cost if the services were provided in-network.
Independent dispute resolution
The interim final rules also provide that plans have 30 business days to negotiate payment amounts starting on the day of initial payment or notice of denial of payment. If a negotiation fails, the parties have four business days to initiate a binding arbitration process called "independent dispute resolution" (IDR). Each party submits a payment offer during the IDR process and one of the amounts is selected by the certified IDR entity. The IDR entity must choose one of the amounts submitted by the parties. The losing party has to pay the arbitration costs.
The interim final rules also provide that prior external review guidance is amended to expand the scope of adverse benefit determinations eligible for external review to include determinations about plan compliance with the surprise billing and cost-sharing protections under the No Surprises Act and its implementing regulations. The interim final rules extend external review under the No Surprises Act to grandfathered plans.
Plans are required to publicly disclose, in machine-readable files, in-network rates, out-of-network rates, and prescription drug prices. Regulations defer enforcement of the requirement until July 1, 2022, with enforcement of the requirement to publish prescription drug prices deferred pending further rulemaking.
Insurance identification cards
Physical or electronic insurance cards must now include deductible amounts, out-of-pocket maximums, and a phone number and website for consumer assistance information for plan years beginning on or after Jan. 1, 2022. Until regulations are adopted, good faith compliance with the ID card requirements may include identifying on the ID cards the applicable major medical deductible and out-of-pocket maximum, a telephone number and website, or a Quick Response (QR) code, to access additional deductible and out-of-pocket maximum limits.
Beginning on or after Jan. 1, 2022, plans must establish and periodically update a website that contains a list of contracted providers and facilities. Plans are expected to make a good faith effort to comply with this requirement. When a plan incorrectly identifies a provider as in-network, the plan will not be deemed out of compliance so long as the plan imposes cost-sharing not greater than the cost-sharing amount for a participating provider, and counts the cost-sharing amounts toward any deductible or out-of-pocket maximum.
Continuity of care
Effective on or after Jan. 1, 2022, plan sponsors must ensure continuity of care when a plan's contractual relationship terminates and results in changes in provider or facility network status. Plans may want to make a good faith effort to implement the requirement, pending further guidance.
The agencies have delayed the effective date for the following provisions beyond Jan. 1, 2022:
Advance explanation of benefits (EOB)
Due to the complexities of developing the technical infrastructure for transmission of the necessary data, enforcement of the advanced EOB provisions of the CAA, 2021 is delayed until applicable regulations are adopted.
Price comparison tools
The CAA, 2021 and the TiC rule contain similar price comparison tool requirements. Enforcement of the CAA, 2021 price comparison tool requirements is deferred to align with the TiC rule enforcement schedule beginning with plan years that begin on or after Jan. 1, 2023.
Reporting on pharmacy benefits and drug costs
Plans are required to submit an annual informal report on pharmacy benefits and drug costs with the HHS, DOL, and the Treasury Department. The new deadline for the informational report for plan years 2020 and 2021 is Dec. 27, 2022. Subsequent reports will need to be filed no later than June 1 for the previous plan year. Plans may want to start now so they can begin reporting the required 2020 and 2021 data by Dec. 27, 2022.
The end of the year will come quickly. Plan sponsors may want to start reviewing their plan documents now to make sure all necessary amendments are adopted before the end of 2021.
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