PPI in the News Compliance Corner - August 19, 2021 Archive
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On June 28, 2021, CMS issued a technical alert regarding the inclusion of Part D information in the Section 111 Query Only Response File for Responsible Reporting Entities (RREs) that provide primary prescription drug information for purposes of Medicare Secondary Payer (MSP) Section 111 reporting.

The alert notifies group health plan RREs of changes being made to the Query Only Response File. The changes add fields 20 through 22 to account for current Part D enrollment information for a beneficiary. The new fields request information regarding the current Medicare Part D plan contractor number, plan enrollment date and plan termination date.

These changes are effective December 13, 2021. For additional information regarding RREs and reporting primary prescription drug information, see the article “CMS Issues Guidance Regarding Responsible Reporting Entities and Reporting Primary Prescription Drug Information” in the May 13, 2021, edition of Compliance Corner.

As a reminder, an RRE is usually the insurer for a fully insured plan, the third-party administrator for a self-insured plan and the plan administrator for a self-insured plan that self-administers. While employers are not usually the RRE, they should be aware of this guidance.

CMS Technical Alert »
MMSEA Section 111 MSP Mandatory Reporting GHP User Guide »

On July 26, 2021, the HHS and DOJ jointly released guidance on long COVID as a disability under the Americans with Disabilities Act (ADA), Section 504 of the Rehabilitation Act, and Section 1557 of the ACA. These federal laws protect people with disabilities from discrimination.

The guidance recognizes that some people continue to experience symptoms that can last weeks or months after first being infected with COVID-19, or some may develop new or recurring symptoms at a later time. The guidance describes this condition as “long COVID.”

The guidance states that “a person with long COVID has a disability if the person’s condition or any of its symptoms is a ‘physical or mental’ impairment that ‘substantially limits’ one or more major life activities.” “Major life activities” are defined broadly and includes performing manual tasks, thinking, communicating and working. The term also includes the operation of a major bodily function — for instance, the functions of the cardiovascular system or neurological system.

If an individual's long COVID is qualified as a disability, then they are entitled to the same protections from discrimination as any other person with a disability under the respective laws noted earlier, including reasonable modifications and accommodations in certain circumstances.

At this time, it is not explicitly described how this new guidance will affect employee benefit matters. However, this guidance will likely reinforce the EEOC’s COVID-19 related rules. Moreover, employers should consider this guidance when designing and providing wellness programs and benefit plans in order to avoid any discrimination concerning long COVID.

We anticipate that we will have more tangible applications of this guidance for employee benefit purposes through the additional insights from the agencies or through the industry response to the guidance. We will continue to monitor developments relating to the potential impact on employee benefits and provide key updates as they become available.

Guidance on “Long COVID” as a Disability Under the ADA, Section 504, and Section 1557 »
HHS Press Release »

On August 12, 2021, the DOL announced that United Behavioral Health and United Healthcare Insurance Co. (collectively “United”) settled a lawsuit initiated by the agency and the New York State Attorney General’s Office. The suit was initiated after the Employee Benefits Security Administration investigated United based on allegations that, since at least 2013, United “reduced reimbursement rates for out-of-network mental health services, thereby overcharging participants for those services, and flagged participants undergoing mental health treatments for a utilization review, resulting in many denials of payment for those services.” United agreed to pay $13.6 million to affected participants and beneficiaries; pay $2,084,249 in penalties; and take other corrective action to resolve the dispute.

The agency stated that the allegations against United are violations of the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). The MHPAEA prohibits ERISA plans from imposing treatment limitations on mental health and substance use disorder benefits that are more restrictive than the treatment limitations they impose on medical and surgical benefits. As a result of these violations, participants and beneficiaries of ERISA plans did not receive the mental healthcare that they were entitled to. In addition, United failed to provide sufficient information about what it did to these plans.

In addition to paying restitution and penalties, United agreed to stop following the procedures that resulted in the alleged violations. United used an algorithm called the ALERT system that would deny claims if a clinical review determined that a utilization review was needed because the claim was for a product or service deemed medically unnecessary. United’s use of the ALERT process led to the denial of the mental healthcare claims at issue in the case.

The settlement highlights the focus that the agency is placing on violations of the MHPAEA, particularly violations involving reimbursement rates. Employers should be aware of these developments and work with their carriers and TPAs to ensure that they are in compliance with the law.

DOL Press Release »
Settlement Agreement »

In the August 6, 2021, edition of Employee Plan News, the IRS clarified a provision of the SECURE Act regarding plan adoption. Effective January 1, 2020, the SECURE Act permits an employer to adopt a retirement plan after the close of the employer’s tax year. The employer may treat the plan as having been adopted as of the last day of the taxable year as long as the adoption occurs by the tax return due date (including extensions).

The IRS has now clarified that if an employer adopted a plan in 2021 and treats the plan as having been adopted as of the last day of the employer’s 2020 tax year, the plan sponsor will not be required to file a Form 5500 for the plan year that begins in 2020. Instead, the first filing will be the 2021 Form 5500 on which the plan sponsor will indicate the retroactive adoption of the plan.

Employee Plan News, August 6, 2021 »

On July 28, 2021, the Court of Appeals for the Seventh Circuit held that ERISA did not preempt a claim for state-law breach of corporate fiduciary duties but did preempt a state-law claim for aiding and abetting. In Halperin v. Richards (7th Cir., No. 20-2793, July 28, 2021), the trustees of the Chapter 11 bankruptcy for Appvion filed suit alleging that Appvion’s directors and officers had inflated the company’s stock value to conceal the company’s financial decline and benefit themselves.

Specifically, Appvion was wholly owned by employees through the company’s employee stock ownership plan (ESOP), and the bankruptcy trustees accused the officers and directors of fraudulently inflating the ESOP’s valuations with assistance from the ESOP trustee and its independent appraiser. Accordingly, the bankruptcy trustees filed suit against the directors and officers for breaching their corporate fiduciary duties and against the ESOP trustee and appraiser for aiding and abetting those breaches.

The defendants in the case moved to dismiss all the claims on the theory that their roles in Appvion’s ESOP valuations were governed by ERISA, causing ERISA to preempt state law. The district court agreed with the defendants, dismissing all the claims. But on appeal, the Seventh Circuit reversed the district court as to the claims for corporate fiduciary breach (against the directors and officers) and affirmed the district court as to the claims for aiding and abetting (against the ESOP trustee and appraiser).

In coming to those opposite conclusions, the court analyzed precedence on ERISA preemption. The court decided that ERISA did not preempt state laws on corporate breach of fiduciary duties because the executives in question served in dual capacities. Although ERISA’s “exclusive benefit rule” is paramount and requires that fiduciaries act solely in the interest of ERISA beneficiaries, ERISA also allows for corporate insiders to serve as ERISA fiduciaries. As such, the court held that it was possible for parallel state-law liability against executives who serve in dual roles.

The court also reasoned that if they were to decide that ERISA preempts state law in regard to claims for breach of corporate fiduciary duty, it would leave parties like the plaintiffs without any recourse against the malfeasance of corporate actors serving in dual capacities.

On the other hand, the court found that the ESOP trustee and independent appraiser were involved in the case in a singular role under ERISA. Since they did not have a separate corporate obligation for which the plaintiffs could bring a claim, the court held that ERISA did preempt state aiding and abetting laws against the ESOP trustee and appraiser.

Ultimately, this case serves as a reminder to corporate officers that they could be subject to both ERISA and state laws designed to protect the interests of corporations and their stakeholders.

Halperin v. Richards »

On August 11, 2021, the IRS released an Issue Snapshot focusing upon the universal availability requirement applicable to 403(b) plans (excluding church plans). The analysis was designed to address a common error with respect to the exclusion of certain employees from plan participation.

Under the universal availability rule, all employees of the 403(b) plan sponsor must be eligible to make elective deferrals if any employee has the right to do so. There are limited exceptions to this rule, including one for certain part-time employees. However, part-time employees cannot be excluded as a general class, such as part-time, temporary or seasonal employees. Rather, such employees can only be excluded if they “normally work less than 20 hours per week.”

An employee is considered to normally work less than 20 hours per week if, during the 12-month period beginning on the employee’s hire date (the initial year), the employer reasonably expects the employee to work fewer than 1,000 hours, and for each plan year ending after the close of the initial year (or subsequent 12-month period), the employee actually works fewer than 1,000 hours. If an employee does not satisfy these requirements for any year (for example, by working more than 1,000 hours), the employee can no longer be excluded from making elective deferrals under the part-time exclusion in any future year (regardless of how few hours the employee works in such future year).

The Issue Snapshot also emphasizes that eligible employees must be given an effective opportunity to participate in the plan, which includes notice of eligibility and the period and conditions for elections. At least once during the plan year, the employee must be able to make or change deferral elections, including, as applicable, catch-up or Roth contributions, up to the dollar limits in effect.

Although the Issue Snapshot is not an official announcement of the law that can be cited as precedent, employers who sponsor 403(b) plans may find this internal analysis helpful. Employers may want to review their plan documents and operations to ensure that any exclusion of part-time employees is in accordance with this guidance. In the event of past exclusion failures, employers should consult counsel regarding possible transition relief under IRS Notice 2018-95.

Issue Snapshot – 403(b) Plan – The Universal Availability Requirement »

In July, the Pension Benefits Guarantee Corporation (PBGC) hosted a couple of webinars on the special financial assistance (SFA) for financially troubled multiemployer plans that was provided by the American Rescue Plan Act (ARPA). The ARPA authorized PBGC to provide SFA to multiemployer pension plans that are in critical and declining or critical status, were approved to suspend benefits under the Multiemployer Pension Reform Act of 2014, or became insolvent after December 16, 2014, but have not been terminated. ( See the July 22, 2021, edition of Compliance Corner for more information on the SFA provided through the ARPA.)

The two webinars hosted by the PBGC provided detailed information on the SFA, including the application and review process for plans seeking to claim SFA. They also provided information on the filing process, specifically showing attendees how to complete a filing.

Multiemployer plan sponsors that will seek to apply for SFA funds should review these webinars for pertinent information.

SFA Briefing Webinar 1 »
SFA Briefing Webinar 2 »