PPI in the News Compliance Corner - August 5, 2021 Archive
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On July 26, 2021, the Congressional Research Service (CRS) issued Surprise Billing in Private Health Insurance: Overview of Federal Consumer Protections and Payment for Out-of-Network Services. The report aims to answer questions about the No Surprises Act (the Act), including its requirements and consumer protections.

As background, the Act was initially part of the CAA passed by Congress in late 2020. Recently, federal agencies issued interim final rules implementing the Act’s requirements. For more information on the Act and the interim final rules, see the article published in the July 8th edition of Compliance Corner, "Federal Agencies Issue Interim Final Rules Implementing the No Surprise Billing Act".

The CRS report reiterates that federal requirements address surprise billing in specific scenarios:

• Out-of-network emergency services.
• Out-of-network services provided to a consumer during an outpatient observation stay or an inpatient or outpatient stay during emergency services.
• Out-of-network nonemergency, ancillary and non-ancillary services provided at an in-network facility.
• Out-of-network air ambulance services.
• Services scheduled at least three business days in advance.
• Out-of-network services from a provider that initially was in network but subsequently became out of network during treatment (i.e., continuity of care).
• Out-of-network services from a provider that the consumer assumed was in network based on incorrect information from the plan.

Further, the CRS explains that the consumer protections take one of two forms, financial protection, and informational protection (via consumer notices), and protections will vary depending on the situation. The report elaborates on the specific protections based on the surprise billing scenario, among other related topics such as enforcement of surprise billing requirements and the interaction with state surprise billing laws. While the report does not provide new guidance, it does elaborate on the Act’s requirements which will soon be effective.

Employers should reference this report to better understand the Act, as its requirements and the interim final rules are applicable to group health plans and health insurance issuers for plan and policy years beginning on or after January 1, 2022.

CRS Report »

On July 26, 2021, the IRS issued Notice 2021-46, which lists 11 more FAQs concerning the COBRA premium assistance requirements under the American Rescue Plan Act of 2021 (ARPA). These FAQs provide additional clarification on the following topics: eligibility for premium assistance in cases of extended coverage periods, dental and vision coverage, the applicability of premium assistance to certain kinds of state continuation coverage, and additional discussion concerning which entity is entitled to claim the premium subsidy tax credit.

Extended Coverage Periods
FAQ #1 provides that if an individual had not notified the plan or insurer of the intent to elect extended COBRA continuation coverage before the start of that period but would qualify for COBRA continuation coverage for an extended period due to a disability determination, second qualifying event, or an extension under State mini-COBRA, then that individual is entitled to premium assistance. However, the original qualifying event must have been either a reduction in hours or an involuntary termination of employment. In addition, premium assistance is available only to the extent the extended period of coverage falls between April 1, 2021 and September 30, 2021.

Dental and Vision Coverage
FAQ #2 states that eligibility for COBRA premium assistance ends when the assistance eligible individual (AEI) becomes eligible for coverage under any other disqualifying group health plan or Medicare, even if the other coverage does not include all the benefits provided by the previously elected COBRA continuation coverage. If the AEI had dental or vision coverage through COBRA, and enjoyed the premium assistance provided under the ARPA, that AEI will lose the assistance if they become eligible for group health coverage or Medicare, even if that group health coverage or Medicare does not provide dental or vision coverage.

Limited State Continuation Coverage
FAQ #3 concerns state continuation coverage programs that apply only to a subset of state residents, such as state or local government employees. A state program does not fail to provide comparable coverage to federal COBRA continuation coverage solely because the program covers only a subset of state residents if the program provides coverage otherwise comparable to federal COBRA.

Entities That Can Claim the Premium Subsidy Tax Credit
FAQ #4 provides guidance on determining which entity is the “common law employer” that maintains the plan subject to COBRA coverage. The FAQ states that the common law employer maintaining the plan is the current common law employer for AEIs whose hours have been reduced or the former common law employer for those AEIs who have been involuntarily terminated from employment, which, in both cases, serves as the basis for the AEI’s eligibility for COBRA continuation coverage.

FAQ #5 deals with the situation wherein state continuation is applied in conjunction with federal COBRA and the state continuation program continues to run after the federal COBRA coverage period is exhausted. In that circumstance, the entity that can claim the premium subsidy credit is the common law employer, even if the state-mandated continuation coverage would require the AEI to pay the premiums directly to the insurer after the period of federal COBRA ends. Generally, in fully insured plans subject to state continuation coverage requirements, the carrier will be the entity entitled to claim the tax credit, so the new guidance describes a specific set of circumstances where that may not be the case.

FAQ #6 deals with plans that cover one or more members of a controlled group. If a plan (other than a multiemployer plan) subject to federal COBRA covers employees of two or more members of a controlled group, this FAQ states that each common law employer that is a member of the controlled group is the entity entitled to claim the COBRA premium assistance credit with respect to its employees or former employees. Although all the members of a controlled group are treated as a single employer for employee benefit purposes, each member is a separate common law employer for employment tax purposes. FAQ #8 deals with a potential exception to this principle.

FAQ #7 deals with group health plans (other than multiemployer plans) subject to federal COBRA that cover employees of two or more unrelated employers. This FAQ provides that under this circumstance, the entity entitled to claim the premium assistance credit is the common law employer.

FAQ #8 deals with a potential exception to the principle discussed in FAQ #7 as it pertains to third-party payers. A “third-party payer” for this purpose was defined under previous guidance as an entity that pays wages subject to federal employment taxes and reports those wages and taxes on an aggregate employment tax return that it files on behalf of its client(s). An example of a third-party payer is a PEO. Under previous guidance, a third-party payer can claim the premium tax credit if it: 1) maintains the group health plan, 2) is considered the sponsor of the group health plan and is subject to the applicable DOL COBRA guidance, including providing the COBRA election notices to qualified beneficiaries, and 3) would have received the COBRA premium payments directly from the AEIs were it not for the COBRA premium assistance.

FAQ #8 states that an entity that provides health benefits to employees of another entity, but it is not a third-party payer of those employees’ wages, will be treated as a third-party payer entitled to the premium assistance tax credit as described in the previous guidance.

FAQ #9 deals with stock sales and assets sales between entities, in which the selling group remains obligated to make COBRA continuation coverage available to the individuals who became qualified beneficiaries because of the sale. In these cases, the FAQ states that the entity in the selling group that maintains the group health plan is the entity entitled to claim the COBRA premium assistance credit, even if the buying group becomes the common law employer after the sale (if the buyer is not obligated to make COBRA continuation coverage available to AEIs).

FAQ #10 covers state agencies that maintain the health plans for other state agencies in the same state government. The FAQ states that if a state agency is obligated to make COBRA continuation coverage available to employees of various agencies of the state and local governments within the state, and the AEIs would have been required to remit COBRA premium payments directly to the state agency were it not for the COBRA premium assistance, the state agency is the entity entitled to claim the COBRA premium assistance credit.

Finally, FAQ #11 deals with employers who offer fully insured plans through a Small Business Health Options Program (SHOP) that are not subject to federal COBRA. Such employers may receive the premium assistance tax credit if certain factors apply:

1. The employer participates in a SHOP exchange that offers multiple insurance choices to employees enrolled in the same small group health plan
2. The SHOP exchange provides the participating employer with a single premium invoice, aggregates all premium payments, and then allocates and pays the applicable premium amounts to the insurers
3. The participating employer has a contractual obligation with the SHOP exchange to pay all applicable COBRA premiums to the SHOP exchange
4. The participating employer would have received the state mini-COBRA premiums directly from the AEIs were it not for the COBRA premium assistance.

The FAQ emphasizes that in all other cases of a fully insured plan subject solely to state mini-COBRA, the insurer (and not the common law employer) is the premium payee entitled to the premium assistance credit.

Although only two months remain in the ARPA COBRA premium assistance period, which ends on September 30, 2021, employers should be aware of these new clarifications to the ARPA premium subsidy requirements. Those FAQs that explain which party may claim the tax credit for providing premium assistance in mergers, acquisitions and other complex business arrangements will be particularly useful.

IRS Notice 2021-46 »

The ACA requires non-grandfathered group health plans to provide coverage for certain preventive care services or items with no cost-sharing provision for the participant. A service or item is covered by this mandate one year after one or more of the following events take place:

• The United States Preventive Services Task Force (USPSTF) recommends the service or item with an “A” or “B” rating.
• The Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention recommend the immunization for routine use in children, adolescents and/or adults.
• The Health Resources and Services Administration (HRSA) supports the screening with respect to infants, children and adolescents.
• The HRSA supports the preventive care or screening for women.

In June 2019, the USPSTF released a recommendation with an “A” rating that clinicians offer pre-exposure prophylaxis (PrEP) with “effective antiretroviral therapy to persons who are at high risk of human immunodeficiency virus (HIV) acquisition.” Accordingly, plans and issuers must cover PrEP for plan years beginning on or after June 30, 2020.

In Part 47 of the ACA Implementation FAQs, issued on July 19, 2021, the DOL, HHS and Treasury Department clarify that coverage must include not only the medication itself, but also the following related services to improve the efficacy.

• HIV testing
• Hepatitis B and C testing
• Creatinine testing and calculated estimated creatinine clearance (eCrCl) or glomerular
• Filtration rate (eGFR)
• Pregnancy testing
• Sexually transmitted infection (STI) screening and counseling
• Counseling for assessment of behavior and adherence to CDC guidelines

If plans are not currently in compliance, plan sponsors should work with insurers and TPAs to amend the plan accordingly. The agencies will take a non-enforcement approach through September 16, 2021.

ACA Implementation FAQs, Part 47 »

On July 26, 2021, the DOL released temporary implementing FAQs regarding lifetime income illustrations for ERISA defined contribution plans, which include 401(k) and 403(b) plans. The FAQs largely address questions regarding the timing of the new disclosures to plan participants.

The SECURE Act of 2019 amended ERISA to require that, at least annually, defined contribution plan benefit statements reflect a participant’s account balance as an equivalent lifetime income stream. The income stream must be calculated as a monthly benefit, payable as both a single life annuity and a qualified joint and survivor annuity. On September 18, 2020, the DOL published an interim final rule (IFR) that provided calculations for these lifetime income streams and model language for incorporation in the benefit statements. (For our prior summaries on the IFR, see our previous Compliance Corner articles here and here.)

The FAQs clarify that for participant-directed account plans that provide quarterly statements, the lifetime income illustrations must be included on at least one statement in each 12-month period. The first disclosure must occur within a year of the IFR’s September 18, 2021 effective date. So, for example, a 401(k) plan would need to include the first illustration on any one quarterly statement through the quarter ending June 30, 2022.

For plans that do not allow participants to direct investment of their account assets, the illustrations must be provided on the statement for the first plan year ending on or after September 19, 2021. For most of these plans, the lifetime income information would be included on the statement for the 2021 calendar year, which must be provided to participants no later than the October 15, 2022 (the last date for timely filing the plan’s 2021 Form 5500, assuming the plan sponsor filed for an extension of the July 31 deadline).

Finally, the FAQs indicate that the DOL intends to issue a final rule soon based on comments received in response to the IFR. The DOL also recognized that if the final rule differs materially from the IFR, burdens would be placed on plan administrators if sufficient transition time is not provided to accommodate such changes.

Employers who sponsor defined contribution plans should be aware of this new guidance and work with their service providers to ensure the required illustrations will be timely incorporated in the benefit statements provided to plan participants.

Temporary Implementing FAQs »

The IRS recently released Rev. Proc. 2021-30, which modifies the Employee Plans Compliance Resolution System (EPCRS). Rev. Proc. 2021-30 supersedes the prior version of EPCRS under Rev. Proc. 2019-19, and generally became effective on July 16, 2021.

EPCRS permits sponsors of retirement plans to correct operational and plan document failures that may impact a plan’s tax qualified status. The EPCRS Self-Correction Program (SCP) allows for correction of insignificant errors or significant errors within specific timeframes without an IRS filing or fee payment.

Significant errors not eligible for SCP can generally be corrected by submitting a Voluntary Correction Program (VCP) application that describes the error and proposed correction, along with the applicable fee payment. The program provides specific safe harbor correction methods for common failures.

Rev. Proc. 2021-30 reflects several important changes to EPCRS, including an extension of the SCP correction period for significant failures by one year (from two to three years following the year in which the failure occurred). Accordingly, plan sponsors have extra time to identify and self-correct certain errors (such as employee elective deferral failures) and thus avoid the VCP process and related fee.

The updated guidance also reinstates the safe harbor correction method for automatic contribution arrangement failures through December 31, 2023. (The prior relief expired on December 31, 2020.)

Additionally, Rev. Proc. 2021-30 expands the ability of a plan sponsor to correct operational failures under SCP via retroactive plan amendment. Under certain conditions, a plan sponsor can now adopt an amendment that increases a plan benefit, right or feature even if the increase applies only to a subgroup of participants (as opposed to all eligible participants, which was previously required).

Notably, the new guidance replaces the prior VCP anonymous submission procedure with an anonymous, no-fee, VCP pre-submission conference procedure. This change is effective January 1, 2022. The conference, which is held at the discretion of the IRS, is designed to allow a representative of a plan sponsor to discuss a proposed correction for a complex failure with the IRS before submitting a VCP application and identifying the plan sponsor. The IRS will provide oral commentary on the error and proposed correction, but the advice will not be binding.

Rev. Proc. 2021-30 also expands the prior guidance regarding recoupment of plan overpayments in several ways. Under the updated procedures, the de minimis threshold for requiring repayment is increased from $100 to $250. If repayment is necessary, participants can be given the option of repayment through a lump sum, installments or by reducing future benefits. Furthermore, for defined benefit plans, no repayment or corrective contribution may be necessary, depending upon the plan’s funding level.

Sponsors of retirement plans should be aware of the updated EPCRS procedures. Comments regarding Rev. Proc 2021-30 can be submitted to the IRS no later than October 14, 2021.

Rev. Proc. 2021-30 »

On July 22, 2021, the IRS published a Voluntary Correction Program (VCP) Submission Kit for employers who sponsored a SIMPLE IRA but were ineligible to do so because they had more than 100 employees or sponsored another retirement plan. Employers are only eligible to sponsor a SIMPLE IRA if they have 100 or fewer employees and do not offer any other retirement plan. The VCP Submission Kit provides the steps employers can follow in correcting the mistake of sponsoring a SIMPLE IRA without being eligible.

Specifically, the kit provides a list of the documentation that will be required to apply for VCP relief, including descriptions of the information required to complete a VCP submission compliance statement. The guidance also provides steps on how to submit the VCP application and pay the VCP fee.

Employers who determine that they have incorrectly sponsored a SIMPLE IRA should work with their service provider or counsel to determine if this VCP submission kit is necessary.

VCP Submission Kit – Plan Sponsor Not Eligible for a SIMPLE IRA Plan Under 408(p) »

On July 23, 2021, the IRS issued a notice of proposed rulemaking, amending the rules for electronically filing certain partnership, corporate income tax, unrelated business income tax, withholding tax, and excise tax returns. The proposed rule requires entities that will file more than 100 forms to file electronically, lowering the threshold from 250 returns to 100 returns. Additionally, the proposed rule clarifies that an entity would aggregate all the required forms when determining if they meet the 100-return threshold. The 100-return threshold will also decrease to 10 returns for any form filed in calendar year 2022.

The employee benefit plan-related information returns that would be subject to this proposed rule include the following:

• Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
• Form 5498-QA, ABLE Account Contribution Information
• Form 5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information
• Form 8955-SSA, Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits
• Form 5500, Annual Return/Report of Employee Benefit Plan
• Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan
• Form 5500-EZ, Annual Return of A One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan
• Form 5330, Return of Excise Taxes Related to Employee Benefit Plans

As with previous guidance, entities that are unable to file electronically may request a waiver from the IRS. Employer plan sponsors who complete any of the forms listed above should consult with their counsel or service providers to ascertain their obligation to file with the IRS electronically.

Electronic-Filing Requirements for Specified Returns and Other Documents »