PPI in the News Compliance Corner - February 17, 2021 Archive
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On January 31, 2022, the US Court of Appeals for the First Circuit (First Circuit) reversed the District Court in a case that centers on the Mental Health Parity and Addiction Equity Act (MHPAEA). In N.R. v. Raytheon Company, the plaintiffs brought a case against Raytheon, United Healthcare, and the plan’s administrator on behalf of their minor child after the plan refused to pay for the child’s speech therapy. The plaintiff’s main argument (in count 3) was that the plan’s exclusion of non-restorative speech therapy for autism spectrum disorder (ASD) violated MHPAEA by imposing separate treatment limitations on mental health services.

As a reminder, MHPAEA mandates that plans covering both medical/surgical and mental health/substance use disorder benefits may not impose more restrictive coverage limitations on mental health and substance use disorder benefits.

At the district court level, the defendants moved to dismiss the case, arguing that MHPAEA was not violated because the non-restorative exclusion applies to all types of conditions — including medical/surgical ones. The district court agreed with the defendants and dismissed the case.

However, the First Circuit reviewed the case on a de novo basis, assuming all well-pleaded facts to be true and analyzing those facts in the kindest light to the plaintiff’s case (as precedence required). In so doing, the First Circuit concluded that the plan’s exclusion of non-restorative speech therapy for ASD could violate MHPAEA. They specifically pointed to situations where the plan seemed to cover at least some procedures that would give rise to non-restorative therapy for physical conditions, making it plausible that the exclusion of non-restorative therapy applied only to mental health conditions. As such, the First Circuit concluded that the plaintiffs sufficiently pled the argument that the plan violates MHPAEA, and they reversed the district court’s dismissal of count 3.

The First Circuit also dealt with three other claims. Count 1 is the only count with which the court agreed with the district court, and it was a claim brought against the plan’s fiduciaries that could only be read (by statute) to insinuate that there had been a loss to the plan. Since the losses in this case were only to the individual plan participant, this claim dismissal was upheld by the court.

The First Circuit reversed the dismissal of counts 2 and 4, which addressed the participant’s loss of benefits due to him under the terms of the plan and the defendant’s failure to disclose documents requested by the plan participant, respectively. These counts, along with count 3, were reversed and remanded to the district court to be decided on their merits.

Ultimately, this case serves as a reminder that mental health parity and plans’ compliance with MHPAEA is being addressed by the government and in lawsuits across the country. Employer plan sponsors should work with their service providers to ensure MHPAEA compliance.

N.R. v. Raytheon Company »

The IRS recently released Form 8889, Health Savings Accounts (HSAs), and the related instructions. Form 8889 is used to report HSA contributions, figure HSA deductions and report HSA distributions. It is also used to assess amounts individuals must include in income and pay in additional taxes for distributions for non-qualified expenses or for failures to remain HSA eligible for the testing period after contributing under the “last month” rule.

The 2021 Form 8889 and instructions are like the 2020 versions. However, the instructions have been updated to indicate that HSAs can reimburse amounts paid for COVID-19 personal protective equipment (e.g., masks and hand sanitizers) or home testing (provided these amounts are not reimbursed by other sources). The 2021 version also reflects the updated HSA and HDHP limits and thresholds.

Although Form 8889 is filed by the HSA account holders, employers with HSA programs may want to be aware of the availability of the updated form and instructions.

2021 Form 8889 »
2021 Instructions for Form 8889 »

As background, the No Surprises Act (the Act) prohibits out-of-network healthcare providers from imposing balance bills for emergency services and air ambulance services. Similarly, out-of-network healthcare providers working at in-network facilities may not impose balance bills for certain nonemergency services, including anesthesiology and radiology services. As an integral part of the Act, the regulations established the Federal Independent Resolution (IDR) process for out-of-network providers, plans and insurers to resolve payment disputes if the parties cannot agree on the payment amount after they attempt to hold an open negotiation. The Federal IDR process was effective January 1, 2022.

The Treasury, DOL and HHS (the departments) have released guidance on this process in the form of 47 frequently asked questions and answers. Highlights include:

• Several model notices and forms have been provided for use in the IDR process, such as Notice of Selection of IDR Entity, Notice of Offer and Notice of Agreement on an Out-of-Network Rate.
• The party initiating the IDR process will propose a certified IDR entity from the list available in the Federal IDR portal. If the other party does not approve, they must agree on another. If an agreement cannot be reached, the departments will select one at random. (Note: The portal is not yet available.)
• For 2022, each involved party must pay a $50 administrative fee for the IDR process.
• Generally, IDR entities must make a payment decision within 30 days of being selected.
• Some states have adopted their own IDR process, while others will default to the federal process. Those decisions are identified here.
• The departments expect 17,000 IDR’s annually.

Carriers or third-party administrators generally handle the IDR process in payment disputes between group health plans and providers. However, it is recommended that employers familiarize themselves with the general process.

Frequently Asked Questions Regarding the Federal Independent Dispute Resolution Process »

The IRS recently released the 2022 IRS Publication 15-B, the Employer’s Tax Guide to Fringe Benefits. This publication provides an overview of the taxation of fringe benefits and applicable exclusion, valuation, withholding and reporting rules.

The IRS updates Publication 15-B each year to reflect any recent legislative and regulatory developments. Additionally, the revised version provides the applicable dollar limits for various benefits for the upcoming year.

The business mileage rate for 2022 is 58.5 cents per mile, which can be used to reimburse an employee for business use of a personal vehicle and, under certain conditions, to value the personal use of a vehicle provided to an employee. The 2022 monthly exclusion for qualified parking is $280, and the monthly exclusion for commuter highway vehicle transportation and transit passes is $280. For plan years beginning in 2022, the maximum salary reduction permitted for a health FSA under a cafeteria plan is $2,850.

Employers should be aware of the availability of the updated publication.

2022 Publication 15-B »

On January 28, 2022, the IRS released Notice 2022-8, which sets forth the 2022 Cumulative List of Changes for § 403(b) Pre-approved Plans (2022 Cumulative List). The 2022 Cumulative List is designed to assist § 403(b) pre-approved plan providers applying to the IRS for opinion letters for the second remedial amendment cycle (Cycle 2) under the IRS 403(b) pre-approved plan program.

In Rev. Proc. 2021-37, the IRS outlined the procedures for issuing opinion letters for section 403(b) pre-approved plans for Cycle 2. The 2022 Cumulative List reflects requirements that the IRS will consider when reviewing a plan document submitted for Cycle 2. The Cycle 2 submission period begins on May 2, 2022, and ends on May 1, 2023. Notice 2022-8 does not extend the deadline by which a § 403(b) pre-approved plan must be amended to comply with any change in the requirements.

The 2022 Cumulative List identifies items that were enacted or issued after October 1, 2012. (The § 403(b) requirements reviewed during Cycle 1 included the final regulations under § 403(b) and any applicable requirements of the 2012 Cumulative List of Changes.) But if a plan was not reviewed during Cycle 1, the IRS will review the plan taking into account items on the 2022 Cumulative List, as well as the § 403(b) requirements reviewed during Cycle 1.

The 2022 Cumulative List includes, amongst other items:

• Changes with respect to safe harbor plans, including permitted midyear suspensions of contributions under certain circumstances, elimination of certain notice requirements and an increase in the 10% cap for automatic enrollment safe harbor plans.
• Amended definitions of qualified matching contributions and qualified nonelective contributions.
• Changes regarding in-plan Roth rollovers.
• Modifications to the hardship distribution rules, including expansion of the sources for distributions and removal of the six-month prohibition on contributions after a hardship distribution.
• An exception to the 10% additional tax for qualified birth or adoption distributions.
• Changes to required minimum distribution (RMD) provisions, including an increase in the RMD age from 70 ½ to 72 and new distribution rules for designated beneficiaries.
• Modification of the definition of “spouse” following federal recognition of same sex marriages.
• Changes resulting from numerous federal measures allowing certain participants impacted by the COVID-19 pandemic or natural disasters access to their retirement funds.

In addition to releasing the Cumulative List, the IRS intends to provide an Operational Compliance List periodically to notify plan sponsors and practitioners of changes in § 403(b) requirements that are effective during a calendar year. This list identifies matters that may involve either mandatory or discretionary plan amendments and guidance that affects daily plan operations. The current Operational Compliance list is available at Operational Compliance List | Internal Revenue Service.

Sponsors of § 403(b) retirement plans should be aware of the 2022 Cumulative List and the Operational Compliance List and work with their service providers to ensure their plan documents and operations are timely updated to reflect applicable plan changes and regulatory requirements.

2022 Cumulative List of Changes in Section 403(b) Requirements for Section 403(b) Pre-Approved Plans »

ALEs are employers who employ on average at least 50 full-time employees (including equivalents) on a controlled group basis in the previous calendar year. ALEs are subject to the ACA employer mandate as well as annual ACA reporting via Forms 1094 and 1095-C. For the 2021 reporting, ALEs need to file Forms 1094 and 1095-C with the IRS by February 28, 2022, if filing by mail (available only for ALEs who file fewer than 250 forms) or March 31, 2022, if filing electronically. Additionally, by March 2, 2022, ALEs are required to furnish copies of Forms 1095-C to their full-time employees and other enrolled individuals (if they sponsor a self-insured plan).

An ALE who sponsors a fully insured plan does not need to report their retirees or COBRA participants if they were not active employees in any month in the reporting year (i.e., 2021 for this year’s reporting deadlines). If a retiree or COBRA participant was an active employee in any month before being terminated or retiring in mid-year, then the ALE needs to report them on Forms 1094 and 1095-C.

An ALE who sponsors a self-insured plan needs to report their retirees or COBRA participants if they were enrolled in the ALE’s plan during the reporting year, even if they were not an active employee in any months. This is because self-insured sponsors are also subject to another ACA reporting requirement under IRC Section 6055 to report whether a plan provided minimum essential coverage (MEC) to enrolled individuals during the year. Though the individual mandate provision’s penalty no longer applies, insurers and self-insured employers are required to satisfy the IRS Section 6055 MEC reporting continuously. For fully insured plans, their medical insurers have an obligation to satisfy the IRC Section 6055 reporting requirement rather than the employers. For non-full-time employees and non-employees who are enrolled in self-insured health coverage, the ALEs have an option to use Forms 1094 and1095-B rather than the -C forms. Additionally, they have an option to use the alternative manner of furnishing statements rather than furnishing the copies of Forms 1095-C. For more detailed information, the IRS’s 2021 Instructions for Forms 1094-C and 1095-C are helpful.

By contrast, a small employer that offers self-insured health coverage but is not an ALE member should not file Forms 1094-C and 1095-C but should instead file Forms 1094-B and 1095-B to report information for enrolled employees and non-employees, such as COBRA participants and retirees.

To summarize, ALEs sponsoring fully insured plans do not need to report on Forms 1094 and 1095 and issue Forms 1095 for non-full-time employees (e.g., COBRA qualifying beneficiaries and retirees) who were not active employees in any month in the reporting year. On the other hand, ALEs sponsoring self-insured plans need to report enrolled non-full-time employees and non-employees, including COBRA participants and retirees, on Forms 1094 and 1095.

On February 3, 2022, Iowa Gov. Kim Reynolds announced that the state’s public health emergency proclamation for COVID-19 would end on February 15, 2022, which was initially signed in March 2020. Though most of the provisions that are expiring apply to healthcare settings, employers should be aware of the changes.

Proclamation of Disaster Emergency, February 3, 2022 »