PPI in the News Compliance Corner - February 2, 2023 Archive
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On January 13, 2023, the Department of Labor (DOL) published a final rule adjusting civil monetary penalties under ERISA. The annual adjustments relate to a wide range of compliance issues and are based on the percentage increase in the consumer price index for all urban consumers (CPI-U) from October of the preceding year. The DOL last adjusted certain penalties under ERISA in January of 2022.

Highlights of the 2023 penalties that may be levied against sponsors of ERISA-covered plans include:

• Failure to file Form 5500 maximum penalty increases from $2,400 to $2,586 per day that the filing is late.
• Failure to furnish information requested by the DOL penalty increases from $171 per day (not to exceed $1,713 per request) to $184 per day (not to exceed $1,846 per request).
• Penalties for failure to comply with GINA and failure to provide CHIP notices increase from $127 to $137 per day.
• Failure to furnish Summary of Benefits Coverage penalty increases from $1,264 to $1,362 maximum per failure.
• Failure to file Form M-1 (for MEWAs) penalty increases from $1,746 to $1,881 per day.

These adjusted amounts are effective for penalties assessed after January 15, 2023, for violations that occurred after November 2, 2015. The DOL will continue to adjust penalties no later than January 15 of each year and will post any changes to penalties on its website.

To avoid imposition of penalties, employers should ensure ERISA compliance for all benefit plans and stay updated on ERISA’s requirements. For more information on the new penalties, including the complete listing of changed penalties, please consult the final rule linked below.

Final Rule »

The US Court of Appeals for the Sixth Circuit reversed the district court’s order in favor of an employee in an FMLA action in relation to an employee’s intermittent leave. The employee alleged that his employer, FCA US, LLC (FCA), wrongfully denied him FMLA leave, and that FCA retaliated against him for requesting FMLA leave. The Sixth Circuit determined that the employee is not required to provide specific details about their need to be out for each intermittent leave. Additionally, FCA provided the employee conflicting instructions on how to use FMLA leave. Therefore, the Sixth Circuit concluded in favor of the employee’s allegations.

As background, in Render v. FCA US, LLC, assembly line worker Edward Render began working for FCA in 2013. He was terminated for attendance infractions in 2015, but filed a grievance through his union and was conditionally reinstated in 2017. Under the terms of his conditional reinstatement, FCA could terminate Render if he had either two unexcused tardies or one unexcused absence during his one-year probationary period.

In October 2017, Render applied for intermittent FMLA leave and submitted his doctor’s medical certification to support his request. His doctor noted in the medical certification form that he needed intermittent FMLA leave to manage his major recurrent depression and moderate/generalized anxiety disorder, indicating that Render was unable to perform “[a]ny/all duties related to [his] job during [a] flare-up of symptoms.”

FCA conditionally approved his request. Sedgwick, FCA’s leave TPA, sent Render multiple letters with conflicting instructions about how to call in to use his intermittent FMLA leave days. He called in to one of the numbers indicated on the letters to report his absence and stated that he was having “a flare-up,” adding “I don’t feel good at all.” FCA marked each of the absences and tardies as unexcused rather than designating the leaves as FMLA. Subsequently, FCA terminated Render on the basis that he failed to provide notice of the need to be out of work due to the approved FMLA condition.

The Sixth Circuit determined that Render had met his responsibility for providing notice of his need to use FMLA leave when the original request for intermittent leave was made and approved. Render’s subsequent calls on the days he wanted to use his FMLA leave did not need to “specifically reference either the qualifying reason for leave or the need for FMLA leave.” Further, Render only had to advise FCA of his schedule change on days that he wanted to use his intermittent leave.

The Sixth Circuit concluded that the employee met the FMLA’s employees notice requirements when he referenced “not feeling good” and used language that was referenced in his doctor’s medical certificate. Moreover, the employer’s FMLA call-in procedures must be clearly conveyed to employees in order to be enforceable.

For employers, the case is a reminder of the importance of ensuring that their leave administration procedures, whether administered internally or outsourced to a TPA, are adhering to FMLA leave requirements, including designating a leave properly as “FMLA” when applicable and ensuring that employees’ absence reporting procedure is clearly communicated with the employees, especially for intermittent leave.

Render v. FCA US, LLC »

On January 19, 2023, in Zall v. Standard Insurance Co., the US Court of Appeals for the Seventh Circuit determined that the version of ERISA regulations in effect at the time of the termination of plaintiff’s disability benefits applied in a dispute between the plaintiff and the defendant.

The plaintiff in this case, Eric Zall, sued Standard Insurance Company (Standard) for payment of retroactive disability benefits and a declaration that Standard continued to owe him those benefits. Zall worked as a dentist until chronic pain in his neck and arm prevented him from working. Standard insured and administered a disability benefit through a plan subject to ERISA. In 2013, Zall applied to Standard for disability benefits. The version of the ERISA regulations in effect at the time he applied for benefits required Standard to provide Zall, upon request, with copies of all documents and records that it considered, generated or relied upon if Standard denied benefits to him. Although Standard paid the benefits for six years, the insurer denied those benefits in 2019, asserting that the nature of the disability allowed for only 24 months of disability payments. At the time Standard denied those benefits, the regulations had been amended to require the insurer provide copies of documents and records upon which it relied in denying the benefits whether Zall asked for them or not. Standard did not provide Zall with copies of those documents and records during the administrative review of his claim, specifically an expert report which provided the basis for Standard’s denial.

Zall filed suit, asserting that Standard had “denied him a full and fair review” by failing to give him a copy of the report upon which Standard relied when it denied him further benefits, which the 2019 rules required. Zall also asserted that the evidence did not support Standard’s decision to deny him benefits. The district court did not agree with Zall, reading the regulations in effect in 2019 to apply only to claims filed after April 2018. Since Zall filed his disability claim in 2013, the district court reasoned that the original regulations applied, and the insurer was under no obligation to provide the documentation unless he asked for it. In addition, the district court found that the expert report provided a sufficient basis for Standard’s decision to deny the benefits.

Zall appealed, and the Seventh Circuit found that the regulations in effect in 2019 applied to Zall’s case. Although the 2019 regulations provided some exceptions, which did not apply in this case, the Seventh Circuit determined that the 2019 regulations applied to all claims filed after 2002. The Circuit made this determination based on a plain reading of the regulations. Since the relevant regulations affected the process that Standard followed to review the claim, rather than the substance of any claim consideration, there was no prohibition against applying them retroactively. Although the Circuit ruled that Standard should have provided Zall with the documents that the insurer relied upon to deny benefits, the Circuit did not weigh in on the substantive issue of whether the insurer had sufficient basis for denying the benefit. The Circuit remanded the case back to district court in order to give Zall an opportunity to challenge the expert report and other documentation.

While this case focused on regulatory interpretation, it serves as a cautionary example of what happens when insurers or employers adjudicate claims without sufficient regard for the relevant regulation. Employers and insurers should be aware of which regulations apply, in consultation with counsel, and make sure that they follow those regulations.

Zall v. Standard Insurance Co »

On January 26, 2023, the Pension Benefit Guarantee Corporation (PBGC) issued a final rule providing a withdrawal liability condition exception for certain multiemployer pension plans that access special financial assistance (SFA). As background, the American Rescue Plan Act (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. The changes in this rule were made after the PBGC received comments concerning the SFA final rule.

Under ERISA, employers that withdraw from underfunded multiemployer plans would generally owe withdrawal liability, which represents that employer’s share of unfunded vested benefits. The SFA final rule included rules on how plans must go about calculating withdrawal liability. This final rule provides an exception process whereby withdrawing plan sponsors may request an exception from withdrawal liability conditions if they can show that the exception won’t increase the risk of loss to the plan or the expected employer withdrawals. The final rule indicates that a plan may submit an exception request before the SFA application is filed or before a revised application is filed.

Employer plan sponsors that are a part of a multiemployer plan that took advantage of the SFA should be aware of this new exception to the withdrawal liability conditions and work with their service provider to comply with all PBGC requirements.

Special Financial Assistance by PBGC – Withdrawal Liability Condition Exception »

Employers that sponsor group health plans have an obligation to report whether the prescription drug coverage offered under the plan is creditable or non-creditable. Employers are likely more familiar with the obligation to notify employees, and their family members, regarding the creditable status of their plan(s) by each October 14, as this is the Part D notice that employers typically include with open enrollment documents. A second obligation also exists where employers must report the creditable status of the plan(s) to the CMS within 60 days after the start of the plan year. The second obligation is the focus of this FAQ.

Unlike some compliance requirements, the disclosure to CMS exists for health plans regardless of employer size, plan funding type (i.e., fully insured or self-insured) or whether the plan is primary or secondary to Medicare. The disclosure requirement also applies to church plans and federal, state and local government plans. For entities that are part of a controlled group and participate in the same plan, the requirement applies to the plan sponsor, not necessarily to each participating entity.

As mentioned above, disclosures are due within 60 days after the start of the plan year. Plan sponsors may be required to file an additional disclosure in limited circumstances:

• Within 30 days after any change in the creditable coverage status of the plan.
• Within 30 days after the termination of the plan (regardless of whether the termination is midyear or at the end of the plan year).

The CMS Disclosure Instructions provide detailed information on the two situations above and how to properly report that information.

Currently, there are no specific penalties for failing to timely file the disclosure, and CMS does not have a correction process for failures. However, plan sponsors have a fiduciary duty under ERISA to comply with all federal laws related to their plans, so it is important employers comply with this requirement in a timely manner. Additionally, employers that fail to meet the disclosure requirements are unable to claim retiree drug plan subsidies.

For more information, download a copy of our publication Medicare Part D Disclosures: A Guide for Employers.

Disclosure to CMS Form »