PPI in the News Compliance Corner - January 5, 2023 Archive
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On December 29, 2022, President Biden signed the Consolidated Appropriations Act, 2023 (CAA 2023) into law. The $1.7 trillion-dollar annual federal spending bill includes several bipartisan provisions that affect group health plans and adopts important retirement plan proposals known as SECURE 2.0.

The CAA 2023 provisions applicable to group health plans include the following:

• Telehealth Relief Extension. The CAA 2023 provides a two-year extension of relief that allows high deductible health plans (HDHPs) to provide first-dollar telehealth coverage without negatively impacting HSA eligibility. Generally, coverage provided without cost-sharing before the HDHP statutory minimum deductible is met is considered impermissible coverage for HSA eligibility purposes. However, under the CARES Act COVID-19 legislation from 2020, telehealth services could be treated as disregarded coverage (i.e., not causing a loss of HSA eligibility) for plan years beginning on or before December 31, 2021. The Consolidated Appropriates Act of 2022 (CAA 2022) included a temporary extension of this relief from April 1, 2022, to December 31, 2022. The CAA 2023 further extends the optional telehealth relief for plan years beginning after December 31, 2022, and before January 1, 2025.
• Sunset of the MHPAEA Opt-Out for Self-Funded Non-Federal Governmental Plans. The CAA 2023 eliminates the annual opt-out provision from the Mental Health Parity and Addiction Equity Act (MHPAEA) currently available to many state and local governmental self-funded group health plans. Generally, new opt-out elections will not be permitted after the enactment of CAA 2023, and existing elections that are expiring 180 days or later after such enactment will not be permitted to be renewed. A limited exception applies for certain collectively bargained plans.
• Grants to Support MHPAEA Enforcement. The CAA 2023 authorizes five years of CMS grants totaling $10,000,000 annually to be awarded among states that agree to request and review health insurers’ non-quantitative treatment limitation comparative analyses required under the CAA 2021. The purpose of the grants is to increase MHPAEA enforcement in fully insured group and individual health plans. Accordingly, MHPAEA enforcement is expected to remain a priority of state and federal regulatory authorities.

The inclusion of the SECURE 2.0 Act in the CAA 2023 significantly impacts retirement plans. The SECURE 2.0 Act follows the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 and incorporates aspects of recent House and Senate bills. A primary goal of the SECURE 2.0 Act is to expand employee access to retirement plans and encourage greater savings. Noteworthy SECURE 2.0 Act provisions include the following:

• Automatic Enrollment (Section 101). Effective for plan years beginning in 2025, most new 401(k) and 403(b) plans would be required to automatically enroll participants upon their becoming eligible. (Employees may affirmatively opt out.) The initial automatic enrollment deferral rate is at least 3% but not more than 10%. Each year thereafter, that amount is increased by 1% until it reaches at least 10%, but not more than 15%. All current 401(k) and 403(b) plans are grandfathered. There is an exception for small businesses with 10 or fewer employees, new businesses (i.e., in existence less than three years), church plans and governmental plans.
• Increase in Age for Required Minimum Distributions (Section 107). The required minimum distribution age will increase to 73 for a participant who attains age 72 after December 31, 2022, and age 73 before January 1, 2033, and to 75 for a participant who attains age 74 after December 31, 2032. (Under current law, as established by the SECURE Act 2019, participants are generally required to begin taking distributions from their retirement plans at age 72.) The provision is effective for distributions made after December 31, 2022, for participants who attain age 72 after this date.
• Greater Catch-Up Contribution Limit for Participants Ages 60 through 63 (Section 109). Participants aged 50 or older are currently allowed to make a catch-up contribution (i.e., a contribution in excess of the otherwise applicable deferral limit) up to the annual indexed amount. The 2022 limit on catch-up contributions is $6,500 ($3,000 for SIMPLE plans). Under SECURE 2.0, for participants who have attained ages 60, 61, 62 and 63, these limits increase in 2025 to the greater of $10,000 or 50% more than the regular catch-up amount for non-SIMPLE plans and the greater of $5,000 or 50% more than the regular catch-up amount for SIMPLE plans. The increased amounts are indexed for inflation after 2025.
• Further Expansion of Part-Time Worker Eligibility (Section 125). The SECURE Act of 2019 requires employers to allow long-term, part-time workers to participate in the employers’ 401(k) plans if they have either completed one year of service (with 1,000 hours of service) or three consecutive years of service (with at least 500 hours of service). SECURE 2.0 reduces the three-year rule to two years, effective for plan years beginning after December 31, 2024. Additionally, these long-term part-time coverage rules are extended to 403(b) plans that are subject to ERISA.

We will continue to review and report on the CAA 2023 in upcoming editions of Compliance Corner.

Read our full Washington Update article here.

On December 23, 2022, the DOL, HHS and IRS (the departments) provided relief for employer plan sponsors regarding the CAA 2021 prescription drug data collection (RxDC) reporting requirements. Specifically, for the 2020 and 2021 data submissions that were due by December 27, 2022, the departments provided a submission grace period through January 31, 2023, and will not consider a plan to be out of compliance with the requirements provided that a good faith submission of 2020 and 2021 data is made on or before that date. Additionally, the departments will not take enforcement action with respect to any plan that uses a good faith, reasonable interpretation of the regulations and the RxDC Reporting Instructions in making its submission. Future reports will be due on June 1 following the data year. For example, the 2022 report will be due June 1, 2023.

The guidance provided the following clarifications and flexibilities with respect to reporting requirements for the 2020 and 2021 data:

• Multiple reporting entities can submit the same data file type on behalf of the same plan or issuer, rather than consolidating all the plan’s or issuer’s data into a single data file for each type of data. This is a welcome relief for employers as some employers with more than one TPA or issuer have struggled to coordinate and compile the data from multiple entities into a single data file.
• Certain group health plans may email premium and life-years data instead of submitting it to the Health Insurance Oversight System (HIOS). Though plans and issuers were required to submit information using the HIOS RxDC module, if a group health plan or its reporting entity is submitting only the plan list, premium and life-years data, and narrative response and is not submitting any other data, it may submit the file by email to RxDCsubmissions@cms.hhs.gov instead of submitting in HIOS. In the email, it must include the plan list file, premium and life-years data (data file D1) and a narrative response. The submission may include optional supplemental documents. The name of each file should include the reference year of the submission, the plan list or data file type (e.g., P2, D1) and the name of the group health plan sponsor.
• Same reporting entity may make multiple submissions. The new guidance clarifies that when a reporting entity submits data on behalf of more than one plan or issuer for a reference year (calendar year), the reporting entity may create more than one submission for that reference year, instead of including the data of all clients within a single set of plan lists and data files for the year.
• Optional to report the amounts not applied to the deductible or out-of-pocket maximum. Reporting entities are not required to report a value for “Amounts not applied to the deductible or out-of-pocket maximum,” and the “Rx Amounts not applied to the deductible or out-of-pocket maximum.”
• Reporting on vaccines is optional. Plans and issuers were required to report information on drug names and codes, including National Drug Codes for vaccines. However, the guidance makes vaccine reporting optional.
• Aggregation restriction is suspended. A reporting entity (e.g., issuer) can aggregate at a less granular level than the level used by the reporting entity that is submitting the total annual spending data.

With this relief, employers should review the guidance, particularly the latest clarifications and flexibilities with respect to reporting requirements, and work with their carriers, TPAs, PBMs and other vendors to ensure filings are completed by January 31, 2023.

For background of the RxDC reporting requirement, see the articles published in the December 9, 2021, and September 15, 2022, editions of Compliance Corner.

FAQ About ACA and CAA, 2021 Part 56 »

On December 23, 2022, the Departments of Health and Human Services (HHS), Labor and the Treasury (collectively, the departments) published an amendment to the Calendar Year 2023 Fee Guidance for the Federal Independent Resolution Process under the No Surprises Act, which was previously published October 31, 2022. We covered this original guidance in our November 8, 2022, edition of Compliance Corner.

The original guidance provides information on the federal independent dispute resolution (IDR) process, which includes information for group health plans and insurers who are seeking to resolve a payment claim for items and services covered by the surprise billing protections under the No Surprises Act (NSA) of the Consolidated Appropriations Act, 2021 (CAA, 2021). Under the rules, each party must pay a non-refundable administrative fee for participating in the federal IDR process. The administrative fee is established annually to offset the estimated costs to the departments to carry out the federal IDR process for the year.

The 2023 guidance originally stated the administrative fee would remain $50 per participating party. This amendment increases the 2023 fee to $350 per party for disputes initiated during the 2023 calendar year. The rationale for the increase is that a significant backlog of disputes is expected to grow in 2023. The departments have engaged a contractor and government staff to conduct pre-eligibility reviews, which will come at an increased cost to the federal IDR process. The amended guidance also restates but does not change, the allowable ranges for certified IDR entity fees related to determinations in 2023, which remains $200-$700 for single determinations, or $268-$938 for batched determinations, unless otherwise approved by the departments.

Employers that sponsor group health plans, particularly those that sponsor self-insured plans, should be aware of the updated federal IDR process guidance document.

HHS Updated IDR Fee Guidance »

On December 20, 2022, the IRS issued IRS Notice 2023-04, which describes the indexing factor to calculate the qualifying payment amount (QPA) for items and services furnished in 2023 under the No Surprises Act (NSA). As a refresher, the NSA, in part, provides protections for individuals from surprise bills for certain out-of-network emergency and non-emergency services. The guidance in Notice 2023-04 is used to calculate the QPA when a health plan does not have sufficient information to calculate the QPA; it increases the median contracted rates from 2019 by the annual factor. For 2023, the percentage increase from 2022 is 1.0768582128.

Although this guidance may not directly affect employers, they should be aware of this update and work with their insurers or TPAs to prepare to respond to potential surprise medical billing claims from plan participants. Additional information on QPA calculations and background can be found in our March 29, 2022 Compliance Corner article.

IRS Notice 2023-04 »

On December 29, 2022, President Biden signed the Consolidated Appropriations Act, 2023 (HR 2617) into law. The main purpose of this legislation is to continue funding certain government operations. However, the bill also adopts the SECURE 2.0 Act of 2022 (SECURE 2.0) relating to retirement plans.

SECURE 2.0 follows the Setting Every Community Up for Retirement Enhancement Act (SECURE Act), which was passed as part of the 2020 appropriations bill. (You can read about the SECURE Act in the January 7, 2020, edition of Compliance Corner.) SECURE Act 2.0 introduces new provisions affecting how retirement plans are offered, and it amends some of the provisions found in the SECURE Act.

As background, SECURE 2.0 comes after multiple follow-ups to the SECURE Act that were introduced in the House and Senate. First, the Securing a Strong Retirement Act was passed in the House in March 2022. Next, the Senate Health, Education, Labor and Pensions Committee approved a version known as the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg (RISE & SHINE) Act in June 2022. Finally, the Senate Finance Committee approved the Enhancing American Retirement Now (EARN) Act in September 2022. SECURE 2.0 includes provisions from each of those bills.

SECURE 2.0 is broken up into seven titles, and some of the major provisions affecting employer-sponsored retirement plans are summarized as such:

• Title I: Expanding Coverage and Increasing Retirement Savings
  • Requires new 401(k) and 403(b) plans to institute automatic enrollment and escalation. (Sec. 101)
  • Increases start-up credit for small employers who begin to offer retirement plans to their employees. (Sec. 102)
  • Changes the federal Saver’s Credit to a Saver’s Match that will be deposited into taxpayers’ retirement plan or IRA and provides that the Treasury will publicize the match. (Secs. 103 and 104)
  • Allows 403(b) plans to participate in open multiple employer plans (MEPs) and pooled employer plans (PEPs). (Sec. 106)
  • Increases the age for required minimum distributions from age 72 (as provided in the SECURE Act) to age 73 beginning in 2023 and age 75 beginning in 2033. (Sec. 107)
  • Indexes the IRA catch-up limit and allows for additional catch-up contributions at ages 60, 61, 62 and 63. (Secs. 108 and 109)
  • Allows student loan repayments to be treated as elective deferrals for retirement plan matching purposes. (Sec. 110)
  • Allows an annual tax-free distribution for emergency expenses. (Sec. 115)
  • Permits automatic portability transfers from a terminating employee’s IRA to their new employer’s retirement plan. (Sec. 120)
  • Changes SECURE Act provision requiring eligibility for long-term part-time workers to require that participation be offered to employees working part-time for two years (down from the three years required in the SECURE Act). (Sec. 125)
  • Allows for transfers from 529 plans to Roth IRAs, provided certain conditions are met. (Sec. 126)
  • Permits the creation of emergency savings accounts for non-highly compensated employees to use in conjunction with their defined contribution plans. (Sec. 127)
  • Enhances 403(b) plans by allowing them to utilize collective investment trusts. (Sec. 128)
• Title II: Preservation of Income
  • Amends the requirements imposed on qualifying longevity annuity contracts (QLACs). (Sec. 202)
  • Creates insurance-dedicated exchange-traded funds. (Sec. 203)
• Title III: Simplification and Clarification of Retirement Plan Rules
  • Allows plan sponsors to choose not to recoup overpayments made to retirees. (Sec. 301)
  • Reduces the tax penalty for failure to take required minimum distributions from 50% to 25% (and to 10% if the distribution is from an IRA and the failure is corrected in a timely manner). (Sec. 302)
  • Instructs DOL to create online database retirement savers can use to locate any pension or 401(k) they’ve lost track of. (Sec. 303)
  • Increases the limit for employers to automatically distribute out terminated employees to $7,000 (up from $5,000). (Sec. 304)
  • Expands the Employee Plans Compliance Resolution System (EPCRS). (Sec. 305)
  • Limits repayment of qualified birth or adoption distributions to three years. (Sec. 311)
  • Allows employers to accept employee self-certification of the need for hardship withdrawals. (Sec. 312)
  • Provides opportunity to amend plan to increase benefits through the employer’s tax return due date. (Sec. 316)
  • Limits the notices employers must provide to unenrolled but eligible participants of the retirement plan. (Sec. 320)
  • Requires paper statements be provided once annually for defined contribution plans and once every three years for defined benefit plans. (Sec. 338)
• Title IV: Technical Amendments
  • Makes certain technical and clerical changes to the SECURE Act. (Sec. 401)
• Title V: Administrative Provisions
  • Allows for plan amendments reflecting SECURE 2.0 changes to be made on or before the last day of the first plan year beginning on or after January 1, 2025 (or 2027 for governmental plans). (Sec. 501)
• Title VI: Revenue Provisions
• Title VII: Tax Court Retirement Provisions

Like the SECURE Act, this legislation will overhaul of many of the retirement regulations that have been in place for decades. Some provisions of the bill are effective upon enactment; others are effective for plan years beginning January 1, 2023, while others will become effective at later dates. Retirement plan sponsors should work with their plan advisers, recordkeepers and other service providers to amend their plan as necessary.

Consolidated Appropriations Act, 2023 (SECURE Act begins on page 817) »

On December 30, 2022, the IRS proposed regulations to permanently change retirement plan rules that require certain participant elections and spousal consents to be witnessed in the physical presence of a notary or plan representative. If specified conditions are met, the proposed regulations will allow affected qualified retirement plans to also accept remote notarization or witnessing by a plan representative.

IRS regulations have historically required that certain participant elections and spousal consents (e.g., a defined benefit plan lump sum distribution) be physically witnessed by a notary public or plan representative. However, in Notice 2020-42, the IRS provided temporary COVID-19 relief from the physical presence requirement and allowed the use of an electronic medium for participant elections and spousal consents. This relief was extended several times but was set to expire at the end of 2022. (For further details on IRS Notices 2020-42 and the subsequent relief extensions, please see our June 11, 2020, January 7, 2021, and July 8, 2021, Compliance Corner editions.) The proposed regulations make this relief permanent, with modifications.

Under the proposed regulations, a participant election or spousal consent witnessed remotely by a notary public or plan representative must satisfy the general requirements for participant electronic elections. Under these requirements, the electronic system must be one that the individual making the election can effectively access and that is reasonably designed to prevent anyone else from making the election. The system must also give the individual a reasonable opportunity to review, confirm, modify or rescind the election before it becomes effective and provide a compliant paper or electronic election confirmation within a reasonable time.

Additionally, for a plan to accept remote witnessing by a notary public, the notary public must witness the signature of the individual (e.g., spouse) signing the consent using live audio-video technology and adhere to applicable state laws.

If a plan representative performs the remote witnessing, the process must also meet the following requirements:

• The individual signing must present a valid photo ID during the live audio-video conference.
• The live audio-video conference must allow for direct interaction between the individual and plan representative.
• The individual must transmit (via fax or electronic means) a copy of the signed document directly to the plan representative on the same date it was executed.
• The plan representative must acknowledge the signature has been witnessed by the plan representative in accordance with these requirements and must send the executed document (and acknowledgment) back to the individual using a compliant notice system.
• The plan representative must record the live audio-video conference and retain the recording in accordance with plan document retention requirements. (This is an additional requirement that was not reflected in the temporary relief.)

Retirement plan sponsors should be aware of the proposed regulations and may welcome the flexibility to allow remote witnessing on a permanent basis. However, sponsors are not required to permit remote witnessing. If the sponsor chooses to do so, remote witnessing cannot be the sole option. (Sponsors must still accept notarizations witnessed in the physical presence of a notary.)

Comments on the proposed regulations are being accepted through March 30, 2023, and a telephonic public hearing has been scheduled for April 11, 2023, at 10:00 a.m. Final regulations, once issued, are proposed to apply six months after publication in the Federal Register. Sponsors are permitted to rely upon the proposed regulations in the interim.

IRS Proposed Rule – December 30, 2022 »

Most group health plans and insurers that provide either mental health or substance use disorder (MH/SUD) benefits in addition to medical/surgical benefits (MED/SURG) are subject to the Mental Health Parity and Addiction Equity Act (MHPAEA). This means plans and insurers cannot impose financial requirements (e.g., deductibles, copays, coinsurance or out-of-pocket maximums), quantitative treatment limitations (e.g., number of covered days, visits or treatments) or non-quantitative treatment limitations (e.g., coverage exclusions, prior authorization requirements, medical necessity guidelines or network restrictions) on MH/SUD benefits that are more restrictive than those applied to MED/SURG benefits. In other words, MH/SUD benefits must be provided in parity with MED/SURG benefits. MHPAEA applies to both fully insured and self-insured plans. There are limited exemptions from MHPAEA, including:

• Self-insured plans with 50 or fewer employees (including employees of related employers in a controlled group).
• Stand-alone retiree-only medical plan that does not cover current employees.

Church plans are not exempt from MHPAEA.

The Consolidated Appropriations Act, 2023 (CAA 2023) sunset a MHPAEA opt-out for self-insured non-federal governmental group health plans. As of September 2022, 229 group health plans covering municipal employees, public school teachers, firefighters, police and public healthcare workers were opting out of MHPAEA. With the enactment of the CAA 2023, new opt-out elections are no longer permitted and existing elections expiring on or after June 30, 2023, cannot be renewed.