The Consolidated Appropriations Act 2021 (the “CAA”) was signed into law on December 27, 2020 and provides, among many other things, a variety of relief measures for employee benefit plans, particularly health and welfare plans. Due to the numerous changes in the CAA, we wanted to provide a high-level overview of the multitude of employee benefits provisions, but fear not, we will delve into some of the provisions in more depth in future editions of our newsletter, starting with more detail on FSA changes next month. Provisions of the new law that may require immediate action are noted below.
Retirement Plans
Relief for retirement plans was fairly limited under the CAA but will provide some relief for plans that experienced significant turnover due to the pandemic and for participants who experienced non-COVID-19-related disasters.
Partial Termination Relief. Provides that a qualified plan will not experience a partial plan termination during any plan year that include the period beginning March 13, 2020 and ending March 31, 2021, if the number of active participants covered by the plan is at least 80% of the number of participants covered by the plan on March 13, 2020. Action item: immediately review whether hiring, changing eligibility, or other steps might prevent a partial termination.
Disaster-Related Distribution and Loan Relief. In response to recent wildfires and hurricanes, special distributions, loan, recontribution rules, and penalty relief for participants living in a qualified disaster area and who suffered an economic loss as are result of the disaster. These provisions are similar to provisions for COVID-19 disaster areas under the CARES Act. Amendments implementing these optional provisions must be adopted by the last day of the plan year beginning on or after January 1, 2022 (December 31, 2022 for calendar year plans). Does not include areas that are disaster areas solely due to COVID-19 pandemic, which are addressed by the CARES Act. Action item: contact the third-party administrator regarding implementation and calendar the amendment deadline.
Money Purchase Pension Plan Distributions.Permits, on a retroactive basis, in-service COVID-19 distributions, even if in-service distributions are not otherwise available under the plan. Does not extend the availability to receive COVID-19 distributions beyond December 31, 2020.
Health & Welfare Plans
Significant changes for health and welfare plans were enacted, both in the form of temporary relief for participants suffering during the pandemic and patient protections for the future.
Flexible Spending Account (“FSA”) Relief. The CAA provides these optional changes to health care and dependent care FSAs:
Any unused funds from a plan year ending in 2020 or 2021 may be carried over and used at any time in the next plan year.
FSAs with grace periods may extend those grace periods to up to 12 months
If an employee terminates participation during 2020 or 2021, FSAs my also reimburse for otherwise eligible expenses incurred through the end of that year (plus any grace period).
For dependent care FSAs, if a dependent became too old to have their care expenses reimbursed (age 13) due to the pandemic, any unused funds may be used for the remainder of the plan year in which they aged out (if the regular enrollment period was before January 31, 2020). If any funds remain unused at that time, they can be used until the child turns age 14.
For plan years ending in 2021, employees may make any prospective changes in their FSA contributions without regard to a change in status.
Amendments for optional changes must be adopted by the end of the plan year in which the change is effective (December 31, 2021 for calendar year plans). Action item: immediately consider options and contact advisors to implement, e.g., to prepare and distribute participant notices. Calendar amendments if applicable.
Health Plan Transparency Regulations.New notice requirements regarding health plan pricing will apply to plan sponsors, although plan sponsors of fully-insured plans may contract with the insurer, through a written agreement, for the insurer to take on the responsibility. Effective January 1, 2021. Action item: (i) fully insured plans should immediately contact their insurers, and (ii) administrators of self-insured plans should immediately contact their advisors, to commence implementation.
No Surprise Billing. Beginning January 1, 2022, these changes will require patient protections for out-of-network expenses for: (i) emergency services, (ii) services provided in an in-network facility by an out-of-network provider, and (iii) air ambulance services. Specifically—
Non-emergency services provided by an out-of-network provider at an in-network facility cannot be balance billed unless the patient is notified and consents, at least 72 hours prior to receiving the treatment.
Emergency services provided at an out-of-network facility must be covered at in-network rates without prior authorization.
Any cost-sharing amount the participant pays must count toward the in-network deductible and out-of-pocket maximum.
Must apply in-network rules for prior authorization and in-network cost-sharing
Must base reimbursement on either state law, an interstate compact (if the state is participating), or a formula specified in the CAA.
Requires a 30-day open negotiation period for group health plans and insurers to settle out-of-network claims with providers.
Payment to provider must be made within 30 days of billing.
Establishes an independent dispute resolution (“IDR”) process (binding arbitration) for plans and insurers and out-of-network providers who cannot agree on a rate during the open negotiation period.
Establishes a number of special rules for air ambulance services.
Plans (other than church plans) will be required to report to the Secretary of Health and Human Services (HHS), the Secretary of Labor, and the Secretary of the Treasury, among other information:
50 most frequently dispensed brand drugs
50 costliest drugs
50 drugs with most year-over-year increase in expenditures.
HHS will issue a report on this information.
“Gag clauses” are prohibited, enabling plans to share provider-specific reimbursements and information, and use this information as part of the cost comparison tools that plans and insurers are required to develop.
Plans must analyze non quantitative treatment limitations (like prior authorization) that apply to mental health and substance abuse disorder benefits to show that are comparable to those that are used for medical/surgical benefits.
Insurance ID cards must include in-and out-of-network deductible amounts and maximum out-of-pocket costs.
External review process extended to adverse benefit decisions under the surprise billing provisions.
Plans and issuers must provide an “Advanced Explanation of Benefits” containing good faith estimates of the costs of services the participant is likely to receive and associated disclaimers.
Certain participants must be notified and receive up to 90 days of continued coverage at in-network cost-sharing rates when their provider moves out-of-network.
Plans and issuers must offer a price comparison guidance via telephone and an online cost comparison tool. Plans and issuers must provide participants up-to-date provider directories, and participants who rely on incorrect information received will only be liable for in-network cost-sharing amounts.
ACA Provider Non-Discrimination Regulations.HHS, DOL, and IRS must issue proposed regulations under ACA “Provider Non-Discrimination” protections, which prohibit discrimination based on a provider’s license or certification, to the extent the provider is acting within the scope of the provider’s license or certification under applicable state law.
State All Payer Claims Databases. Establishment of a grant program to create and improve “State All Payer Claims Databases,” under which DOL is required to establish a standardized reporting format for voluntary reporting to such databases by self-insured group health plans.
Fee Disclosures. Extends fee disclosure requirements under ERISA 408(b)(2) such that brokers and consultants to health and welfare plans must disclose their direct and indirect compensation. Effective contracts for services that are executed, extended, or renewed on or after December 27, 2021.
Student Loan Repayment. The CARES Act permitted an employer to repay up to $5,250 of an employee’s student loans in 2020 on a tax-free basis through a Code Section 127 plan. The CAA extended this through 2025.
With the new administration and the recent change in the balance in the Senate, we are expecting additional legislative changes to come soon. Watch this space!
© Boutwell Fay LLP 2021, All Rights Reserved. This handout is for information purposes only and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us. The information contained in this article is effective as of February 2021.