The U.S. Department of Labor (DOL) published a proposed regulation on October 14, 2021, that would clarify how fiduciaries of private sector employee benefit plans should apply ERISA’s fiduciary duties of prudence and loyalty when making investment decisions and exercising shareholder rights. In part, the DOL’s changes to its “Investment Duties” regulation (29 C.F.R. § 2550.404a-1) would expand whether and how plan fiduciaries may consider environmental, social, and governance (ESG) factors when managing and selecting plan investments. The DOL has solicited public comments in a number of places in the proposed regulation, with comments due by December 13, 2021.

The proposed regulation follows closely on the heels of two sets of final regulations issued by the DOL late last year. The first, “Financial Factors in Selecting Plan Investments” (published November 13, 2020), adopted amendments to the Investment Duties regulation and generally required plan fiduciaries to select investments and investment courses of action based solely on consideration of “pecuniary factors.” On December 16, 2020, the DOL published the second final regulation, “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights,” which also adopted amendments to the Investment Duties regulation by expanding the obligations of plan fiduciaries when exercising shareholder rights, including proxy voting.

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As we previously discussed in our article, the American Rescue Plan Act of 2021 (“ARPA”) provides that eligible multiemployer pension plans (“MEPPs”) can receive special financial assistance (“SFA”) to cover plan benefits through the 2051 plan year.  As directed under ARPA, the Pension Benefit Guaranty Corporation (“PBGC”) issued its interim final rule (the “IFR”) on July 9, 2021 (as is discussed in our previous blog post), providing methodology for calculating the amount of SFA available to eligible MEPPs and detailing how such SFA is treated for purposes of calculating withdrawal liability.  In its introductory comments to the IFR, the PBGC indicated that it would supplement the IFR with informal guidance detailing the SFA application and review process, limitations and reporting requirements for MEPPs applying and receiving SFA, the PBGC’s actuarial assumptions in calculating SFA awards, and how the PBGC would interact with other administrative agencies (specifically, the Departments of Treasury and Labor) in implementing its SFA program.

The PBGC presented this informal guidance via a webinar on July 22, 2021, and, on August 12, 2021, publicly released the two supplements it had previously presented.  The first supplement provides detailed background of the PBGC’s SFA program.  The second supplement recaps the PBGC’s first webinar on the SFA program and includes a detailed walkthrough of the PBGC’s e-filing portal for SFA applications.  Together, the supplements provide detailed information for MEPP trustees and service providers engaging in the SFA application process.

On June 17, 2021, the Supreme Court rejected another attempt to dismantle the Patient Protection and Affordable Care Act (“ACA”) in its highly-anticipated decision in Texas v. California.  However, instead of ruling on the central issue in the case—whether the ACA was rendered unconstitutional when Congress eliminated the individual tax penalty for failing to obtain health insurance—the Court dispatched the case on a procedural technicality.  In a 7:2 decision authored by Justice Breyer, the Court held that neither the states nor the individuals challenging the law had legal standing to challenge the provision of the ACA that requires individuals to have health insurance (known as the individual mandate).

Following this most recent chapter in the “epic Affordable Care Act trilogy,” as Justice Alito put it in his dissent, many hope that there will be greater certainty around the longevity of the ACA.  “Since the ACA was enacted more than a dozen years ago, employers have been asked to comply with and commit to the law despite numerous legal and legislative challenges.  We hope the court’s ruling re-establishes the ACA as settled law that can be relied upon—and improved,” American Benefits Council President James A. Klein said in news release shortly after the Court’s decision.

On June 14, 2021, the Department Labor (“DOL”) issued Information Letter 06-14-2021 to address whether ERISA requires plan fiduciaries to produce audio recordings and transcripts of telephone conversations between plan insurers and claimants.

The issue arose from a plan insurer’s denial of a claimant’s request for an audio recording.  When it denied the request, the plan insurer stated that the “recordings are for ‘quality assurance purposes,’” and “are not created, maintained, or relied upon for claim administration purposes, and therefore are not part of the administrative record.”  DOL disagreed, stating that it interprets 29 C.F.R. § 2560.503-1(m)(8)(ii) as requiring disclosure of the recordings because the materials were “relevant” to a claimant’s claim, irrespective of whether the information was “not created, maintained, or relied upon for claim administration purposes.”

Ultimately, DOL concluded that a recording or transcript of a conversation with a claimant would not be excluded from disclosure merely because the plan or claims administrator:

  • did not include it in the administrative record;
  • does not treat it as part of the claim activity history; or
  • generated it for quality assurance purposes.

The DOL Information Letter is not binding on courts or even DOL, but plan sponsors and third-party plan service providers should be aware that recordings or transcripts of a conversation with a claimant may become subject to disclosure.

The Pension Benefit Guaranty Corporation (“PBGC”) released its highly-anticipated interim final rule (the “IFR”) on July 9, 2021, providing methodology for calculating the amount of special financial assistance (“SFA”) available to certain financially troubled multiemployer pension plans (“MEPPs”) under the American Rescue Plan Act of 2021 (“ARPA”).  The IFR also sets out additional details on the SFA application process and how SFA awards are treated for purposes of withdrawal liability calculation.  The following summarizes certain key aspects (but not all components) of the IFR:

  • Calculating SFA Awards – As we previously discussed in our article, ARPA provides that eligible MEPPs may receive SFA in an amount sufficient to cover plan benefits through the 2051 plan year.  The PBGC’s IFR sets out a more specific calculation providing that the amount of SFA an eligible MEPP may receive is equal to the difference between the MEPP’s current and anticipated benefit obligations and its resources (current assets, expected future contributions, and anticipated withdrawal liability payments) from the last day of the calendar quarter before the MEPP files its application for SFA through the end of the 2051 plan year.
  • SFA Application Timing and Payment – The IFR further set out details on the content, timing, and review process for MEPP SFA applications. ARPA requires that the PBGC review SFA applications within 120 days of receipt, so the IFR breaks application availability into six priority categories based on factors including the MEPP’s funding status and projected insolvency date (with applications opening as early as July 9, 2021 for already insolvent MEPPs).  Once the PBGC approves a MEPP’s SFA application, the PBGC will generally pay the award in a lump sum within 60 to 90 days of approval.
  • Treatment of SFA Awards for Withdrawal Liability Calculation – An early draft of the ARPA legislation contained a provision that disregarded SFA awards for purposes of calculating withdrawal liability. This provision was struck for procedural reasons and instead ARPA deferred to the PBGC to address SFA treatment for withdrawal liability purposes.  The IFR provides that SFA awards are included when calculating a MEPP’s assets for withdrawal liability purposes, but a MEPP that receives an SFA award must use the PBGC’s mass withdrawal interest assumptions for calculating withdrawal liability until the later of 10 years from the end of the plan year in which the SFA award is received or the last day of the plan year in which the MEPP no longer holds assets from the SFA award (or any earnings therefrom).

Separately, the IFR imposes a limitation on settling withdrawal liability disputes whereby trustees of a MEPP receiving an SFA award cannot enter into a withdrawal liability settlement for liability that exceeds $50 million (using mass withdrawal interest rate assumptions) without prior PBGC approval.  The IFR does not set forth the PBGC’s criteria for approving any such settlement, but the IFR’s requirement to use mass withdrawal interest rate assumptions may limit a MEPP’s ability to agree to a higher discount rate in settlement negotiations.

The IFR contains additional important discussion of topics related to SFAs issued under ARPA, including confirming MEPP eligibility for an SFA, restrictions on a MEPP’s use of SFA assets, and other conditions placed on MEPPs receiving an SFA.  These, along with additional guidance from the IRS in Notice 2021-38 on the impact of SFAs on the Internal Revenue Code’s minimum funding rules and reinstatement of suspended benefits, should be considered by trustees of MEPPs that are potentially eligible for an SFA under ARPA and by employers participating in such MEPPs.

On July 1, 2021, the U.S. Department of Health and Human Services (“HHS”), Department of Labor, Internal Revenue Service, and Office of Personnel Management issued their first installment of interim final surprise billing regulations.  As explained in a prior post, the regulations implement new requirements for group health plans, health insurance issuers, and healthcare providers and facilities that were imposed by the bipartisan No Surprises Act, which was enacted as part of a 2020 appropriations act.  The rules, “Requirements Related to Surprise Billing; Part I,” prohibit surprise or balance billing for certain healthcare services.

One important aspect of the new surprise billing regulations for sponsors of group health plans and health insurance companies is its effect on billing for emergency services, out-of-network air ambulance services, and certain out-of-network services provided at an in-network facility.  If a plan or policy provides or covers any emergency services, they must Continue Reading Federal Agencies Release Interim Final Surprise Billing Regulations

The Internal Revenue Service released updates to its Employee Plans Compliance Resolution System (“EPCRS”) in Revenue Procedure 2021-30.  Key changes to the EPCRS include:

  • Extending the self-correction period for significant operational failures from two to three years, effective July 16, 2021;
  • Eliminating the requirement that retroactive plan amendments for self correction benefit all plan participants, effective July 16, 2021;
  • Eliminating the ability to make anonymous submissions but allowing anonymous no-cost pre-submission conferences to discuss potential VCP submissions, effective January 1, 2022;
  • Extending the sunset date for the safe harbor correction method for missed deferral failures in plans with automatic contribution features from December 31, 2020 to December 31, 2023, effective January 1, 2021;
  • Increasing from $100 to $250 the threshold for certain de minimis amounts that plan sponsors are not required to correct;
  • Requiring that Audit CAP sanctions be paid using the website beginning January 1, 2022; and
  • Expanding guidance on recoupment of overpayments.

Revenue Procedure 2021-30 is generally effective as of July 16, 2021, but, as noted above, certain changes are effective on other dates.

On June 8, the U.S. Department of Health and Human Services sent proposed regulations limiting surprise billing to the White House Office of Management and Budget (“OMB”).  The proposed regulations would implement the bipartisan No Surprises Act, which was enacted as part of a 2020 appropriations act.  OMB must review the proposed regulations before they can be issued by HHS.

The No Surprise Act limits unanticipated bills for medical treatment obtained from non-network providers in an emergency situation or in non-emergent situations by ancillary out-of-network providers such as anesthesiologists who treat a patient in a network facility.  The law requires that billing disputes between providers and insurance companies be settled through binding arbitration, which may not take into account rates for care provided under government programs such as Medicare and Medicaid.  Instead, arbiters may use other factors when settling rate disputes, such as the median contracted rate for the service, the provider’s training and expertise, and the severity of the patient’s condition.

HHS plans to issue drafts of the new surprise billing regulations on July 1, 2021.

On Friday, May 28, 2021, the Congressional Research Service (“CRS”) released its analysis of Multiemployer Defined Benefit Pension Plans (“MEPPs”) that are potentially eligible for special financial assistance under the American Rescue Plan Act, 2021 (“ARPA”).  As we previously discussed in our article on ARPA’s special assistance for financially troubled MEPPs, a MEPP is eligible for financial assistance if it meets at least one of the following conditions:

  1. It is in critical and declining status in any plan year from 2020 through 2022;
  2. It had an application to suspend benefits under MPRA-approved prior to the enactment of ARPA (March 11, 2021);
  3. It is in critical status in any plan year from 2020 through 2022, has a modified funded percentage of less than 40% (calculated as the current value of plan assets divided by the present value of plan liabilities, using a specified interest rate), and the ratio of active to inactive participants in the plan is less than 2:3; or
  4. It became insolvent after December 14, 2014, and was not terminated by the date of enactment of ARPA.

At the time of ARPA’s enactment, the Congressional Budge Office estimated that 185 MEPPs could qualify for $86 billion in financial assistance.  CRS’s report provides a comprehensive listing of each MEPP that is potentially eligible for special financial assistance under ARPA based on the eligibility criteria set forth above (and identifies the criteria under which each MEPP is potentially eligible).

The Department of Health and Human Services has stated that it will restore transgender and LGBTQ+ health care protections. Under the Trump Administration, HHS had defined the term “sex” narrowly to mean gender assigned at birth. This had the consequence of excluding transgender and other LGBTQ+ individuals from protection against discrimination in health care. The Biden Administration has now reversed that policy.

This change aligns HHS enforcement with a June 2020 Supreme Court case, Bostock v. Clayton County. In Bostock, the Supreme Court held that federal law’s ban on sex discrimination also prohibits discrimination on the basis of sexual orientation or gender identity. Though Bostock concerned an employment discrimination issue, the ban on sex discrimination extends to many areas of federal law, including health care.

The Patient Protection and Affordable Care Act includes a number of anti-discrimination provisions, including a ban on sex discrimination. As required by Bostock, HHS will now interpret the term “sex” to include sexual orientation and gender identify, in addition to gender assigned at birth. Announcing the change, HHS Secretary Xavier Becerra said, “Fear of discrimination can lead individuals to forgo care, which can have serious negative health consequences. It is the position of the Department of Health and Human Services that everyone—including LGBTQ people—should be able to access health care free from discrimination or interference, period.”