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COVID-19 Special Enrollment in Group Health Plans

"[M]any insurers are offering a 30-day special enrollment period (SEP) for their insured and self-funded group health plans.... [This] COVID-19 SEP does not qualify as a HIPAA special enrollment event nor a change in family status event under the section 125 cafeteria plan rules that would permit mid-year enrollment in a self-funded or fully-insured group health plan on a pre-tax basis.... The COVID-19 SEP poses additional issues for self-funded group health plans, especially ones that are subject to ERISA.... The stop loss policy may not cover participants who enroll during a COVID-19 SEP which means the plan sponsor would be fully liable for claims made by such participants."

Does Your Group Health Plan Need a Check-Up?

"Employers with self-funded GHPs should ask their claims administrators if they are engaging in cross plan offsetting with respect to the employers' GHPs. If so, employers should consider stopping that practice and asking the claims administrators to reprocess prior benefit claims.... Employers should perform a compliance audit of their employer mandate reporting process to ensure that the proper reports with the appropriate codes are being filed with the IRS and provided to employees.... Employers should make sure that their claims administrators are following the ERISA claims rules with respect to any partial or complete denial of a benefit claim."

Form 5500 Penalties Increase: Do You Know Who Is in Your Controlled Group?

"The penalty [under ERISA Section 502(c)(2) for a failure or refusal to file Form 5500] has been increased from a maximum of $1,100 per day to a maximum penalty of $2,063 per day.... [G]iven the size of the increase, there could be more incentive for the DOL and IRS to pursue Form 5500 audits. Given the significant penalties, plan sponsors should carefully analyze their controlled group relationships to ensure that they are properly reporting subsidiary or other related entities on the Form 5500."

Private Equity Groups on the Hook; What in the World Is a 'Partnership in Fact'?

"With respect to retirement plans, the potential adverse impact ranges from a failure to properly extend participation in the plan to the employees of the deemed controlled group to nondiscrimination testing issues, both as to coverage and contribution testing. Similarly, with respect to welfare benefit plans, such a failure could lead to potential penalties under the [ACA] by a failure to recognize controlled group employees in determining if an employer is subject to the employer mandate." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)]

Telemedicine: A Popular New Benefit with Potential Legal Gotchas

"[Here] are some of the considerations employers should consider in determining whether to offer telemedicine services. [1] Do the scope of your telemedicine services cause the program to be a group health plan?.... [1] Is it feasible to offer telemedicine services through your existing group health plan? ... [2] Are there any legal restrictions that impact your ability to offer telemedicine services?"

PCORI Fees: IRS Audits on the Horizon

"The IRS has recently begun PCORI Fee audits. These examinations require the plan sponsor to [1] identify all of its covered group health plans, [2] identify any plans the plan sponsor determined were exempt from the PCORI Fee and provide the applicable legal authority for that conclusion, [3] specify the method of counting the average number of lives for all covered plans, and [4] provide all associated work papers. In addition, for insured plans, these audits request the plan sponsor to have its Forms 1094-B and 1095-C available during the examination.... [P]lan sponsors may want to perform a precautionary PCORI Fee review."

Health Care Reform -- The Gift That Keeps on Giving: Section 1557 Nondiscrimination Rules

"Covered plan sponsors must ensure that their group health plans do not discriminate based on any section 1557 protected status in terms of health coverage, claim denials, or cost sharing limits.... [If] a plan contains a blanket exclusion of coverage for transgender services, that exclusion must be removed. These changes should be made in time to be communicated during 2017 open enrollment meetings."

Key Takeaways from Cigna v. Humble for Employers Who Sponsor Self-Funded Medical Plans

"This decision creates a roadmap of 'to do's' that sponsors of self-funded medical plans administered by any TPA (not just CIGNA) should follow to avoid having their plan be a victim of similar litigation. This is particularly important in light of a follow-up federal lawsuit filed last week in Houston by a separate group of stand-alone surgical clinics ... against plan sponsors and plan administrators of self-funded plans that use CIGNA as their TPA. This lawsuit alleges a litany of fiduciary and co-fiduciary violations, and may serve as a basis for copycat cases[.]" [Connecticut General Life Ins. Co. v. Humble Surgical Hospital, No. 4:13-cv-3291 (S.D. Tex. June 1, 2016)]

Key Takeaways from the Newly Issued Proposed Section 409A Regs

"Exempt stock rights (stock options and stock appreciation rights) can be awarded to service providers who are expected to commence work for the service recipient within 12 months, if they actually do commence work within that period.... Liberal timing rules apply to payments triggered by the service provider's death.... 'Clawbacks' on exempt stock rights are permitted.... A payment can qualify as a 'short-term deferral' even if the payment is made after March 15 of the year following vesting, where the payment is prohibited by federal securities law restrictions."

Year-End Legislative and IRS Developments for Benefit Plans

"If adopting any of the [health or dependent care FSA] relief offered by the Act, plan sponsors should consider taking steps to limit their financial exposure, including limiting the number of mid-year election changes that will be permitted and prohibiting reductions in pre-tax FSA elections or carryovers of unused contributions or balances that would result in underfunding of reimbursements that have already been made.... [Retirement plan] sponsors must begin to track hours worked by LTPTEs for plan years beginning in 2021 and retain that information in future years so they can determine whether plan eligibility is met under this provision for any plan years starting after December 31, 2023.... Plan sponsors should be aware that they will be inviting a potentially significant recordkeeping burden if they decide to amend their 401(k) plans to provide employer contributions to LTPTEs and subject those contributions to a vesting schedule."