Health & Welfare Plans
Agencies Issue New Round of Affordable Care Act FAQs
The Departments of Health and Human Services, Labor, and the Treasury (the “Departments”) recently issued their 18thround of Frequently Asked Questions addressing important matters that plan sponsors should consider when implementing the Affordable Care Act (ACA). Certain sections of the FAQ will impact employer-sponsored health plans and thus deserve attention.
A key section of this FAQ addresses the out-of-pocket maximums that a plan may impose for certain benefits. The ACA places limits on out-of-pocket costs on all essential health benefits (EHB) covered under a plan. Under the FAQ, the Departments require that non-grandfathered group health plans comply with the out-of-pocket limits for plan years beginning on or after January 1, 2015. The FAQ further clarifies what services a plan may disregard for purposes of the plan’s out-of-pocket maximum. For example, the ACA will not require a plan to subject out-of-network services and certain non-covered items (like cosmetic services) to the annual out-of-pocket limits.
The FAQ also addresses the employer design of wellness programs under the ACA. The Departments issued final wellness regulations in 2013 that allowed employers to reduce premiums for participants who participate in a wellness or tobacco cessation program. With respect to tobacco cessation programs, the FAQ clarified that an employer may, but is not required to, eliminate the surcharge it imposes on a participant who initially declines to participate in the tobacco cessation program but enrolls in the middle of the plan year. Further wellness-related guidance in the FAQ explains how a plan must provide a participant with a reasonable alternative standard for obtaining a premium reduction where a physician advises that a program is inappropriate for the participant.
The FAQ also answers questions involving the Mental Health Parity and Addiction Equity Act of 2008, the application of the ACA to expatriate health plans, and the prohibition on cost-sharing requirements for certain preventive services related to breast cancer.
PBGC Proposal Eases Rules Related to Multiemployer Plan Filing and Notice Requirements
On January 28th, 2014, the PBGC issued a proposed rule that would ease certain multiemployer plan filing and notice requirements. One important aspect of the proposed rule would ease the notice requirement for plan sponsors contemplating a plan merger. Plan sponsors currently considering a merger with another multiemployer plan must notify the PBGC 120 days in advance of such merger. The proposed rule would shorten this notice requirement to 45 days for certain types of mergers. The notice, which contains information about the merger, the plans involved, and required actuarial valuations, is designed to allow the PBGC to evaluate whether the merger will satisfy certain statutory requirements. In proposing to shorten the advance notice requirement, the PBGC recognized that many plan sponsors, in an effort to complete plan mergers before the end of a year, often request a waiver of the 120-day advance notice period. The shortened notice period is designed to accommodate the needs of plan sponsors, while maintaining the PBGC’s oversight in this area.
The PBGC also proposed to limit reporting in two other areas. First, multiemployer plans that become insolvent—meaning that they can only pay benefits at minimum levels set by the PBGC—are typically required to provide annual notices to the PBGC, participants, and beneficiaries. Since adopting this rule, the PBGC recognized that insolvent plans rarely return to financial health. Accordingly, the proposed rule would require the plan sponsor to issue these notices only once, rather than on an annual basis. Second, the PBGC proposed to limit the requirement that certain terminated plans perform annual valuations. Under current rules, a terminated but not insolvent plan is required to report an annual valuation to the PBGC so that the PBGC can adequately evaluate its risks should the plan become insolvent. In reviewing this regulation, PBGC recognized that the costs of requiring an annual valuation would accelerate plan insolvency and require PBGC intervention. To alleviate this problem, the proposed rule would require terminated multiemployer plans with less than $25 million in nonforfeitable benefits to provide valuations to the PBC every three years.
New “myRA” Workplace Savings Program
In his January 28, 2014 State of the Union address, President Obama outlined a new retirement savings program called “myRA”. Although we do not yet know all the details (the White House has released a fact sheet but more guidance is likely to come), the program aims to provide broad access to a starter retirement savings account for individuals. Set to launch in late 2014, the program will allow individuals to divert a part of their earnings to a retirement savings account. For tax purposes, an individual’s myRA account will likely function as a Roth IRA account. Workers will be permitted to accumulate up to $15,000 in their account, which will be invested in a guaranteed income fund. Importantly, employees who have access to an employer-sponsored retirement plan will also be able to contribute to a separate myRA account.
Early descriptions of the program suggest minimal employer involvement, although it appears that employers will be able to direct employee payroll contributions to employees’ myRA accounts. In particular, small employers who do not currently sponsor a retirement plan may want to communicate this program to employees when more details are known. Details about how an employer may be able to participate in the program should come later this year.