Under the current rules, 401(k) plans may allow participants to make catch-up contributions when they are age 50 or older.  For 2024, the catch-up contribution limit is $7.500.

SECURE 2.0 creates a window of increased catch-up contribution limits for participants ages 60–63.  Below are key things 401(k) plan sponsors should know about this change:

1. Are the changes mandatory? Plan sponsors are not required to offer catch-up contributions.  However, further guidance is necessary to confirm whether the changes are mandatory for plans that choose to offer catch-up contributions.

2. When do the changes take effect? The new limits take effect for tax years beginning after December 31, 2024.

3. Which participants are eligible for the increased limit? Participants are eligible for the increased limits for the years in which they attain ages 60, 61, 62, and 63.

4. What is the increased limit? The increased catch-up contribution limit for eligible participants is the greater of: (a) $10,000, subject to cost-of-living adjustments starting in 2026; or (b) 150% of the limit in effect for 2024 (i.e., $11,250).

While the change seems straight forward, administration may be complex. For example, plan sponsors should consider how to track eligibility for the increased limits, in addition to tracking eligibility for regular catch-up contributions, and how to re-impose the lower catch-up contribution limits when participants age out of the higher limits.  Employers may need to work with their payroll teams and update their existing processes (e.g., payroll codes) to implement these changes.

Finally, keep in mind that the increased catch-up contribution limits are separate from the SECURE 2.0 Roth catch-up rule for certain high-earning individuals, which the IRS delayed to 2026. For information about the Roth catch-up contribution rule, see our Employee Benefits Blog, “IRS Delays Roth Catch-Up Contribution Requirement.”

1. The Reproductive Health Care Rules limit when a group health plan can disclose reproductive health care protected health information (“PHI”) for non-health care purposes.  More specifically a group health plan may not disclose such PHI: (a) to conduct a criminal, civil, or administrative investigation into any person for the mere act of seeking, obtaining, providing, or facilitating reproductive health care; (b) to impose criminal, civil, or administrative liability on any person for the mere act of seeking, obtaining, providing, or facilitating reproductive health care; or (c) to identify any person for such purposes.

2. The Reproductive Health Care Rules’ protections only apply when the reproductive health care is lawful.  Reproductive health care is health care that affects the health of an individual in all matters relating to the reproductive system and to its functions and processes.  It is lawful when it is permitted under the state law in which such health care is provided, or when it is authorized by Federal law.  A group health plan must assume reproductive health care is lawful unless it has actual knowledge or factual information from the person requesting the information that it is not.

3. A group health plan must receive an attestation for certain uses or disclosures of PHI that potentially relate to reproductive health care.  Existing HIPAA Privacy Rules allow a group health plan to:  (a) use and disclose PHI for health oversight activities; (b) disclose PHI for judicial and administrative proceedings; (c) disclose PHI for law enforcement purposes; and (d) use and disclose PHI about decedents to coroners and medical examiners.  However, under the Reproductive Health Care Rules, a group health plan cannot use or disclose PHI potentially related to reproductive health care for these purposes unless it obtains a valid attestation from the requester.  The Reproductive Health Care Rules specify the information a valid attestation must have, and HHS indicated that it intends to publish model attestation language.  An individual who falsifies an attestation would be subject to potential criminal liability and a group health plan that fails to obtain a valid attestation before disclosing such PHI would be subject to potential civil penalties.

4. The Reproductive Health Care Rules clarify when a group health plan may disclose reproductive health care PHI pursuant to an administrative request (e.g., an administrative subpoena or summons). Existing HIPAA Privacy Rules allow a group health plan to disclose PHI pursuant to an administrative process if: (a) the information sought is relevant and material to a legitimate law enforcement inquiry; (b) the request is specific and limited in scope; and (c) de-identified information could not reasonably be used.  The Reproductive Health Care Rules additionally provide that such disclosures must be required by law and not otherwise subject to the prohibition outlined in takeaway #1 above.

5. A group health plan must take actions to comply with the Reproductive Health Care Rules. Effective December 23, 2024, a group health plan may want to consider taking the following actions to comply with the Reproductive Health Care Rules: (a) adopting a standard attestation form to use when the group health plan receives requests for reproductive health care PHI; (b) reviewing and revising their HIPAA privacy policies and procedures to ensure compliance with the Reproductive Health Care Rules; (c) providing updated training to workforce members with access to PHI that address new requirements under the Reproductive Health Care Rules; and (d) reviewing and revising business associate agreements to ensure such agreements address the Reproductive Health Care Rules.  Effective February 16, 2026, a group health plan must update its Notice of Privacy Practices to support reproductive health care privacy rights and address confidentiality of substance use disorder patient records as required under the CARES Act of 2020.

A top hat plan is an unfunded, employer sponsored plan that provides deferred compensation to a select group of management or highly compensated employees. Employers who sponsor these plans must file a top hat statement with the Department of Labor (“DOL”) within 120 days of the plan’s effective date. By doing so, the employer ensures that the plan is exempt from a number of ERISA’s reporting and disclosure requirements.

Filing a Top Hat Statement

Filing a top hat statement is a simple process. It is an electronic filing that includes the following information:

• Employer identification information (EIN, name, address);
• Plan administrator information;
• Number of top-hat plans maintained;
• Number of participants in each plan; and
• A declaration that the sponsor maintains the plan(s) primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.

There is no user fee for a timely filed top hat statement.

Correcting a Missed Filing

If an employer realizes that it has not filed a Top Hat Statement when required, it may correct this failure using the DOL’s Delinquent Filer Voluntary Compliance Program (“DFVC Program”). This is the same program that employers use to correct missing or late Forms 5500. To correct, the employer must submit the late filing and a $750 user fee through the DFVC Program. The $750 user fee applies regardless of the number of plans or the degree of lateness.

Employers who are unsure if they have made the required top hat statement filing may use the DOL’s search tool to locate top hat filings at: https://www.askebsa.dol.gov/tophatplansearch.

1. What is a PLESA?  A PLESA is a retirement savings vehicle where non-highly compensated employees can make Roth contributions to their employer sponsored retirement account of up to $2,500.  PLESAs may only be offered in defined contribution plans including 401(k), 403(b) and governmental 457(b) plans.

2. No Hardship is Required to Receive a Distribution From the PLESA.  Employees may withdraw the amount in the PLESA at any time, without certifying a hardship or other financial emergency. Employees must be permitted to make withdrawals without any fees at least once per month.

3.  10% Early Distribution Penalty Does Not Apply.  Normally, amounts distributed prior to age 59½ are subject to a 10% early withdrawal penalty.  The 10% penalty does not apply to distributions from a PLESA.

4. Automatic Enrollment is Permitted.  Employers may automatically enroll employees into a PLESA, provided employees are given notice of automatic enrollment and the ability to opt out.  The automatic enrollment percentage must be 3% or less of compensation.

5. Employer Matching Contributions on PLESAs.  If an employer makes matching contributions to the retirement plan, the employer must provide matching contributions on amounts contributed to the PLESA at the same rate as the matching contribution is made on other employee elective contributions.  Matching contributions are made to the matching contribution account in the plan and not to the PLESA. 

The IRS continues to evaluate and process Employee Retention Credit (“ERC”) claims with a focus on inaccurate and ineligible filings. Among its efforts to police the ERC program, the IRS announced a new initiative that permits taxpayers to return ERCs to which the employer is not entitled and avoid audit and penalty.

The short-duration relief, known as the Employee Retention Credit Voluntary Disclosure Program (“ERC-VDP”), will run until March 22, 2024. Under the ERC-VDP, employers that received ERCs for which they were ineligible may self-identify and return 80% of the credits to the IRS (the 20% discount is intended to factor in the portion of the ERC payment lost to the promoter).

To participate in this program, the IRS requires that an eligible taxpayer: (1) apply to the ERC-VDP using a template form; (2) cooperate with the IRS, including providing additional information (e.g., the name and contact information of any advisors or tax preparers who advised or assisted with the claim and details about the services provided, etc.); (3) pay back 80% of the ERC received; and (4) sign a closing agreement. Employers unable to repay the required 80% of the ERC at the time of signing the closing agreement may be considered for an installment agreement on a case-by-case basis. No penalties or interest are generally due on the repayment of the ERCs, but an installment agreement arrangement carries penalties and interest.

In order to be eligible for the ERC-VDP, the employer must meet the following requirements: (i) the employer must not be under criminal investigation and cannot have been notified that it is under criminal investigation; (ii) the employer cannot be under an IRS employment tax examination for the tax period for which it is applying to the ERC-VDP; (iii) the employer cannot have received an IRS notice and demand for repayment of part or all of the ERC; and (iv) the IRS cannot have received information from a third party that the employer is not in compliance and the IRS cannot have acquired information directly related to the noncompliance from an enforcement action.

Employers in receipt of ERCs may wish to consult with tax and benefits counsel to evaluate participation in the ERC-VDP. For more information about the ERC-VDP, including eligibility information, employers may consult a series of FAQs published by the IRS. Additional details about the ERC can be found here, here, and here.  

In addition to the ERC-VDP, a separate program allows certain employers that filed an ERC claim who have not yet received or who have received but have not yet deposited/cashed their refunds to withdraw their submissions and avoid future repayment, interest, and penalties. More information about the ability to withdrawal can be found here.

The failure to timely file Form 3921 and/or Form 3922, as applicable, can subject an employer to the penalties described in Section 6721 and 6722 of the Code.

In their 2024 Policy Guidelines Glass Lewis says that in addition to satisfying legal requirements, effective clawback policies should provide for clawback when there is “evidence of problematic decisions or actions, such as material misconduct, a material reputational failure, a material risk management failure, or a material operational failure...” The guidance also indicates that the clawback rights of an issuer should extend to both time-based and performance-based incentive compensation.

It is still too early to tell exactly how Glass Lewis will evaluate clawback policies that only satisfy the minimum legal requirements of the listing standards, but this new guidance seems to suggest that Glass Lewis may raise concerns with such policies.

The final TiC regulations, published in the Federal Register on November 12, 2020, in part required group health plans to disclose on a public website three files regarding negotiated rates for covered items and services from in-network providers (the “In-Network Rate File”), historical payments to out-of-network providers (the “Out-of-Network Rate File”), and in-network negotiated rates and historical prices for covered prescription drugs (the “Prescription Drug File”), starting with plan years beginning on or after January 1, 2022.

Before the TiC machine-readable file requirements took effect, however, the Departments provided some limited enforcement relief for these requirements, including the relief described below:

• In Q1 of FAQs About Affordable Care Act and Consolidated Appropriations Act, 2021 Implementation Part 49 (“FAQ 49”), the Departments announced their deferral of enforcement regarding the Prescription Drug File requirement.

• In FAQs About Affordable Care Act Implementation Part 53 (“FAQ 53”), the Departments announced a limited enforcement safe harbor regarding the In-Network Rate File.  The enforcement safe harbor generally applied to plans that are unable to fully comply with the In-Network Rate File requirement due to having an alternative reimbursement arrangement that prevents the accurate reporting of certain dollar amounts, as required for the In-Network Rate File.  FAQ 53 provided such plans with technical alternatives for compliance.

FAQ 61 rescinds enforcement relief under FAQs 49 and 53 as follows:

• FAQ 61 rescinds the deferred enforcement of Prescription Drug Files provided by Q1 of FAQ 49 and indicates that the Departments will address enforcement decisions related to the Prescription Drug Files on a case-by-case basis, as the facts and circumstances warrant.  FAQ 61 further notes that the Departments intend to develop technical requirements and an implementation timeline in future guidance regarding the Prescription Drug Files. 

• FAQ 61 rescinds the enforcement safe harbor for In-Network Rate Files provided by FAQ 53 and indicates that the Departments intend to exercise enforcement discretion on a case-by-case basis, noting that the Departments are unlikely to pursue enforcement action if plans can demonstrate that compliance would have been extremely difficult or impossible.  

With enforcement back on, this may be a good time for group health plans to consider whether they are in compliance with the TiC regulations.  Keep in mind that the TiC machine-readable file requirements are in addition to group health plans’ requirements imposed by the Consolidated Appropriations Act, 2021 (the “CAA”).  For more information about the CAA compliance obligations, see our CAA chart.

Whether coverage is “affordable” is determined by reference to the lowest cost, self-only option available under the employer’s health plan.  Applicable guidance provides certain safe harbors with respect to affordability, the amounts of which fluctuate year-to-year due to cost-of-living adjustments and other factors.

The IRS recently published Revenue Procedure 2023-29, which lowers the affordability threshold from 9.12% in 2023 to 8.39% in 2024.  This means that premiums will likely need to be lower in 2024 to remain affordable.  For instance, employers that rely on the federal poverty line affordability safe harbor may charge an employee premium up to $101.94 in 2024, which represents a decrease from $103.28 in 2023.  Although the dollar amount may appear small, penalties for noncompliance can be significant.

Based on this updated guidance, employers may wish to evaluate their health plans and ensure that their offerings are “affordable” by reference to Code Section 4980H and the corresponding safe harbors.  More information on affordability and ACA compliance can be found in our Employer Shared Responsibility Penalty Checklist for Employers, copies of which are available on request.

Notice 2023-62 addresses these concerns by giving plan sponsors until January 1, 2026 to implement the SECURE 2.0 Roth catch-up rule. It provides that the two-year administrative transition period is intended to facilitate an orderly transition for compliance. It also makes clear that, during this period, catch-up contributions will continue to be treated as satisfying the requirements of the Internal Revenue Code, even if they are not designated as Roth contributions. The Treasury Department and the IRS stated that they intend to issue future guidance to help plan sponsors implement this new rule. 

Importantly, Notice 2023-62 also fixes a technical glitch in SECURE 2.0 that inadvertently eliminated catch-up contributions altogether. It clarifies that participants who are age 50 and over may continue to make catch-up contributions in 2024 and later, regardless of income.

Notice 2023-62 provides welcome relief to plan sponsors who have been facing administrative challenges in implementing this provision. 

From now to the December 1, 2023 deadline issuers should consider engaging outside counsel to assist with the following tasks: (i) the preparation of a new and compliant clawback policy (or if a policy already exists, the amendment of such policy to comply with applicable listings standards), (ii) the review of existing equity plans, incentive plans and related employment documents to determine whether such documents require amendment to synchronize with the compliant clawback policies, and (iii) consideration of how the issuer intends to disclose the policy in proxy statements filed after December 1, 2023.

2. The IRS continues to enforce Code Section 4980H penalties vigorously and takes the position that there is no statute of limitations for failure to comply.  Penalties can be significant and may extend across multiple calendar years. 

3. A recent decision from the Court of Appeals for the D.C. Circuit confirms that employers may not sue to enjoin enforcement of Code Section 4980H penalties.  Instead, employers may challenge an assessment with the IRS directly or pay the tax and seek judicial review via a suit for refund.

If you need help determining whether you are an “applicable large employer” subject to these rules or estimating the extent of potential penalty exposure, our Employer Shared Responsibility Penalty Checklist for Employers may be a useful starting point.  Copies are available on request. 

Recap – In response to the COVID-19 National Emergency, DOL and Treasury issued guidance requiring benefit plans to extend certain ERISA deadlines related to COBRA continuation coverage, HIPAA special enrollment, and benefit claims and appeals, effective March 1, 2020.  These deadline extensions generally expired on the earlier of: (1) July 10, 2023; and (2) one year from the date an individual first became eligible for the extension.   

Update – As noted in the CMS, Treasury, and DOL July 20, 2023 letter, the Biden-Harris Administration is calling on employers and plan sponsors to amend their group health plans to extend the 60-day special enrollment period required by HIPAA for individuals losing Medicaid and CHIP and ideally match the temporary special enrollment period on HealthCare.gov that runs from March 31, 2023 – July 31, 2024.  During the COVID-19 Public Health Emergency, Medicaid programs had to keep people continuously enrolled to receive enhanced federal funding.  Because this continuous enrollment provision ended March 31, 2023, millions of individuals are going to lose Medicaid and CHIP coverage.  Furthermore, because HHS estimates 3.8 million of these individuals will be eligible for employer sponsored coverage, the Biden-Harris Administration wants group health plans to help their employees maintain health coverage.

Five Considerations –

1. A plan sponsor does not have to extend its group health plan’s 60-day special enrollment period for loss of Medicaid and CHIP. 

2. If a plan sponsor decides not to extend this 60-day special enrollment window, it can take other steps to help its employees obtain health coverage such as telling them they can enroll in the group health plan within 60 days, reminding them about Medicaid and CHIP renewal, and encouraging them to enroll in coverage through the Exchange on HealthCare.gov.  CMS has provided an employer fact sheet for employers available here and a compilation of other resources here.

3. If a plan sponsor decides to extend its 60-day special enrollment period for loss of Medicaid and CHIP, it should amend its plan and/or issue a summary of modification (“SMM”) clarifying the terms of the special enrollment period.   For example, employers seeking to avoid adverse selection and to comply with the cafeteria plan rules that generally prohibit retroactive mid-year election changes should clarify that enrollment will be prospective and set an end date for the extended enrollment period.

4. As always, self-funded plans should seek approval of any changes from their stop-loss carrier, and insured plans from their insurer.

5. Once a plan sponsor makes a decision, it should notify participants and educate its benefits department so they can administer special enrollment on a uniform basis. 

1. Delaying the Age for RMDs

The age for starting RMDs has been raised from 72 to 75 years. This increased age provision phases in over time, with the final adjustment taking effect in 2033.  The change recognizes that many Americans are working and saving for retirement for longer periods, and the later distribution requirement allows for more flexibility in managing retirement assets.

2. No RMDs from Roth Accounts

Starting with the 2024 calendar year, participants are no longer required to take RMDs from their retirement plan Roth accounts.  This change aligns the RMD rules for Roth accounts in retirement plans with the rules applicable to Roth IRAs. 

3. Decreased Penalties for Missed RMDs

The excise taxes for failing to take an RMD have been decreased from 50% to 25% of the RMD amount not taken. The penalty may be further reduced to 10% if the RMD is corrected in a timely manner.

Conclusion

SECURE 2.0 continues the significant legislative changes made to the RMD rules that began with the original SECURE Act.  The IRS has provided some guidance and transition relief to help implement the changes made by the SECURE Act and SECURE 2.0, but more guidance is expected in the future.

Section 305 of SECURE 2.0 will effectively allow plan sponsors to correct eligible plan failures that are identified too late for self-correction under the existing EPCRS, which requires significant operational failures to be corrected by the end of the 3^rd plan year following the plan year for which the failure occurs in order to be eligible for self-correction.

SECURE 2.0 further requires the Treasury to revise the existing EPCRS (currently set forth in Rev. Proc. 2021-30) to reflect the changes in Section 305 of SECURE 2.0 by December 29, 2024.  In the meantime, the IRS issued Notice 2023-43, which provides interim guidance in advance of the EPCRS update.  In part, Notice 2023-43 provides interim guidance that explains:

• The type of eligible inadvertent failures that plan sponsors may and may not self-correct under SECURE 2.0 before EPCRS is updated.

• The provisions of EPCRS that will not apply with respect to a self-correction of an eligible inadvertent failure under SECURE 2.0 before EPCRS is updated.

• How a “reasonable period” will be determined for purposes of correcting eligible inadvertent failures under SECURE 2.0 before EPCRS is updated.

Until further guidance is issued, there are still some open questions as to how Section 305 of SECURE 2.0 will be implemented.

• As of January 1, 2024, SECURE 2.0 changes these rules for older participants who receive more than $145,000 in wages from their employer in the prior year.  It requires that older participants who meet this wage threshold make catch-up contributions on a Roth basis.  This $145,000 limit will be adjusted for inflation beginning in 2025.

• SECURE 2.0 refers to “wages” as defined in Section 3121(a) of the Internal Revenue Code.  This definition will likely differ from the definition of “compensation” or “wages” that many employers currently use under their plans and will require them to keep track of yet another dollar limit.

• Employers have questions about how this new rule applies, including:
  • Since plans are not required to permit catch-up contributions, can employers eliminate the ability to make catch-up contributions only for participants who hit the $145,000 threshold in the prior year?
  • Can employers require all catch-up contributions to be made on a Roth basis?
  • How does the $145,000 wage requirement work for mid-year hires?  For example, if an employee is required to make Roth catch-up contributions for the year based on prior year wages received from his or her employer, but then gets a job with a new employer in the same year, is the employee permitted to make non-Roth catch-up contributions to his or her new employer’s retirement plan? 

• Employers with plans that do not currently offer Roth contributions need to decide whether to implement a Roth feature or to eliminate catch-up contributions altogether.

• Employers should be working with their recordkeepers and their payroll providers to ensure that they understand the impact of this change and are making the system changes necessary for implementation.

• We would expect additional guidance on this new requirement or a deadline extension before the end of 2023.

2. Such “gag clauses” may be found in agreements between a group health plan or issuer and any of the following parties: (1) a health care provider; (2) a network or association or providers; (3) a third party administrator (“TPA”); or (4) another service provider offering access to a network of providers.

3. Group health plans and issuers must annually submit to the Departments of Labor, Health and Human Services, and Treasury (“Departments”) an annual Gag Clause Prohibition Compliance Attestation (“Attestation”).  The first Attestation is due no later than December 31, 2023, covering the period beginning December 27, 2020 through the date of Attestation.  Subsequent Attestations are due by December 31 of each year thereafter.

4. If a plan is self-insured, it can rely on another entity (e.g., a TPA or pharmacy benefit manager) to submit the Attestation if the plan enters into a written agreement with the entity that indicates that they will attest on the plan’s behalf.  However, if the other entity fails to do so, the legal requirement to provide the Attestation remains with the plan.  If a plan is insured, it can rely on the issuer to submit the Attestation.

5. The Departments launched a website for submitting the Attestations and have issued instructions, a system user manual, and a reporting entity excel template.  

For more information regarding the principal requirements under the CAA that apply to employer-sponsored group health plans, see our updated CAA Chart.

Both the New York Stock Exchange (“NYSE”) and Nasdaq have filed amendments to their proposed clawback-related listing standards (the NYSE Amendment can be found here; the Nasdaq Amendment here). For both the NYSE and Nasdaq, the effective date of the proposed rules will be October 2, 2023. If the Securities and Exchange Commission approves the amendments, this means issuers on the NYSE and Nasdaq will be required to adopt compliant clawback policies by no later than December 1, 2023.   A December 1, 2023 effective date gives issuers additional time to review their existing policies with their compensation consultants and legal advisors and to consider the changes, if any, that should be made to make their policies compliant with the NYSE and Nasdaq listing standards.

Although we are well into the 2023 Proxy Season, for issuers that have yet to file, we thought it would be helpful to summarize ISS’ updated guidance:

• ISS has updated the methodology for calculating burn rate using a “New Value-Adjusted Burn Rate” model.  The new model compares the issuers burn rate to a benchmark of peers.  This new model may impact how an issuer scores under the Equity Plan Scorecard if the issuer is seeking shareholder approval of a new equity compensation plan.

• ISS has updated the threshold scores for obtaining a passing score in the Equity Plan Scorecard.  For 2023, a passing score for: (i) S&P 500 issuers increased from 57 to 59 points; (ii) for Russell 3000 issuers increased from 55 to 57 points; and (iii) for non-Russell 3000 issuers increased from 53 to 55 points.

• In order to receive positive points on the Equity Plan Scorecard for a clawback policy, the applicable policy must apply to both equity awards that vest based solely on the passage of time and performance-based awards.  This means that a clawback policy that only satisfies the minimum requirements of the final clawback rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act will not capture positive points for this Equity Plan Scorecard factor.

If you are an issuer seeking shareholder approval of your equity incentive plan and/or asking your shareholders to increase the size of your equity plan’s share pool, please consider reviewing the updates to the Equity Plan Scorecard in connection with the preparation of your new and/or amended equity incentive plan.

2. The student loan repayment benefit was set to expire until Congress pushed back the provision’s sunset date. As such, student loan payments made between March 27, 2020, and December 31, 2025, are eligible.

3. To take advantage of this new employee benefit, employers must adopt a written policy and otherwise comply with the formal requirements of Code Section 127, which governs qualified educational assistance programs.

Ready to establish an educational assistance program? Looking for guidance or more information? Contact the trusted employee benefits counsel of your choice!

The end of the COVID-19 Emergencies will trigger (immediately or within specified timeframes) the end of various COVID-19 requirements and related relief for group health plans.  As further detailed in our SW Benefits Update, “2022 End of Year Plan Sponsor “To Do” List (Part 1) Health and Welfare,” the expiring COVID-19 rules include:

• Required coverage of COVID-19 testing (including over-the-counter testing) without cost-sharing, pursuant to the Families First Coronavirus Response Act (“FFCRA”) and subsequent guidance. 

• Required coverage of COVID-19 vaccinations without cost-sharing from out-of-network providers, pursuant to the “Coronavirus Aid, Relief, and Economic Security Act” (the “CARES Act”) and subsequent guidance.

• Although unclear, possibly relief permitting high deductible health plans (“HDHPs”) to cover testing and treatment of COVID-19 prior to the satisfaction of the minimum deductible without jeopardizing the plan’s HDHP status.[1]

• Required deadline extensions benefiting plan participants with respect to COBRA, HIPAA special enrollment, and ERISA claims and appeals deadlines. 

• Relief benefiting plans and plan fiduciaries by providing additional time to provide certain notices, disclosures, and documents, such as summary plan descriptions (“SPDs”), summaries of material modification (“SMMs”), and summaries of benefits and coverage (“SBCs”). 

• Limited COVID-related enforcement relief related to mental health parity rules. 

• Relief permitting excepted benefit employee assistance programs (“EAPs”) and on-site medical clinics to provide benefits for COVID-19 diagnosis, testing, and vaccinations without impacting excepted benefit status.

In anticipation of the end of the COVID-19 Emergencies, group health plan sponsors should consider how to prepare for the special rules to lapse.  The appropriate next steps will likely vary from plan-to-plan, depending on how plans have addressed the rules to date and how plans intend to approach COVID-19 coverage moving forward.  For example, next steps might include: 

• Evaluating which COVID-related benefits should continue or terminate.

• Preparing any necessary plan amendment and/or SMM.

• Notifying participants at least 60 days in advance of any material plan modifications that would affect the content of the plan’s SBC, keeping in mind that FAQs Part 43 relieves certain plans from the SBC advance notice rule with respect to the reversal of certain COVID-related changes, if the plan previously provided notice of the duration of the coverage or reduced cost-sharing or the plan otherwise provides such notice within a “reasonable” time in advance of the reversal.

• Contacting the plan’s third party administrators and COBRA administrator to ensure that they are prepared to transition to pre-COVID-19 COBRA, HIPAA special enrollment, and ERISA claims and appeals deadlines.

• Preparing any other necessary participant communications.  With respect to the participant COVID-19 deadline extensions, EBSA Disaster Relief Notice 2021-01 specifically indicates that plan administrators or fiduciaries should “consider affirmatively sending a notice regarding the end of the relief period.”

• Updating written plan procedures and administrative practices as needed.

More information about the end of the COVID-19 Emergencies can be found in a Statement released on January 30, 2023, a Fact Sheet released on February 9, 2023, and a Notice released on February 10, 2023.

[1] The IRS provided this HDHP relief in IRS Notice 2020-15.  Notice 2020-15 suggests the relief is effective “until further guidance is issued,” but also indicates that the relief is issued “[d]ue to the unprecedented public health emergency posed by COVID-19.”  Additional guidance is welcome to clarify whether the relief extends beyond the COVID-19 Public Health Emergency.

The Departments issued the Proposed Rules pursuant to Section 2713 of the Public Health Services Act, which was added by the Affordable Care Act and incorporated into the Employee Income Retirement Security Act of 1974 (“ERISA”) and the Internal Revenue Code of 1986, as amended (the “Code”).  This provision requires that non-grandfathered group health plans and group or individual insurance plans provide certain specified preventive services without cost sharing, including benefits for certain women’s preventative health services as provided for in comprehensive health guidelines supported by the Health Resources and Services Administration (“HRSA”).  In 2011, the HRSA adopted guidelines that, in relevant part, included sterilization procedures, patient education and counseling for women with reproductive capacity, and all Food and Drug Administration approved, cleared or granted contraceptives as prescribed by a healthcare provider.  The HRSA has modified its guidelines over the years, most recently in 2021.

Since 2010, the Departments have issued rules and other guidance in attempts to clarify the requirements for coverage of contraceptive services and to provide certain exemptions from these requirements for those who object to contraceptive coverage on religious and moral grounds.  In November 2018, the Departments issued final rules that include exemptions from the contraceptive coverage mandate for group health plans, institutions of higher education arranging student health insurance coverage, and health insurance issuers.  They also exempt individuals with religious or moral objections from enrolling in plans or policies that follow the mandate.  The regulations also offer an optional accommodation process that allows objecting colleges, universities, and employers to refrain from providing birth control coverage while, at the same time, ensuring that the women and covered dependents who are enrolled in these plans have access to contraceptive services with no cost share. The Departments’ rules have been litigated at nearly every turn.

The Proposed Rules modify the 2018 final rules in an effort to address President Biden’s directives regarding the availability of healthcare coverage and, in particular, women’s access to reproductive healthcare services.  The Proposed Rules retain the existing religious exemption for entities and individuals with religious objections, but they eliminate the moral exemption.  They also preserve the optional accommodation process.  Importantly, the Proposed Rules introduce a new “individual contraceptive arrangement.”  The individual contraceptive arrangement makes available providers and facilities that are willing to provide contraceptive services at no cost to individuals who are covered through objecting entities that do not use the existing accommodation process.  The objecting entity does not have to be involved in the individual contraceptive arrangement.  Providers and facilities that participate in an individual contraceptive arrangement can seek reimbursement for their services by entering into an agreement with an issuer on a Federally Facilitated Exchange or a State-Based Exchange. The Exchange can then seek an adjustment of its Exchange user fees to pay for the cost of the reimbursement. 

With alternative dispute resolution on the rise, this case confirms that in the Tenth Circuit, mandatory arbitration of ERISA claims is allowed. However, mandatory arbitration cannot limit the remedies that are otherwise provided to litigants under ERISA. In other words, an arbiter must be allowed to fashion the same relief that would otherwise be available to a beneficiary in federal court. When drafting or amending ERISA plan documents, the inclusion of, and extent of, a mandatory arbitration clause should be something to consider.

Plaintiff Harrison is a former employee of defendant Envision Management Holding, Inc. (“Envision”). While Harrison was employed by Envision, Envision created the ESOP and transferred 100% of Envision’s stock into the ESOP. Envision hired Argent Trust Company to serve as the Trustee of the ESOP and manage the sale. The ESOP purchased Envision’s stock for $163.7 million (priced at between $1,404 and 1,770 per share); however, weeks after the ESOP sale, the stock was valued at only $349 per share.

Harrison filed suit in the United States District Court, District of Colorado alleging six causes of action, including claims under 29 U.S.C. § 1132(a)(2) and (a)(3), and requesting plan-wide relief including, among other things, a declaration that all defendants breached their fiduciary duties, the removal of Argent as the ESOP trustee, and the restoration of the ESOP’s losses resulting from the breach of fiduciary duties.

Defendants moved to compel arbitration pursuant to an arbitration clause in the ESOP Plan. The arbitration clause required that any claim involving the ESOP, including any claims against fiduciaries or trustees, must be resolved exclusively by binding arbitration. The ESOP Plan further excluded beneficiaries from bringing class-action claims and prohibited a claimant from seeking relief on behalf of the Plan—i.e., claimants could only seek relief for harm they individually suffered and could not request changes to the ESOP Plan structure, such as the removal of trustees or fiduciaries. The District Court denied Defendants’ motion to compel arbitration finding that the arbitration clause precluded claimants from seeking relief expressly available under ERISA. Defendants appealed.   

The Tenth Circuit did not take issue with the ESOP Plan’s mandate that claims be exclusively resolved through arbitration. Neither did the Tenth Circuit call into question the ESOP Plan’s exclusion on class or collective actions. Instead, the Tenth Circuit held that the ESOP Plan prevented claimants from vindicating their statutory remedies under ERISA and, as such, the provision was void.

29 U.S.C. § 1132(a)(2) allows claimants to obtain certain forms of plan-wide relief, including injunctive relief and the removal and replacement of plan fiduciaries. However, the ESOP Plan’s arbitration clause prohibited this same relief. While the Federal Arbitration Act requires the strict enforcement of arbitration clauses, [see 9 U.S.C. § 2], courts have employed the “effective vindication” doctrine to prohibit arbitration agreements from denying claimants their right to statutory remedies.

The Tenth Circuit applied the “effective vindication” doctrine and found that the ESOP Plan’s arbitration clause limited Harrison’s ability to effectuate rights and remedies that Congress expressly granted beneficiaries under ERISA. Because the ESOP Plan precluded Harrison from obtaining relief authorized under ERISA, the “effective vindication” doctrine prohibited its enforcement.  

This case makes it clear that in the Tenth Circuit, ERISA plans are allowed to force claims to arbitration. ERISA plans are further allowed to prohibit class or collective actions. However, ERISA plans cannot limit the scope and breadth of remedies provided by ERISA.

The failure to timely file Form 3921 and/or Form 3922, as applicable, can subject an employer to the penalties described in Section 6721 and 6722 of the Code.

Below is a brief summary of laws impacting HDHPs and telehealth since 2020:  

• Pre-COVID-19 Long-standing Internal Revenue Service (“IRS”) Telehealth Rule – Under Internal Revenue Code (“Code”) Section 223, if an HDHP provides non-preventive care, including telehealth and other remote care services to a participant before the minimum deductible is satisfied, the plan will fail to be an HDHP, disqualifying individuals covered under the HDHP from being eligible to make or receive tax-favored HSA contributions.

• Families First Coronavirus Response Act (“FFCRA”) Section 6001 – In response to COVID-19, Congress passed legislation that requires group health plans to cover (without cost-sharing, prior authorization, or medical management requirements) certain COVID-19 diagnostic tests and related services provided during telehealth visits (as well as in-person, urgent care, and emergency room visits) until the end of the COVID-19 Public Health Emergency.

• IRS Notice 2020-15 – IRS made an exception allowing HDHPs to cover COVID-19 testing and treatment on a pre-deductible basis but did not provide any relief for waiving HDHP deductibles for telehealth visits that are not for COVID-19 testing or treatment.

• Coronavirus Aid, Recovery and Economic Security Act (the “CARES Act”) Section 3701 and IRS Notice 2020-29 – Congress amended the Code so that an HDHP may provide telehealth and other remote care services on a pre-deductible basis, without impacting an individual’s ability to contribute to an HSA, for services provided on or after January 1, 2020 and plan years beginning on or before December 31, 2021.

• Consolidated Appropriations Act, 2022 (“2022 CAA”) Section 307– Congress extended HDHP telehealth relief under the CARES Act from April 1, 2022 – December 31, 2022, notably leaving a three-month gap in relief from January 1, 2022 – March 31, 2022. 

• Consolidated Appropriations Act, 2023 (“2023 CAA”) Section 4151- Congress extended HDHP telehealth relief under 2022 CAA through plan years beginning before January 1, 2025.  For calendar year plans, this extension means that the plan may offer the telehealth relief for the 2023 and 2024 plan years.  However, for non-calendar plan years, it may leave a gap in coverage. 

Below are some additional issues employers may want to consider:

• The 2023 CAA telehealth relief is optional.  Employers may, but do not have to, provide telehealth and other remote care services on a pre-deductible basis. However, employers that choose not to provide telehealth on a pre-deductible basis still must comply with FFCRA which, as noted above, requires group health plans to cover (without cost-sharing, prior authorization, or medical management requirements) certain COVID-19 diagnostic tests and related services provided during telehealth visits until the end of the Public Health Emergency.

• The 2023 CAA telehealth relief is temporary.  Although various organizations will lobby to make this relief permanent, it is currently set to expire December 31, 2024 for calendar year plans.

• Regardless of whether an HDHP takes advantage of the 2023 CAA telehealth relief, the plan sponsor should clearly communicate whether it provides telehealth and other remote care services on a pre-deductible basis.  This may require a plan amendment, revised SPD, or summary of material modifications and is particularly important for non-calendar year plans that cannot provide telehealth and other remote care services on a pre-deductible basis for any 2022 plan year months that fall in 2023.

For more information about the original relief, see our SW Benefits Updates, “The Cares Act – What Are the Health and Welfare Plan Issues to Consider?”, “COVID-19 and Cafeteria Plans – To Amend or Not to Amend?” and “HDHP Telehealth Relief Extended for Remainder of 2022, but Mind the 3-Month Gap in Relief.”

CalSavers currently applies to eligible employers with five or more employees.  The CalSavers requirements for employers took effect in three phases:  (1) September 30, 2020, for eligible employers with more than 100 employees;  (2) June 30, 2021, for eligible employers with more than 50 employees; and (3) June 30, 2022, for eligible employers with five or more employees.

As amended by S.B. 1126, CalSavers will expand to eligible employers with one or more eligible employees by December 31, 2025.  Accordingly, California employers with less than five employees may need to carefully consider the following questions:

• Will you be subject to CalSavers, as amended by S.B. 1126?  In other words, are you an eligible employer with eligible employees, as defined under the CalSavers rules?

• When do CalSavers requirements take effect for employers with less than five employees? As noted above, S.B. 1126 calls for compliance by December 31, 2025.  However, S.B. 1126 also grants the CalSavers Retirement Savings Board authority to extend the deadline.  Therefore, small employers may want to pay close attention to any applicable CalSavers deadlines announced in the next few years.

• If you will be subject to CalSavers, would you rather offer a different qualified retirement plan?  Employers are exempt from CalSavers if they provide an employer-sponsored qualified retirement plan (e.g., a 401(k) Plan). 

The failure to comply with CalSavers may result in penalties of up to $750 per eligible employee for continued noncompliance.  Earlier this year, the CalSavers Retirement Savings Board announced that CalSavers began imposing these penalties in January 2022.

In Hughes, the Supreme Court vacated the Seventh Circuit’s opinion affirming that 401(k) plan fiduciaries did not breach the duty of prudence owed to plan participants by offering a large number of investment options, including “needlessly expensive investment options.”  The Supreme Court held that plan fiduciaries cannot rely solely on the number of investment options available to plan participants and, instead, must ensure that available investment options are prudent. 

Albert v. Oshkosh Corp. was the Seventh Circuit’s first opportunity to apply the Supreme Court’s Hughes opinion.  Plaintiff Andrew Albert is a former employee of a subsidiary of the Oshkosh Corporation.  The Oshkosh Corporation is the sponsor of the Oshkosh Corporation and Affiliates Tax Deferred Investment Plan (the “Plan”) which has over 12,000 participants.  Albert filed suit against Oshkosh Corporation, the Company’s Board of Directors, the Plan’s administrative committee, and other unknown officers and employees (together, “Oshkosh”) alleging that they breached the fiduciary duties owed to Plan participants under ERISA by, among other things: (1) charging excessive fees; and (2) failing to ensure investment options were prudent.  The district court granted Oshkosh’s motion to dismiss finding that Albert failed to sufficiently plead its breach of fiduciary duty claims.  The Seventh Circuit affirmed dismissal of all of Albert’s claims against Oshkosh, finding that Hughes was not instructive on the excessive fees claims. 

On the excessive fees claims, the Seventh Circuit held that one cannot look at the dollar value of the fees in a vacuum and, instead, must compare the fees paid with the services rendered.  In Albert’s complaint, he only pled that the fees plan participants were being charged were excessive.  He did not detail the services that were being provided in exchange for those fees and, therefore, the Court was unable to determine whether the fees charged were reasonable.  The Seventh Circuit affirmed dismissal because Albert only looked at the amount charged for the fees, and not whether they were sufficient for the services provided.   

The Court likewise affirmed the district court on the investment options claim.  Citing Hughes and the Sixth Circuit’s Smith v. CommonSpirit Health case (also analyzing Hughes), the Court held that “Albert’s allegations are . . . threadbare: that ‘[Oshkosh] failed to consider materially similar and less expensive alternatives to the Plan’s investment options’.” 

Neither Hughes, the Sixth Circuit, nor the Seventh Circuit have stated what must be pled for a breach of fiduciary duty of prudence claim to survive a motion to dismiss.  However, the Seventh Circuit, in essence, raised the pleading standard for excessive fees claims by holding that allegations of failing to consider one set of investment options for another will not suffice. 

The Seventh Circuit will again have the opportunity to review this issue when it hears the Hughes case on remand from the Supreme Court. 

Notably, the Obama Administration construed Section 1557 to apply to gender identity and sexual orientation.  In 2020, the Trump Administration issued final rules reinterpreting Section 1557 and repealing certain protections with respect to transgender health issues. 

Last year, the Department of Health and Human Services (“HHS”) announced that it would enforce Section 1557 with respect to gender identity and sexual orientation and that it would issue corresponding regulations.  On August 4, 2022, HHS published the anticipated Notice of Proposed Rulemaking (“NPRM”) in the Federal Register.  According to HHS, the NPRM is intended to restore certain Obama-era protections under Section 1557 and to align the regulations with the Supreme Court’s landmark ruling on sex discrimination in Bostock v. Clayton County.  A summary of the NPRM can be found here.

Comments on the NPRM can be submitted via regulations.gov.  The existing regulations under Section 1557 remain in effect until final regulations are issued, if at all.

Notice 2022-33 also provides the same extension for some (but not all) of the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).  The extended relief for the CARES Act amendments applies only to the 2020 waiver of required minimum distributions. The provisions of the CARES Act relating to coronavirus-related distributions and loans continue to have a December 31, 2022 amendment deadline.

• HHS, the U.S. Department of Labor and the Department of the Treasury (the “Departments”) issued a reminder to group health plan sponsors and issuers that the Public Health Service (“PHS”) Act (which also amended the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code) requires that non-grandfathered group health plans and health insurers offering non-grandfathered group or individual health insurance coverage provide contraceptive coverage without cost sharing as preventive care.  The PHS Act requires that plans and issuers cover, without cost sharing, at least one form of contraception in each contraceptive category and also contraceptive services or FDA-approved, cleared or granted contraceptive products that an individual and her attending provider have determined to be medically appropriate.  This mandate includes emergency contraception such as Levonorgestrel (Plan B) and Ulipristal Acetate (Ella).  The Departments referenced reports of non-compliance and urged non-grandfathered group health plans and health insurers to immediately ensure that they are complying with these rules.

• The HHS Office for Civil Rights (“OCR”) issued guidance clarifying the situations in which the Health Insurance Portability and Accountability Act Privacy Rule permits, but does not require, the disclosure of protected health information to third parties, such as law enforcement. 

• OCR also issued guidance that advises individuals regarding the extent to which their private medical information is protected when they use personal cell phones and tablets. It also provides tips on the ways in which individuals can protect this information when using health information apps.

• HHS Centers for Medicare and Medicaid Services (“CMS”) issued a memorandum to State Survey Agency Directors prompting them to ensure that hospitals comply with their existing obligations under the Emergency Medical Treatment and Labor Act (“EMTALA”).  EMTALA requires that hospitals with dedicated emergency departments provide a medical screening examination to any individual who comes to the emergency department and requests one.  It also requires that the hospital provide stabilizing treatment or an appropriate transfer to another hospital that can provide stabilizing treatment in cases where the screening examination reveals that an emergency medical condition exists.  EMTALA defines emergency medical conditions for pregnant women to include ectopic pregnancy, complications of pregnancy loss, or emergent hypertensive disorders such as preeclampsia.  CMS made clear that EMTALA preempts any state law that prohibits abortion when it is the stabilizing treatment necessary for a woman who is experiencing an emergency medical condition.

This guidance does not necessarily cover new ground.  However, it serves as a reminder to those who are subject to these requirements that they may want to confirm compliance to ensure that access to reproductive and contraceptive care after Dobbs remains in place where required by law.