Section 1557 is the non-discrimination provision of the Affordable Care Act (ACA).  Section 1557, which has been in effect since 2010, is intended to prevent discrimination in certain health programs or activities that receive federal financial assistance.   In May of 2024, the Department of Health and Human Services’ (HHS) Office of Civil Rights (OCR), the agency responsible for the implementation and administration of Section 1557, issued final regulations governing Section 1557 (the 2024 Final Rule).  The 2024 Final Rule is not OCR’s first bite at this apple.  In fact, the 2024 Final Rule represents OCR’s third attempt to establish regulations under Section 1557: 

The 2024 Final Rule is based on the NPRM and comments received in response to it. While the Rule applies broadly to nearly every healthcare industry sector, this article addresses its impact on employer-provided group health plans. 

Scope of the 2024 Final Rule

Under the 2024 Final Rule, a “covered entity” receiving federal financial assistance is prohibited from discriminating on the basis of “race, color, national origin, sex, age, disability, or any combination thereof” concerning the provision or administration of health benefits.   For this purpose, a “covered entity” includes any health insurance issuer, broker, pharmacy benefit manager, or third-party administrator receiving federal financial assistance, including Medicare payments, grants, loans, credits, subsidies, and contracts.  The preamble to the 2024 Final Rule states that most employer-provided group health plans are not covered entities.  However, because the 2024 Final Rule will apply to most service providers, the rule will indirectly affect employer-provided group health plans.   

Protections Under the 2024 Final Rule

The 2024 Final Rule clarifies OCR’s position on certain open issues affecting employer-provided group health plans, notably:

  • Transgender Care.  Section 1557 and the journey to the Final 2024 Rules have been largely driven by litigation surrounding coverage of gender-affirming care.  On the heels of Bostock, the 2024 Final Rule attempts to establish that the federal prohibition against discrimination on the basis of “sex” includes gender identity.   The 2024 Final Rule specifies that sex discrimination includes discrimination on the basis of “sex characteristics, including intersex traits … sexual orientation; gender identity; and sex stereotypes.”  This means that covered entities are prohibited from denying, limiting, or otherwise excluding gender-affirming care or placing stricter restrictions or more significant cost-sharing requirements on services performed for gender-affirming care as those imposed on the same services when performed for other medical diagnoses.   

The 2024 Final Rule attempts to ward off challenges to the prohibition against categorical exclusions of gender-affirming care by preempting those challenges. The 2024 Final Rule explicitly states that, to the extent states have laws prohibiting gender-affirming procedures, Section 1557 preempts such laws. The state of Florida has already challenged this preemption provision.    

  • Pregnancy and Abortion.    The 2024 Final Rule also clarifies that “sex discrimination” includes discrimination related to pregnancy and pregnancy-related conditions.  The 2024 Final Rule does not address abortion.  However, in the preamble, OCR affirms that Section 1557’s protections include discrimination in abortion coverage.  However, the 2024 Final Rule does not require the coverage of abortion and is not intended to override any state-specific laws regarding abortion.  Under Section 1557, a decision not to provide abortions is discriminatory only if the decision is applied differently based on prohibited classifications. 

Conscience Exemption

Throughout the 2024 Final Rule, OCR specifies that Section 1557 should not be construed to affect federal laws regarding conscience or religious protection.  Covered entities can either rely on the federal protections for religious freedom and conscience laws or apply for a “conscience exemption” from the OCR.  Because the 2024 Final Rule directly governs covered entities, not plan sponsors, employers seeking a conscience or religious exemption from Section 1557 may not be able to rely on the 2024 Final Rule as the basis of such exemption.    

The Path Forward

Generally, the 2024 Final Rule is effective as of the first day of the first plan year beginning on or after January 1, 2025.  However, the 2024 Final Rule will likely have the same challenging road as its predecessors.  Litigation involving prior Section 1557 legislation remains pending in more than one federal district court.  And, on May 6, 2024, mere days after the 2024 Final Rule was passed, the state of Florida filed a lawsuit on behalf of a religious medical group seeking an injunction against the 2024 Final Rule. 

While it may seem the 2024 Final Rule is the last word on the topic, until the legal challenges are resolved, one would be wise to contact a knowledgeable ERISA attorney with questions.  The Jackson Lewis Employee Benefits Practice Group members can help if you have questions or need assistance. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work.

On April 23, 2024, the United States Department of Labor (DOL) issued updates to the investment advice fiduciary regulation, formally called the “Retirement Security Rule” and generally referred to as the “DOL Fiduciary Rule.”  These updates, generally effective September 23, 2024 (a one-year transition period extends the effective date for some provisions into 2025), will have broad implications in the insurance and financial services industries.  With the ink barely dry, the first legal challenge to the Retirement Security Rule has been filed.  (Federation of Americans for Consumer Choice Inc. v. DOL, complaint filed 5/2/24)(FACC Litigation.)

Statutory and Regulatory Background 

Under the Employee Retirement Income Security Act (ERISA), certain individuals are considered “fiduciaries.”  As such, they are held to the highest standards known to law and are personally liable for failing to abide by these standards.  These fiduciary duties are reinforced by prohibitions against certain Prohibited Transactions, which forbid a fiduciary from ‘‘deal[ing] with the assets of the plan in his own interest or for his own account,’’ and ‘‘receiv[ing] any consideration for his own personal account from any party dealing with such plan in connection with a transaction involving the assets of the plan.’’ DOL has authority to grant Prohibited Transaction Exemptions to these broad prohibitions for compliant transactions.  Absent an exemption, a fiduciary cannot receive any consideration or compensation for any investment transaction involving the assets of an ERISA plan.

 Since many protections, duties, and liabilities in ERISA hinge on fiduciary status, determining who is a ‘‘fiduciary’’ is of central importance.  ERISA has a statutory definition of “fiduciary,” which includes three fiduciary categories.  Relevant to the Retirement Security Rule are those individuals who are considered fiduciaries because they “render investment advice for a fee.” 

Five Part Test 

In 1975, the DOL implemented by regulation a “five-part test” for determining whether someone was rendering investment advice to an employee benefit plan and, therefore, would be considered an ERISA fiduciary.  Under the five-part test, a person is a fiduciary only if they: (1) render advice as to the value of securities or other property, or make recommendations as to the advisability of investing in, buying, or selling securities or other property (2) on a regular basis (3) pursuant to a mutual agreement, arrangement, or understanding with the plan or a plan fiduciary that (4) the advice will serve as a primary basis for investment decisions about plan assets, and that (5) the advice will be individualized based on the particular needs of the plan.  All five parts of this test must be met for fiduciary status to attach. 

2016 Final Rule and Judicial Challenges 

Beginning in 2010, the DOL began revising the regulatory definition of an investment advice fiduciary.  The impetus for this process was the changing retirement landscape from defined benefit to defined contribution plans and the resulting shift toward individual control over investment decisions via participant-directed (e.g., 401(k)) plans and individual retirement accounts.  A proposed rule was adopted in 2010 and withdrawn in 2011 amid widespread criticism.  In April 2015, the DOL again proposed new regulations defining investment advice fiduciary status and finalized that rule in April 2016 (the 2016 Final Rule.) After a series of legal challenges, the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit) vacated the 2016 Rule in Chamber of Commerce v. United States Department of Labor.

The Retirement Security Rule

On November 3, 2023, the DOL adopted a proposed Retirement Security Rule.  The Retirement Security Rule was adopted in final form on April 23, 2024.  DOL also made widespread changes to the related Prohibited Transaction Exemptions.

The Final Rule states that a financial professional acts as a fiduciary if: 

  • The financial professional makes a recommendation to a retirement investor;
  • That recommendation is for a fee (either direct or indirect); and
  • One of the following:
    • There is a representation or acknowledgment that the professional is a fiduciary; or
    • The financial professional provides investment recommendations to investors on a regular basis as part of their business, and the facts and circumstances objectively indicate all the following about the recommendation:
      • it is based on the review of the retirement investor’s particular needs or individual circumstances;
      • it reflects the professional judgment of the financial professional to the retirement investor’s particular needs; and
      • it may be relied on by the retirement investor as intended to advance the retirement investor’s best interest.

DOL has expressed concern that the “regular basis” and “mutual agreement” prongs of the prior Five-Part Test “worked to defeat legitimate retirement investor expectation of impartial advice” and attempted to close these perceived loopholes in the Retirement Security Rule.  The rule, as adopted, broadens both the number of people who will be considered ERISA investment advice fiduciaries and the advice that will be considered investment advice.

The FACC Litigation

On May 2, 2024 (or 9 days after the Final Rule was adopted), the FACC filed its complaint in the United States District Court for the Eastern District of Texas.  Not surprisingly, the Complaint relies heavily on the Fifth Circuit’s decision in Chamber of Commerce (which is controlling precedent.)  The complaint alleges that the DOL both exceeded their regulatory authority and acted in an arbitrary and capricious manner in adopting the Retirement Security Rule and amending the related Prohibited Transaction Exemptions.

DOL’s adoption of the Retirement Security Rule is the latest step in their ongoing (now approaching 15-year) attempt to shore up what they see as gaps in fiduciary coverage related to investment advice.  The FACC Litigation is likely the first of several judicial challenges to the Retirement Security Rule.  We will continue to monitor and report on this evolving area.  If you have any questions, please contact any member of the Jackson Lewis Employee Benefits Practice Group or the Jackson Lewis attorney with whom you work.

If the U.S. Department of Labor’s Notice of Proposed Information Collection Request, issued on April 15, 2024, becomes final, fiduciary retirement plan committees may be asked to evaluate the important question of whether the plan should voluntarily submit missing participant data to the DOL before filing the next Form 5500.  The DOL is seeking comments on the proposal by June 17, 2024.

This proposal is intended to implement Section 303 of The SECURE 2.0 Act of 2022, which adds Section 523 of ERISA and charges the U.S. Department of Labor with responsibility for establishing a “Retirement Savings Lost and Found” database by December 29, 2024.  The purpose of the database is to help connect participants and beneficiaries who are entitled to benefits with the plan administrator so they can make a claim.

The DOL has encountered several stumbling blocks with the establishment of the Retirement Savings Lost and Found.  Significantly, the DOL thought they would be able to obtain the participant data from the Form 8955-SSA that is filed with the IRS, which provides the information to the Social Security Administration (SSA).

When separated vested participants later file claims for Social Security Benefits, the SSA lets those participants know they “may be entitled to a benefit” from the XYZ plan.  It is these Form 8955-SSA that have created many headaches for employers over the years who have long-ago paid-out participants coming out of the woodwork believing they may still have a retirement plan benefit.  So it may be with a sigh of relief for fiduciaries to learn the IRS has refused to provide the DOL with the Form 8955-SSA data to be used to populate the Retirement Savings Lost and Found, citing concerns related to the confidentiality of tax information under Section 6103 of the Internal Revenue Code.

With this impediment, the DOL pivoted and concluded it instead needed to seek the voluntary disclosure of information in order to meet its 2-year deadline for establishing the Retirement Savings Lost and Found.  Fiduciaries may find value in having access to a tool that can connect participants and beneficiaries to their plan benefits and conclude the disclosure is in their best interests.  However, there are several critical countervailing considerations.

First, the scope of the information requested goes well beyond what was reflected in SECURE 2.0.  For example, the data request solicits information “dating back to the date a covered plan became subject to ERISA . . . or as far back as possible, if shorter.”  Coincidentally, ERISA is celebrating its 50th birthday this year on September 2, 1974.  Do you have 50 years of missing participant data in your files?  Do you want to tell the DOL that you do not?

Further, SECURE 2.0 contemplated the submission of only the participant’s name and taxpayer identification number to the DOL.  Yet the notice requests the submission of the participant’s name, date of birth, mailing address, email address, telephone number, and taxpayer identification number.  Fiduciaries would need to carefully weigh whether they are comfortable providing a government oversight body with this indicative data, including contact information.  The request also asks for the prior plan names, prior administrators, and prior sponsors, which would be a headache for businesses involved in a lot of mergers and acquisitions.

But wait, there is more.  The DOL also seeks information about whether any participants are over their normal retirement age and unresponsive about their benefits or whose contact information may not be accurate.  This could highlight potential 401(a)(9) minimum required distribution questions and potential vulnerabilities in fiduciary missing participant procedures.  The notice began by noting that missing participants often are the result of “inadequate recordkeeping practices, ineffective processes for communicating with such participants and beneficiaries, and faulty procedures for searching” for these individuals.

Second, the notice leaves the DOL’s cybersecurity measures to your imagination, simply noting that “multiple security measures will be in place” to protect the data provided.  What are those security measures?  Has the DOL conducted a risk assessment related to the transmission and storage of participant data, for example?  The DOL’s own Cybersecurity Program Best Practices publication may serve as a guide to fiduciaries in evaluating whether the security measures are sufficient.  There also may be contractual provisions with recordkeeper or other plan service providers that restrict the disclosure of participant information.

Third, the DOL did not establish a fiduciary safe harbor or any protections in the event the information the fiduciary volunteers is ultimately compromised, incomplete, or incorrect.  For example, what happens if the Social Security Number the Plan has on file is 999-999-9999 or the date of birth is 1-1-1900?  What happens if the data the fiduciary provides highlights that the participant has not received required minimum distributions?  Will the voluntary submission lead to a missing participant or a more extensive investigation?

Time will tell.  Importantly, the DOL notes that it has the authority to investigate and collect information under other sections of ERISA and to verify the identities of those accessing the database.  So, if this voluntary avenue proves unsuccessful, the DOL may pivot again to using its enforcement authority to mandate the submission of missing participant data.

For now, plan fiduciaries should keep an eye on the notice and consider voicing their feedback, positive or negative, to the DOL.  Once finalized, fiduciary committee agendas may reflect this important question.

The Jackson Lewis Employee Benefits Practice Group members can assist if you have questions or need assistance.  Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work.

To all those who work in the employee benefits arena, whether in legal, finance, benefits administration, payroll, tax, human resources, or many other disciplines, this is our annual reminder to celebrate the valuable and important work done for employees, beneficiaries, and Plan Sponsors alike.

This year, we focus on the increased attention on all things related to health and welfare plans.

Employer-sponsored health plans are perhaps the most common (and expected) benefit plan offering for employers of all sizes and industries, particularly following the enactment of the Affordable Care Act’s (ACA) employer mandate.  While plan designs, healthcare costs, and the delivery of healthcare services themselves have considerably evolved over the years, the compliance burdens and risks associated with maintaining such plans are evolving as well.

Over the last few years, we have highlighted the mounting compliance concerns for employer-sponsored health plans.  Beyond the Employee Retirement Income Security Act (ERISA), the federal tax code, COBRA, HIPAA, and the ACA, group health plans must navigate mandates imposed under the Mental Health Parity and Addiction Equity Act (MHPAEA) and transparency requirements under the Consolidated Appropriations Act of 2021 (CAA).  On top of these federal considerations, plan sponsors and fiduciaries must also navigate benefit offerings in a post-Dobbs-world where varying state legislation, regulation and litigation are pushing at the boundaries of ERISA preemption.  Most recently, these efforts have raised questions surrounding the provision of fertility/IVF benefits and transgender benefits.

Similarly, while the bulk of ERISA fiduciary litigation, and specifically class action litigation, have been focused on qualified retirement plans holding significant plan assets, there is renewed attention on group health plans.  Rising healthcare costs, complex designs, and an increased focus (both state and federal) on pharmacy benefit managers (PBMs) have thrust the fiduciary process surrounding these plans into the spotlight.

With so many moving pieces and evolving guidance, plan sponsors are well advised to revisit their governance and administration surrounding health and welfare plans.  This includes confirming the fiduciary process in place and following best practices surrounding the administration and decision-making related to these plans.  Just as in the retirement plan context, plan fiduciaries need to engage, monitor, and leverage trusted vendors in this space.  Given the complexities in benefit design and cost structures embedded in health plans, a prudent process that uses all available resources is key to establishing a plan design and structure that maximizes value for participants.

And don’t forget the proper handling of claims and appeals.  ERISA has specific processes and timelines for handling claims and appeals.  Strictly following that process (as outlined in plan documents and summary plan descriptions) allows for a deferential standard of review should a claim dispute head to litigation.  As part of that process, plan sponsors and fiduciaries often receive requests for documents and plan or claim-related information from medical providers and attorneys in an attempt to collect payments from plans.  These requests should be reviewed timely and carefully with legal counsel and third party administrators to determine what should be provided and when.

In short, on this National Employee Benefits Day, as with all others, important work continues.  While the considerations applicable to health and welfare plans are not new, they are complicated and an area of increased attention.  Please contact a member of the Jackson Lewis Employee Benefits Practice Group if you need any assistance.

Subscribe to our blog (Benefits Law Adviser), newsletter, and mailing list to stay informed. 

Thanks to SECURE Act 2.0, newly established 401(k) and 403(b) plans must now have an automatic enrollment.  The SECURE Act 2.0 was passed in December 2022 and made sweeping changes to retirement plan regulations. We discuss many of those changes in our SECURE Act 2.0 blog series

Plans with an automatic enrollment feature immediately enroll employees in the employer-sponsored plan once employees satisfy eligibility requirements.  401(k) and 403(b) plans established after December 29, 2022, must have an automatic enrollment feature. The Internal Revenue Service released Notice 2024-02 to clarify when a plan is “established” for purposes of determining whether the plan must have an automatic enrollment feature.  The IRS is accepting public comments related to Notice 2024-02 through April 22, 2024. 

The plan’s adoption date determines whether it is subject to mandatory automatic enrollment. A plan adopted before December 29, 2022, but not effective until after December 29, 2022, is not subject to mandatory automatic enrollment. For example, a 401(k) plan adopted on October 3, 2022, but not effective until January 1, 2023, does not have to have automatic enrollment. 

Suppose two plans, both of which were adopted before December 29, 2022, are merged to create a new ongoing plan with an effective date after December 29, 2022. In that case, the new ongoing plan is not subject to mandatory automatic enrollment. Similarly, a plan that is a spin-off of a plan that was established before December 29, 2022, is not treated as being established after December 29, 2022, and is not subject to mandatory automatic enrollment unless the spun-off plan is maintained or sponsored by an employer that did not maintain or sponsor the plan from which the spin-off plan was spun-off.

Employers that maintain or sponsor newly established 401(k) and 403(b) plans subject to mandatory automatic enrollment must establish the plan in a way that satisfies the requirements listed in Code Section 414A. Very generally,

  • Employees must be enrolled in the plan immediately upon satisfying the eligibility requirements.
  • In the first year of participation, employees are treated as electing to defer a minimum of 3% but not more than 10% of their compensation. The plan sponsor must decide the default deferral percentage and apply it uniformly to all participants.
  • In the years following the first year of participation, participants’ deferral percentage must increase by 1% each year, up to a maximum of 10% (for plan years ending before January 1, 2025) or 15% (for plan years on or after January 1, 2025).
  • Employees may make an affirmative election to change their deferral rate at the frequency allowed under the terms of the plan.
  • Employers must provide a notice that details an employee’s right to opt out of the plan or elect a different deferral rate and describes the default investment selected for participants if the participant fails to make an investment election.
  • Participants must have a reasonable opportunity to elect to opt out of the plan.
  • Within 90 days of the first deferral made under automatic enrollment, participants must have an opportunity to elect to withdraw all of the deferrals made to the plan, plus any earnings.

We are available to help plan sponsors understand and implement the automatic enrollment requirements under SECURE 2.0.  Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.

An employer can contest a withdrawal liability assessment and ultimately prevail. That is the moral of Bulk Transport Corp. v. Teamsters Union No. 142 Pension Fund, No. 23-1563 (7th Cir. Mar. 22, 2024).

Withdrawal Liability Generally

Withdrawal liability is a statutory liability imposed on employers whose obligation to contribute to union pension funds (called multiemployer pension plans) ceases in whole or part. These rules were enacted in 1980 as part of the Multiemployer Pension Plan Amendments Act (MPPAA). Because MPPAA is a remedial statute, courts have often held that it should be liberally construed in favor of protecting the participants in multiemployer pension plans. Indeed, the statute is dramatically skewed in favor of pension funds and disfavor employers. More…

It’s hard to believe that 2024 is well underway! That means it’s a perfect time to think about an issue that might get lost in the summertime and (dare I already say) year-end shuffles: fiduciary committees.

ERISA imposes fiduciary duties on those considered a fiduciary under an ERISA-covered plan. Generally, absent a delegation, the board of directors is considered the plan fiduciary—meaning the board is subject to the complex duties and obligations imposed on plan fiduciaries. It’s now common, if not the norm, for the board to delegate its fiduciary duties to a fiduciary committee. But having a committee isn’t a set-it-and-forget-it situation—it requires regular action to ensure the committee is properly undertaking its role as a plan fiduciary.

Below are some best practice items committees should consider annually:

Review the committee charter. The committee charter often sets out details about what authority has been delegated to the committee and about the processes that the committee must or may follow in carrying out its duties and responsibilities. Regularly reviewing the charter not only helps to make sure the committee is adhering to those duties and responsibilities, but it can also help identify areas that may need adjustment.

Schedule fiduciary training. ERISA sets out fiduciary duties that apply to plan fiduciaries, including the duty of loyalty, the duty to act prudently, the duty to follow plan documents, and the duty to diversify investments.  There is a lot packed into these concepts—it is essential that plan fiduciaries understand these duties and what they mean for handling issues related to their plan. Fiduciary training is not only crucial for new committee members but also a valuable refresher for existing committee members. A recent court cited a committee’s regular fiduciary training as evidence of its prudent process and compliance with its fiduciary duties.

Consider establishing a committee for your health and welfare programs. While the focus of fiduciary duties is often aimed at qualified retirement plans, ERISA applies fiduciary duties to ERISA-covered health and welfare programs.  This fact has been in the spotlight recently with the rise of fee litigation targeting fiduciaries concerning oversight and operation of prescription drug benefits, including pharmacy benefit manager arrangements.

Schedule regular committee meetings and document the process. Having regular committee meetings helps make sure the committee is adhering to its duties and engaging in proper oversight of the plan(s). Committees can bring in their hired experts to help them evaluate plan issues and make decisions. Don’t forget to keep minutes so the committee has a well-documented record of its process.

Review the fiduciary liability insurance policy. ERISA imposes personal liability on plan fiduciaries. Fiduciary liability policies generally provide coverage for claims related to the administration and operation of retirement and health and welfare plans. Having an up-to-date, robust policy is a vital part of making sure the fiduciaries (and the plan) are prepared to face the seemingly never-ending litigation targeting plan fiduciaries.

The attorneys at Jackson Lewis have deep experience establishing and working with fiduciary committees, including providing fiduciary training.  If you have questions or would like assistance in establishing or operating a fiduciary committee, please get in touch with an Employee Benefits Practice Group team member or the Jackson Lewis attorney with whom you regularly work.

A recent Alabama Supreme Court case, LaPage v. Center for Reproductive Medicine, has made headlines and raised questions about the legal implications of providing in vitro fertilization (IVF) benefits.  During IVF, eggs are fertilized outside the body to create an embryo, and in the case at hand, the parents sued after several embryos were accidentally destroyed.  The court ruled that frozen embryos are children and are protected from destruction under the state’s wrongful death law.  This ruling is significant at this time because, in the wake of the Dobbs decision, which overturned Roe v. Wade, there has been a recent trend by many employers to offer increased coverage of fertility benefits. 

What Are the Implications for Plan Sponsors?

The LaPage decision raises a number of potential benefits considerations for plan sponsors: 

Should the Plan Pay?

The first question for plan sponsors to consider is whether, in light of the fact that embryos can no longer legally be destroyed in Alabama, the plan can or should cover the cost of preserving embryos in perpetuity (or as long as modern science will allow). To be preserved, the embryos must be kept at extremely cold temperatures, which is very expensive.

To be treated as a tax-advantaged medical expense under a plan, the cost of embryo preservation would need to meet the definition of “medical care” under the Internal Revenue Code (the Code).  Medical care is defined in Section 213(d)(1)(A) as amounts paid “for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.”  Plan sponsors have historically justified the cost of preserving the embryos for some period of time on the basis that the covered participant is receiving medical care for assistance with the ability to conceive and/or carry a child via the IVF process.  However, plan sponsors should consider whether the frozen embryo would have to be considered a dependent, as defined under the plan and Code, for the long-term cost of preserving the embryo to be covered under the plan’s terms.  Query whether the frozen embryo could be deemed to have the same principal place of abode as the taxpayer (as required under Code Section 152(c)(1)(B).)  On the other hand, plan sponsors are left to wonder whether the cessation of payment for preservation would be punishable under Alabama’s wrongful death statute.

Should the Plan Provide Travel Benefits to Participants Seeking IVF?

While the initial response of fertility clinics in Alabama was to stop IVF treatment, the Alabama legislature has since taken steps to protect IVF doctors from criminal or civil liability and otherwise protect IVF services.  Nevertheless, given the emerging legal complexity of IVF in Alabama, plan sponsors should consider whether to add or extend travel benefits to cover travel expenses so participants can access IVF benefits in other states. 

As we noted in the wake of the Dobbs decisions in 2022, Code Section 213(d) covers certain amounts paid for travel for medical care, and as a result, a travel benefit to cover IVF could be provided by a group health plan.  In fact, the broad travel benefits added to many plans following the Dobbs decision might already cover this type of travel benefit. Plan sponsors should proceed with caution if a travel benefit is not included as part of a group health plan because travel benefits offered outside the terms of a group health plan could unintentionally create a group health plan that would raise compliance issues under the Affordable Care Act, ERISA, COBRA, and HIPAA. As a result, we generally do not recommend that employers offer travel benefits for medical care outside of their group health plans.

Can Employers Offer a Travel Benefit to Transport Embryos for Destruction?

Plan sponsors should also consider whether to cover travel expenses where the purpose of the travel is to transport the embryo outside the state of Alabama for destruction.  This analysis is complicated by moral questions and the unanswered issue of whether Alabama would allow for the transportation of frozen embryos across state lines.  Under a strict reading of the Code, payment of travel expenses by the group health plan must be for medical care, so the issue becomes whether the destruction of an embryo qualifies as medical care.  It would be difficult to argue that travel for destruction would be for the diagnosis, cure, mitigation, treatment, or prevention of disease of the embryo, so the travel would have to be considered part of the covered IVF process for the participant parent.


Because this is an emerging legal change that is quickly evolving at this time, plan sponsors should consider these issues carefully and avoid rushing to make any definitive decisions.  It is worthwhile to remind plan sponsors that even if they do not have work locations in Alabama, given the prevalence of remote work today, they might have remote employees or employees who have a covered dependent residing in Alabama to whom these new laws would apply. 

Plan sponsors might get questions from employees because this is a hot topic receiving a lot of media attention, so it would be wise to have a prepared response that has been approved by the executive team and legal counsel and can be provided consistently to all inquiries.

Employers who wish to address the changes in the Alabama law should proceed with caution and remain flexible as the new legal landscape takes shape. Please contact a Jackson Lewis Employee Benefits attorney or the Jackson Lewis attorney with whom you regularly work for assistance.

It’s 2024, which means a new batch of provisions from SECURE Act 2.0 have gone into effect. One of the more significant ones is an increase in the “cashout” limit that a qualified plan can impose to kick former employees with small balances out of their plans.

The cashout limit allows a qualified plan to force a distribution of the accrued benefit of a participant whose account balance is below a certain threshold stated in the Internal Revenue Code. You don’t need the participant to make an election or otherwise consent to the distribution; you just have to give them a reasonable period to make an election as to how they want to receive the benefit. If they don’t respond, the plan ships out the benefit. If the value of the forced distribution is over $1,000 and the participant doesn’t elect how to receive the benefit, the distribution must go into an IRA established for the participant – and it isn’t hard for a plan to find a service provider who will be happy to set up those IRAs.

For a while, this limit was $3,500 and was increased to $5,000 by the Taxpayer Relief Act of 1997. The final regulations for this increase became effective October 17, 2000. SECURE Act 2.0 bumps it up to $7,000 as of January 1, 2024. Plans aren’t required to have a force-out provision, but nearly all do, and for good reason.

It’s hard to imagine a scenario where it wouldn’t be smart for a plan to take advantage of the increased limit. Here are the main reasons why:

  • The IRS and DOL have made it known to plan sponsors that it’s important for them to do their best to keep track of terminated employees so those participants can ultimately get the benefits they’ve earned. The more participants you can drop, the fewer participants you have to worry about losing.
  • Plans with 100 or more participants (generally, it’s 100; the rules are a little more complex than that) with account balances at the start of the plan year must be audited by an independent CPA firm. While I’m one of the first people who will tell you that good auditors provide value and can catch a lot of operational errors before they snowball into bigger problems, they aren’t cheap. Sponsors on the borderline of needing an audit usually want to avoid the cost if they can, so removing more account balances might get the plan under the limit.
  • For bigger plans that are more likely to be the target of a class action lawsuit, removing participants can reduce the leverage that a participant class can have, even if the claims aren’t all that strong. Once a class action is filed, it’s largely a numbers game.
  • If the plan’s third-party administrator charges a fee based on the number of participants, reducing the plan’s headcount naturally reduces that fee.
  • Distributing the balance of a participant who isn’t 100% vested allows the non-vested amounts to be moved into the plan’s forfeiture account, and those amounts can pay plan expenses, offset contributions, or be reallocated to other employees.
  • For ESOPs (sorry, I had to get in something specific to ESOPs), forcing out a participant’s balance earlier can help control the plan’s repurchase liability, assuming that the value of the stock will increase. It’s generally less expensive to buy out the stock earlier. Plus, if shares are forfeited, they can be allocated to other employees, and having enough shares to allocate to current employees can become more of a struggle as an ESOP matures.

Recent guidance extended the required amendment adoption date to December 31, 2026, for many SECURE 2.0 provisions, including this increase to the cashout threshold. Plan sponsors wanting to use the higher threshold may do so while waiting to adopt an amendment. Those inclined to increase their cashout level should discuss the change process with their third-party administrators before taking any action themselves.

The Jackson Lewis Employee Benefits Practice Group members can assist plan sponsors in understanding and putting the requirements of SECURE 2.0 into practice. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.