Takeaways

  • On January 14, 2025, the DOL issued Field Assistance Bulletin (FAB) 2025-01, providing sponsors and administrators of ongoing defined contribution plans with a new option for missing participant balances of $1,000 or less: transfer to the state unclaimed property fund associated with the participant’s last known address.

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Article

BACKGROUND

Historically, when terminating defined contribution plans, the DOL specified IRAs as the preferred destination for missing participant account balances. However, the DOL also noted that, in seemingly narrow circumstances, transfer to a state unclaimed property fund may also be appropriate.  See FAB 2014-01.  Before making a distribution to a state unclaimed property fund, the plan fiduciary was required to prudently conclude that this distribution was appropriate despite the adverse tax consequences — income tax withholding and potential early distribution penalties — that would apply in lieu of tax-deferred rollover to an IRA.  In later guidance, the DOL expressed concerns over IRA fees that outpaced investment returns. It noted that there were a number of features of state unclaimed property funds that might increase the likelihood that missing participants would actually be reunited with their retirement savings — noting that state unclaimed property funds do not deduct fees from amounts returned to claimants.

TEMPORARY ENFORCEMENT POLICY

Citing the underlying purpose of state unclaimed property funds — reuniting individuals with their lost assets — and noting data supporting that state unclaimed property funds have collectively returned billions of dollars in unclaimed property to rightful owners — FAB 2025-01 announced DOL’s temporary enforcement policy, applicable until formal guidance is issued:  The DOL will not take action to enforce breach of fiduciary duty claims where an unclaimed account of $1,000 or less is transferred to a state unclaimed property fund.  Naturally, there are many requirements and conditions, including:

  • In calculating whether the benefit is $1,000 or less, the amount of outstanding plan loans are disregarded and rollover contributions are included;
  • The plan fiduciary must conclude that the state unclaimed property fund is a prudent destination;
  • The plan fiduciary must have implemented and exhausted a prudent program to find missing participants and
  • The summary plan description must explain that missing participants may have their account balances transferred to a state unclaimed property fund and identify a plan contact for further information.

In addition, the state unclaimed property fund must be an “eligible state fund,” meaning, among other things, that the fund:

  • Allows claims for transferred benefits to be made and paid in perpetuity;
  • Does not impose fees or other charges;
  • Has a free searchable website that includes the name of the plan in its search results and allows electronic claims;
  • Participates in an unclaimed property database that the National Association of Treasurers has approved;
  • Conducts annual searches for updated addresses of missing participants with accounts of $50 more and, if a new address is found, provides written notice that the money is being held and
  • In the event a missing participant reappears and is paid directly by the plan, reimburses the plan fiduciary.

The plan fiduciary may also rely on the state unclaimed property fund’s representation that it satisfies all requirements of an “eligible state fund.”

CONCLUSION

Plan fiduciaries will likely welcome this temporary enforcement policy, but it does come with limitations — applying only to account balances of $1,000 or less — and with conditions, including SPD amendment.  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.  Subscribe to the Benefits Law Advisor Blog here.

In a significant development for employers managing Paid Family and Medical Leave (PFML) programs, the IRS has issued new guidance clarifying the federal income and employment tax treatment of contributions and benefits under state-funded PFML programs. This guidance, detailed in Revenue Ruling 2025-4, addresses key tax implications for both employers and employees, ensuring compliance and proper reporting. Employers are encouraged to review this guidance to align their payroll and finance practices accordingly. For a comprehensive understanding, read the full article.

Takeaways

  • Plan sponsors of defined contribution plans may now self-correct the delinquent remittance of participant contributions and loan repayments when those amounts are deposited to the plan within 180 days of the pay date and the missed earnings amount is $1,000 or less.

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On January 14, 2025, the Employee Benefits Security Administration (EBSA) within the Department of Labor (DOL) updated its Voluntary Fiduciary Compliance Program (VFCP).  The VFCP allows plan officials to correct certain breaches of fiduciary duties under the Employee Retirement Income Security Act (ERISA).  Plan officials who correct certain fiduciary breaches consistent with the VFCP’s terms and conditions receive a “no action letter,” which declares that the EBSA will not pursue enforcement action or assess penalties against plan officials for the corrected breach.

While the update includes several changes to the VFCP, this blog focuses on the new self-correction component (SCC), which will be available beginning March 17, 2025. This component will correct the delinquent remittance of participant contributions and loan repayments, the most common breach corrected under the VFCP.

Under DOL regulations, participant contributions and loan repayments withheld from participant pay must be segregated from an employer’s general assets on the earliest date such amounts can be reasonably segregated.  Due to the widespread use of electronic funds transfers, many employers segregate these amounts within 1-2 business days of the applicable pay date.  A fiduciary breach occurs when these amounts are deposited after the applicable timeframe.

Plan sponsors may use the SCC to correct a delinquent remittance if:

  • the delinquent contributions and loan repayments (principal amounts) are deposited to the plan within 180 days of the applicable pay date, and
  • the lost earnings on the principal is $1,000 or less.

Self-correctors must use the VFCP Online Calculator to calculate lost earnings from the pay date through the date the earnings are deposited to the plan.

A SCC notice must be submitted using EBSA’s online tool.  The notice must include the plan sponsor’s name, email address, and EIN, the plan name and number, principal and earnings amounts, the date earnings were paid to the plan, the pay date, and the number of participants affected by the correction.  Rather than receiving a no-action letter, the self-corrector will receive an acknowledgment email from EBSA.

In addition, the plan sponsor must submit a completed SCC Retention Record Checklist (Checklist) and supporting documents to the plan administrator.  The Checklist must include:

  • a brief statement explaining why the principal amounts were not deposited timely
  • proof of payment of the principal and earnings amounts (for example, bank statements or executed wire transfers)
  • a copy of the “printable results” generated by the VFCP Online Calculator
  • a copy of the policies or procedures implemented, if any, to prevent future delinquent remittance
  • a copy of the acknowledgment email generated by the online tool
  • a signed penalty of perjury statement from the plan official or fiduciary seeking relief under the SCC and
  • A copy of the authorization if a service provider submits the SCC notice.     

So, how does correcting a delinquent remittance under the SCC differ from the formal application?  Plan sponsors will not receive the no-action letter many are accustomed to receiving when submitting a formal VFCP application to EBSA.  That’s about it.  Neither correction method requires a filing fee, so the cost to the plan sponsor is generally the same under the formal application and the SCC.  The SCC notice and Checklist require similar information as required under the formal application.  Depending on the principal amount, filing a formal application and receiving a no-action letter may be more beneficial.  It remains to be seen how many plan sponsors will take advantage of the new SCC process.

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.  Subscribe to the Benefits Law Advisor Blog here. 

As we bid farewell to 2024 and look ahead to the new year, we reflect on the many evolving compliance obligations that health and welfare plan sponsors tackle each year. Although this list is by no means exhaustive, it highlights four items and associated deadlines that have recently emerged on the health and welfare scene. Plan sponsors should review their routine compliance checklists and update as necessary to ensure a smooth transition into 2025.

  1. Gag Clause Attestations

The Consolidated Appropriations Act of 2021 generally prohibits the use of gag clauses in certain agreements and requires group health plans and health insurance issuers to annually submit a Gag Clause Prohibition Compliance Attestation. A fully insured group health plan’s responsibility is satisfied if the issuer submits an Attestation on behalf of the plan. Similarly, a self-insured plan may delegate the task of submitting the Attestation to a third-party administrator (TPA) via a written agreement if the TPA will accept this responsibility. The Attestation must be submitted to the Departments of Labor, Health & Human Services, and the Treasury by December 31st.  See this link for further details and instructions on submission.

  1. Mental Health Parity – Fiduciary Certification

In September, the Departments of Labor, HHS, and the Treasury issued new final rules amending regulations implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) and adding new regulations implementing the nonquantitative treatment limitation (NQTL) comparative analyses requirements. Consistent with the proposed rules, the final rules strengthen consumer protections by aiming to achieve parity between mental health/substance use disorder (MH/SUD) benefits and medical/surgical (M/S) benefits. The final rules generally apply to group health plans and group health insurance coverage for plan years beginning on or after January 1, 2025, although many provisions will not apply until 2026.

The final rules require that, in addition to the NQTL comparative analysis, each plan or issuer must prepare and make available to the Secretary, upon request, a written list of all NQTLs imposed under the plan or coverage. In addition, for ERISA-covered plans, this written list must be given to the named plan fiduciaries, who are required to include a certification as part of the comparative analysis. At least one of these named fiduciaries will certify they have engaged in a prudent process to select one or more qualified service providers to perform and document a comparative analysis in connection with the imposition of any NQTLs that apply to MH/SUD benefits under the plan in accordance with applicable law and regulations and have satisfied their duty to monitor those service providers as required by part 4 of ERISA. At a minimum, the certifying fiduciary should review the comparative analysis, ask questions, and discuss the findings and conclusions with the service provider responsible for performing and documenting the comparative analysis, and obtain assurance from the service provider that, to the best of its ability, the NQTL and associated comparative analysis complies with MHPAEA and its implementing regulations.

Plans subject to MHPAEA should update their existing comparative analyses to reflect the new certification requirement by the first day of the 2025 plan year.

  1. Reproductive Health Care ‒ Updates to HIPAA Policies, Procedures, and Notice of Privacy Practices

In response to the decision in Dobbs v. Jackson Women’s Health Organization that effectively overturned Roe v. Wade, the Biden-Harris Administration, through OCR, issued a final rule to modify the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy Rule to support privacy in reproductive health care. The rule places limitations on the use and disclosure of reproductive healthcare information by healthcare providers and group health plans. The rule also requires several updates to HIPAA policies and procedures concerning health plans and operations of health care providers. Although most of those changes went into effect on December 23, 2024, HIPAA-covered entities have until February 16, 2026, to update their Notices of Privacy Practices. For more information about this change, see our blog posts: New HIPAA Final Rule Imposes Added Protections for Reproductive Health Care Privacy and HIPAA Final Rule For Reproductive Health Care Privacy with December 23, 2024, Compliance Deadline.

  1. ACA Section 1557 Notices of Nondiscrimination and Availability

The U.S. Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR) enforces Section 1557 of the Affordable Care Act (Section 1557), which prohibits discrimination on the basis of race, color, national origin, age, disability, or sex (including pregnancy, sexual orientation, gender identity, and sex characteristics), in covered health programs or activities. Last spring, OCR issued a final rule under Section 1557 advancing protections against discrimination in health care. Under the final rule, covered entities (i.e., health programs and activities that receive HHS funding or are administered by HHS) must provide an annual notice of nondiscrimination to participants, beneficiaries, enrollees, applicants of their health programs and activities, and members of the public. This notice must be provided within 120 days of July 5, 2024, under the requirements of 45 CFR § 92.10. Similarly, covered entities must provide, within one year of July 5, 2024, a notice of the availability of language assistance services and auxiliary aids and services, stating at a minimum that these are free of charge when necessary for compliance with Section 1557. See 45 CFR § 92.11.

Although the rule was scheduled to go into effect on July 5, 2024, certain provisions have been stayed or enjoined pending multiple lawsuits. For example, under the final rule, a notice of nondiscrimination states in part that the covered entity does not discriminate on the basis of sex, which includes discrimination based on gender identity. However, in Tennessee v. Becerra, No. 1:24cv161-LG-BWR (S.D. Miss.), the court stayed nationwide several regulations to the extent they “extend discrimination on the basis of sex to include discrimination on the basis of gender identity”. The case is currently pending appeal.

Covered entities must continue to provide notices of nondiscrimination and availability unless specific provisions are stayed or enjoined. OCR’s sample notice of nondiscrimination currently characterizes as optional the inclusion of a statement of nondiscrimination based on gender identity. Still, covered entities should be prepared to adjust their notices if the stay is lifted. Sample notices are available on OCR’s website. For more information, see Section 1557 of the Patient Protection and Affordable Care Act | HHS.gov.

The new year often presents an opportunity to renegotiate or terminate existing service provider agreements, so now is a perfect time to reanalyze contracts before renewal. For an overview of health plan fiduciary compliance issues and strategies, see our five-part blog series, Health Plan Hygiene.

If you have questions, please contact a member of the Jackson Lewis Employee Benefits Practice Group or the Jackson Lewis attorney with whom you regularly work.

In a win for plan sponsors, the recently enacted Employer Reporting Improvement Act and the Paperwork Burden Reduction Act (the Acts), among other things, introduce several significant changes to the reporting and enforcement rules of the Affordable Care Act (ACA). 

The Current Rules

Forms 1095-B and 1095-C:  Under the ACA, plan sponsors, specifically Applicable Large Employers (ALEs), must report information about the health coverage they offer to their employees.  This ACA reporting is done through Forms 1095-B and 1095-C, which must be filed with the IRS and provided to all full-time employees and employees receiving employer-sponsored coverage. (This is the case, even though the ACA’s individual mandate is currently set to $0, and therefore functionally isn’t being enforced.)

Key aspects of ACA enforcement also include:

  • A Tight Turnaround to Respond to Proposed Assessments: The IRS may assess employer shared responsibility payments (ESRP) based on a plan sponsor’s reporting.  Before making this assessment, the IRS will send a letter with a proposed ESRP, to which sponsors can respond with corrected coding and other mitigating information.  Plan sponsors currently have only 30 days to respond to these letters.  This can be particularly challenging, as the letters are sent via US mail and often take time to get to the right person.  A late response can result in an ESRP assessment when one isn’t warranted, and additional penalties.
  • No Statute of Limitations: The period for assessing and collecting ESRPs has generally been open-ended, with no statute of limitations to potentially limit liability for aged amounts.

Changes Introduced by the Acts

The Acts introduce several changes which will improve the reporting and enforcement process for sponsors:

  • Forms 1095-B and 1095-C:  Plan sponsors (and health insurance providers for fully insured plans) are no longer required to send these Forms to all full-time employees and covered individuals. Instead, these Forms must only be sent in response to an employee/covered individual’s request.  If requested, the applicable Form must be provided by the later of January 31 or 30 days after the date of the request. One big caveat – in order to take advantage of this change, sponsors must provide notice to employees, telling them about their right to ask for a Form.  Further guidance on the form and requirements for this notice is likely forthcoming. Meanwhile, a good faith interpretation may suffice when drafting the notices.
  • Extended Response Time for Proposed ESRPs: Plan sponsors will now have at least 90 days to respond to a proposed ESRP before further action is taken. This extension provides plan sponsors more time to open their mail! (With more time to gather necessary information and respond appropriately, which may result in fewer ESRP assessments and other penalties.)
  • Statute of Limitations on Penalty Assessment: There will now be a six-year period for collecting ESRPs, counting from the due date for filing the applicable Forms 1095-B and 1095-C or the actual filing date, whichever is later. This extension provides clarity and predictability for plan sponsors, capping potential assessments and allowing sponsors to better manage their compliance efforts.

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

Among the provisions of SECURE 2.0 (effective December 29, 2022) welcomed by plan sponsors were the additions to the Internal Revenue Code that allow qualified plans to refrain from trying to recoup an “inadvertent benefit overpayment” (referred to here as an IBO), and from having to restore such payments to the plan.  In addition, the Code was amended to permit the treatment of such overpayments as eligible rollover distributions for certain purposes.

The IRS has now addressed, via interim guidance in Notice 2024-77 issued and generally effective October 15, 2024, some of the many questions that arise under the new Code IBO relief provisions. Before that date, a reasonable good faith compliance standard applies, and after that date following the guidance in the Notice will be considered compliance. Comments on the new guidance may be made to the Treasury Department by December 16, 2024.  The following is a general summary of the major points of guidance in the Notice:

IBO definition. An IBO is defined by the Notice as an “eligible inadvertent failure” consisting of a payment from a qualified plan that either (A) exceeds the amount that should have been payable under the terms of the plan or (B) exceeds a Code or regulatory limitation. The requirement that the overpayment be an eligible inadvertent failure means it must have occurred despite the existence of established practices and procedures as described in Revenue Procedure 2021-30, the current IRS EPCRS plan correction standards, and that it not be egregious, relate to diversion or misuse of plan assets nor be directly related to an abusive tax avoidance transaction.  An IBO also encompasses payments made before a proper distribution date under the plan and Code, excluding any overpayments made to “disqualified persons” as defined in the prohibited transaction provisions of the Code or to any owner-employee. The term also excludes any payment made as part of a correction for another failure under the EPCRS correction procedures.

Coordination with EPCRS. The EPCRS plan correction standards are amended to be consistent with the Notice. But note that if a plan opts to forego recoupment of an overpayment any related operational failures must still be corrected. These could include scenarios in which the overpayment resulted from incorrect account allocations, resulting in the underpayment of benefits to other participants, or where the overpayment causes an impermissible forfeiture under Code Section 411.

Recoupment compliance. If, despite the available recoupment relief, a plan still seeks recoupment of an IBO, it must do so under the EPCRS overpayment correction standards and the provisions of ERISA (as amended by SECURE 2.0) regarding the limitations on recoupment.

Eligible rollover treatment of IBOs. An IBO transferred to an eligible retirement plan will be treated as an eligible rollover distribution under the Code (with corresponding excise tax relief for early withdrawals and excess contributions) if the payor plan does not seek recoupment of the overpayment and if the payment otherwise qualifies as an eligible rollover distribution. In such cases, the overpayment cannot have resulted from a compensation limit failure under Section 401(a)(17) or an annual additions failure under Section 415. Eligible rollover distribution treatment also applies if the payor plan attempts to recoup the overpayment, and the overpayment is repaid to that plan. If the plan does seek recoupment, it must notify the payee that any amount not returned to the plan will not be eligible for tax-free rollover treatment.

Other portions of the Notice clarify plan corrections when an overpayment results from violations of Code Sections 436, 401(a)(17), or 415 and states that a plan may not correct an IBO by retroactively amending the plan to increase benefit payments already made if that amendment would result in a violation of Sections 401(a)(17) or 415 for a past year. Similar guidance applies to any retroactive amendments that increase past benefit payments in a way that violates Code Section 436 for the past year.

Please contact your Jackson Lewis Employee Benefits Attorney for more detailed advice on dealing with IBOs in light of this interim guidance. 

The Internal Revenue Service recently announced its cost-of-living adjustments applicable to dollar limitations on benefits and contributions for retirement plans generally effective for Tax Year 2025 (see IRS Notice 2024-80). Most notably, the limitation on annual salary deferrals into a 401(k) or 403(b) plan will increase to $23,500, and the dollar threshold for highly compensated employees will increase to $160,000. This year’s notice also includes the optional SECURE 2.0 Super Catch-up amounts for participants ages 61-63.  The more significant dollar limits for 2025 are as follows:

LIMIT20242025
401(k)/403(b) Elective Deferral Limit (IRC § 402(g)) The annual limit on an employee’s elective deferrals to a 401(k) or 403(b) plan made through salary reduction.$23,000$23,500
Government/Tax Exempt Deferral Limit (IRC § 457(e)(15)) The annual limit on an employee’s elective deferrals concerning Section 457 deferred compensation plans of state and local governments and tax-exempt organizations.$23,000$23,500
401(k)/403(b)/457 Catch-up Limit (IRC § 414(v)(2)(B)(i)) In addition to the regular limit on elective deferrals described
above, employees over the age of 50 generally can make an additional “catch-up” contribution not to exceed this limit. (See special rule below for those aged 60–63)		$7,500$7,500
SECURE 2.0 Super Catch-up Age 60-63 (IRC  § 414(v)(2)(E)(i)) Other than Plans described in 401(k)(11) or 408(p).Not applicable$11,250
Defined Contribution Plan Limit (IRC § 415(c)) The limitation for annual contributions to a defined contribution
plan (such as a 401(k) plan or profit sharing plan).		$69,000$70,000
Defined Benefit Plan Limit (IRC § 415(b)) The limitation on the annual benefits from a defined benefit plan.$275,000$280,000
Annual Compensation Limit (IRC § 401(a)(17)) The maximum amount of compensation that may be taken into account for benefit calculations and nondiscrimination testing.$345,000 ($505,000 for certain gov’t plans)$350,000 ($520,000 for certain gov’t plans)
Highly Compensated Employee Threshold (IRC § 414(q)) The definition of an HCE includes a compensation threshold for the prior year. A retirement plan’s discrimination testing is based on coverage and benefits for HCEs.$155,000 (for 2024 HCE determination)$160,000 (for 2025 HCE determination)
Highly Compensated Employee (“HCEs”)  (SECURE 2.0 Sec. 603 – IRC § 414(v)(7))    Catch up contributions for HCEs earning above this limit in FICA wages for the preceding year MUST be ROTH contributions.   Not Required for Plan Years beginning in 2025$145,000$145,000
Key Employee Compensation Threshold (IRC § 416) The definition of a key employee includes a compensation threshold. Key employees must be determined for purposes of applying the top-heavy rules. Generally, a plan is top-heavy if the plan benefits of key employees exceed 60% of the aggregate plan benefits of all employees.$220,000$230,000
SEP Minimum Compensation Limit (IRC § 408(k)(2)(C)) The mandatory participation requirements for a simplified employee pension (SEP) includes this minimum compensation threshold.$750$750
SIMPLE Employee Contribution (IRC § 408(p)(2)(E)) The limitation on deferrals to a SIMPLE retirement account.$16,000$16,500
SIMPLE Catch-up Limit (IRC § 414(v)(2)(B)(ii))) The maximum amount of catch-up contributions that individuals age 50 or over may make to a SIMPLE retirement account or SIMPLE 401(k) plan. (See special rule below for those aged 60-63)$3,500$3,500
SECURE 2.0 Super Catch-up Age 60-63 (IRC  § 414(v)(2)(E)(ii)) The maximum amount of catch-up contributions that individuals aged 60–63 may make to a SIMPLE retirement account or SIMPLE 401(k) plan.Not Applicable$5,250
Social Security Taxable Wage Base See the Social Security Contribution and Benefit Base site. This threshold is the maximum amount of earned income on which Social Security taxes may be imposed (6.20% paid by the employee and 6.20% paid by the employer).$168,600$176,100

Please contact a team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.

As we conclude our “Health Plan Hygiene” blog series, we reflect on the important insights shared about fiduciary responsibilities under the Employee Retirement Income Security Act of 1974 (ERISA) and highlight the risk posed by recent group health plan fiduciary litigation and offered strategies for mitigating these risks by meeting ERISA obligations. We have explored best practices for evaluating, selecting, and contracting with third-party administrators, emphasizing the importance of cybersecurity protocols for health plan data, and discussed the proactive review of third-party vendor fee arrangements, including pharmacy benefit managers and broker compensation structures.

As health and welfare plan fiduciaries prepare for the year ahead, how can they remain vigilant in identifying and executing their responsibilities in a climate of increasing compliance demands and associated risk?  

  1. Set up a fiduciary committee. Where a health and welfare plan document permits delegation, a named fiduciary, such as the plan administrator, may wish to delegate some of its fiduciary duties to a health and welfare plan fiduciary committee. Fiduciary committees are designed to act solely in the best interests of plan participants and beneficiaries by ensuring prudent policies and procedures are in place. A fiduciary committee typically includes designated decision-makers and at least one person with intimate knowledge of the plan’s written terms, day-to-day operations, and the plan sponsor’s participant population, such as an HR professional with a benefits background. While the delegator shares responsibility for ensuring that the committee executes its duties properly, the committee can help the delegator stay abreast of evolving compliance requirements and best practices. The committee may want to adopt a charter that addresses, at a minimum, the committee’s purpose, scope of authority and responsibilities, meeting frequency, and committee membership, including appointment and removal procedures.
    1. Document decision-making. Establish and consistently use internal recordkeeping procedures for all fiduciary decisions and actions taken regarding the plan. For example, the fiduciary committee should take minutes during all meetings to reflect on the topics discussed and the reasoning behind its decisions. Clear documentation of the decision-making process promotes transparency and becomes critical if a plan is audited or sued.
    1. Mindfully negotiate and monitor service provider contracts. Health and welfare plan fiduciaries may want to establish and use prudent processes when selecting service providers. For example, the fiduciary might request proposals from multiple service providers to assess whether the terms are appropriate for the current market. Once a service provider is selected, the fiduciary is wise to stay updated on all contracts and operations regarding the plan to ensure the terms are written and performed in the best interest of plan participants and beneficiaries. Fiduciaries may also reassess and re-negotiate fees when appropriate.
    1. Ensure plan expenses are reasonable. The fiduciary has a duty to ensure plan expenses are reasonable, including any compensation paid to experts and third-party service providers.
    1. Conduct an internal audit. ERISA requires certain employee benefit plans to submit to an annual independent audit, a report of which is filed with the Department of Labor. However, some welfare plans, such as those that covered fewer than 100 participants at the beginning of the plan year if the plan is fully insured, unfunded, or a combination of fully insured and unfunded, are excluded from this requirement. Regardless of whether an audit is required, voluntarily conducting an independent audit facilitates proper plan governance and often helps identify opportunities to improve compliance.

    For questions, please contact a Jackson Lewis Employee Benefits Practice Group member or the Jackson Lewis attorney with whom you regularly work.

    With just a couple of weeks before election day, the Biden Administration announced on October 21, 2024, that it was issuing proposed rules designed, in part, to require health plans to cover over-the-counter contraception without cost sharing, including birth control, the morning-after pill, and the male condom.  The proposed rules are the latest in a series of pronouncements that post-date the Dobbs decision overturning Roe v. Wade, which are aimed at providing access to reproductive health.  However, the tri-agencies’ earlier reproductive health guidance has been subject to a legal challenge, with a pending request for review by the Supreme Court.  Time will tell how these efforts to mandate contraception coverage without cost-sharing will be resolved.

    At the heart of the guidance is the Affordable Care Act’s preventive care mandate, which in part requires non-grandfathered group health plans and issuers offering group health insurance coverage to cover, without cost-sharing, both preventive items or services, including those rated “A” or “B” by the United States Preventive Services Task Force (PSTF), and preventive care and screenings for women not recommended by PSTF, but that are included in guidelines issued by the Health Resources and Services Administration (HRSA).

    To further this preventive services mandate and with reference to the HRSA’s most recent Women’s Preventive Services Guidelines that “recommends that adolescent and adult women have access to the full range of contraceptives and contraceptive care to prevent unintended pregnancies and improve birth outcomes” and now omits any reference to prescribed contraception, the proposed rule in part:

    • Requires non-grandfathered health plans and health insurance issuers to cover, without cost-sharing and without a prescription, the cost of all types of contraception, including the first-ever Food and Drug Administration (FDA) approved over-the-counter birth control pill.  This is a significant step from prior guidance that required a prescription;
    • Mandates disclosures to covered persons so they are aware and can take full advantage of the newly available coverage; and
    • Enhances the “exceptions process” for medical management techniques whereby coverage can be sought for preventive health items or services that generally are not covered by the plan if the individual’s provider determines it is medically necessary for an individual.

    If finalized, the proposed rule would impose new administrative processes on employer-sponsored plans, mandate employee disclosures, and require plan amendments.  The government recognizes that the proposed rule has the potential to drive up the cost of contraception and is likely to impact the gross premiums and out-of-pocket costs of all covered persons, even those who do not obtain over-the-counter contraception.  Therefore, in lieu of also implementing other over-the-counter coverage mandates it is evaluating, such as coverage for tobacco cessation products, the proposed rule takes an incremental approach to guidance, starting only with the contraception mandate. 

    The proposed rule is the latest in a series of guidance issued by the Biden Administration following the Dobbs decision that may get folded into impending legal challenges.  Those challenges focus on the authority of the PSTF that is issuing these preventive service mandates. 

    Specifically, prior preventive care guidance, which includes mandatory coverage for prescribed contraception, HPV vaccines, and drugs preventing the transmission of HIV, has been challenged under the Administrative Procedures Act.  The assertion is that those serving on the PSTF and issuing these preventive care mandates are “principal officers” of the United States who have not been validly appointed under the Appointments Clause of Article II of the Constitution.  As a result, the challengers assert that the preventive care mandates the PSTF has issued are unlawful.  These arguments have gained traction in the courts.  A writ of certiorari filed by the Biden Administration on September 19, 2024, is still pending before the Supreme Court.  It is unclear whether the Supreme Court will agree to hear the case. 

    Employer-sponsored health plans, therefore, are in a holding pattern to see how these reproductive health mandates will resolve.  In this particularly partisan environment, employers should be on the lookout for forthcoming guidance. 

    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.