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.

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Under the Affordable Care Act (ACA), applicable large employers (ALEs) — i.e., those with, on average, fifty (50) or more full-time or full-time-equivalent employees in the preceding year — must offer in the following year affordable, minimum value group health plan coverage to their full-time employees and those employees’ dependents or risk imposition of ACA penalties. Affordability is determined by using the employee’s premium for the lowest-cost employee-only coverage under the employer’s plan. The coverage is affordable if the employee premium for this coverage is 9.5% (as adjusted) or less of the employee’s household income.

Recognizing that employers might have a very difficult — if not impossible — time determining full-time employee household income, the ACA employer mandate final regulations set forth three (3) safe harbor proxies for employee household income that employers can select from to make affordability determinations:  the federal poverty line, W-2 wages, or rate of pay.

In the recently issued Rev. Proc. 2023-29, the Internal Revenue Service announced the affordability percentage that will apply for plan years beginning in 2024:  8.39%. This percentage is a notable reduction from the previously applicable 9.12% for 2023 and is the lowest applicable percentage since the employer mandate’s inception.

With open enrollment for calendar year plans just around the corner, ALEs should take immediate steps to make sure their offers of coverage for 2024 will satisfy the new affordability percentage.

If you have questions concerning the affordability percentage or any other aspect of the ACA, the Jackson Lewis Employee Benefits Practice Group members are available to assist. 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.

Most employers know that if a group health plan provides mental health or substance use disorder (MH/SUD) benefits in any of six specified classifications, the plan must provide MH/SUD benefits in all specified classifications in which the plan provides medical or surgical (M/S) benefits. Additionally, the 2008 Mental Health Parity and Addition Equity Act (MHPAEA) requires plans to ensure that the financial requirements and treatment limitations (quantitative or nonquantitative) imposed on MH/SUD benefits are no more restrictive than those imposed on M/S benefits. While the United States Department of Labor’s Employee Benefits Security Administration (EBSA, which enforces employer-sponsored plans’ compliance with the MHPAEA) has proclaimed that it already has issued multiple compliance navigation guides for plans, the truth is that the guidance issued to date has lacked sufficient detail and failed to account for the actual circumstances necessary to be helpful to employers. Meanwhile, EBSA is investigating employer plans for compliance, publicly naming those that it deems fall short, and encouraging plan participants to demand written disclosures of details that are largely unavailable.

The Road and Navigation Systems Still Are Under Construction

EBSA has issued multiple requests for comments and guidance over the past couple of decades in connection with the MHPAEA. EBSA’s guidance includes 2013 final regulations, a self-compliance tool, 2019 FAQs (in which it listed examples of nonquantitative treatment limitations or NQTLs), and 2021 FAQs (in which it announced that it would begin investigating plans for compliance with the NQTL comparative analysis documentation requirements that became effective that year). One thing all of the prior guidance has in common is a failure to acknowledge that the employer, who’s usually ultimately accountable for compliance, has virtually no way to assess whether its group health plan complies with the mental health parity requirements. Except in rare circumstances, employers don’t select network providers, don’t negotiate reimbursement rates, don’t determine what preauthorization requirements will apply for what covered services, don’t know what’s medically necessary, and don’t know what claims have been approved or denied or why. So, for employers, the road to compliance is like driving through a construction zone without navigation and with multiple speed traps and caution signs posted in a foreign language. Employers need a roadmap and a way to navigate the many obstacles and construction zones on the route to compliance.

The recently-issued proposed regulations we blogged about last month are somewhat helpful because they provide more specific information about what data plans must collect and consider in order to design and apply NQTLs. This includes evaluating historical data comparing in- and out-of-network utilization rates and provider reimbursement rates – information the employer has to extract from the plan’s third-party administrator. While EBSA acknowledged the challenges employers face in collecting and evaluating the data needed to determine compliance, it still expects plans to show the analysis undertaken and the steps taken to mitigate material differences in access to MH/SUD benefits compared to M/S benefits. The EBSA (and other federal agencies) annual reports to Congress, which describe the agencies’ findings in enforcement investigations and highlight the agencies’ primary concerns regarding mental health parity, are also potentially helpful. For example, chief among the concerns highlighted is network adequacy. The agencies cite what’s been reported as a “growing disparity” in in-network reimbursement rates between MH/SUD providers and M/S providers, which drives down MH/SUD providers’ network participation and, therefore, increases the cost of MH/SUD services for patients.

How Employers Can Navigate A Road That’s Still Under Construction

It’s obvious that federal agencies are still gathering the information they think is relevant and necessary to provide meaningful guidance and enforcement. So, for now, employers should develop and document a compliance program using what is available to show a good faith effort to comply with the MHPAEA, including the NQTL comparative analysis requirement.

Any such compliance program should include these steps:

  • Determine which vendors to contact to gather the necessary documentation and information. In addition to the insurer or third-party administrator (TPA) for the group health plan, this may also include, for example, a behavioral health administrator and/or pharmacy benefit manager.
  • Develop a list of specific questions for the insurer/TPA and other vendors that will enable the employer to gather the information needed to determine whether the plan complies with the MHPAEA, including the NQTL requirements. It is helpful to reference the DOL self-compliance tool to develop an effective list of questions and to use its framework to document the compliance review effort. One should also incorporate the data elements in the recently issued proposed regulations. If the plan service provider has conducted and documented a compliance review itself, particularly the required NQTL comparative analysis, this will save the employer an enormous amount of time and other resources.
  • Document all communications with the insurer/TPA and other vendors, particularly those from whom one requests assistance gathering the data necessary to ensure MHPAEA compliance.
  • Analyze the data provided by the insurer/TPA and other vendors, both on a granular level and in the aggregate, using available EBSA guidance to help spot disparities. If needed, develop follow-up questions to the insurer/TPA and other vendors regarding any coverage disparities between MH/SUD and M/H benefits, the application of utilization review to MH/SUD benefits, and/or the reasoning behind MH/SUD claims denials.
  • If needed, identify areas of concern and pursue corrective action.  Retain all communication with the insurer/TPA or other vendor involved. 
  • If needed, update administrative services agreements to ensure ongoing cooperation from TPAs and other plan service providers in evaluating compliance, correcting compliance issues, and making required disclosures.

Bear in mind that MHPAEA compliance is an ongoing trip and should be revisited annually and whenever EBSA issues meaningful additional guidance. Employers can attend a free webinar on the proposed regulations that the federal agencies sponsor on September 7, 2023. Also, employers or employer groups interested in helping shape the final regulations have until October 2, 2023, to submit written comments on the proposed regulations. 

The attorneys in the Employee Benefits Practice Group are available to assist clients with developing and documenting their MHPAEA compliance programs and preparing comments on the proposed regulations. 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.

With another National Employee Benefits Day upon us, it is a good reminder for all involved in the world of Employee Benefits to pause (take three deep breaths) and use it as an opportunity to look back at where we’ve been over the last year and where we are going. While the challenges are many, the work is more valuable than ever.

One constant over the last few tumultuous years is change. From the compliance perspective, employers like certainty (plan advisors do, too), and recently there has been anything but. This is true now more than ever across all areas of benefits and is likely to be the case for years to come.

It is no surprise (pun intended) that health and welfare plan administration continues to occupy more time and attention than ever before. Plans continue to grapple with compliance with Mental Health Parity, Transparency in Coverage, the No Surprises Act, and other recent changes that define how group health plans need to operate (both at the federal and state level). Traditionally, an area in which plans operated more autonomously, health plan administration and compliance have become increasingly complex and will continue to grow more complicated, particularly for multi-state plans. Add to that already full plate the need to navigate the issues following the U.S. Supreme Court’s decision in Dobbs, many of which will continue to evolve for years to come, and recent state and federal attention on pharmacy benefits.

As we approach the end of the Public Health Emergency and National Emergency, benefit plans should also pay close attention to unwinding the temporary relief provided at the outset of the pandemic. This includes close attention to COBRA, special enrollment and claims deadlines, and decisions on coverage of COVID-19 diagnostic testing, treatment, vaccines, and telehealth under group health plans. And for good measure, plans now need to consider a recent court decision invalidating the ACA’s preventative care mandate.

Retirement plan design and administration are not immune from the wave of change. Eagerly awaited retirement plan legislation in the form of SECURE 2.0 finally arrived at the end of last year, bringing with it a panoply of mandatory and optional changes for the consideration of plan sponsors. With an eye toward increasing retirement savings and expanding coverage within the private plan system, SECURE 2.0 will spawn more guidance and implementation efforts for years to come. Plan fiduciaries are also confronting the push and pull of the role of ESG investments in retirement plan fund lineups – including trying to keep straight the regulatory, legislative, and judicial attempts to weigh in on the proper role of ESG investments, and for that matter, what even is an ESG investment. All of this change comes against the broader backdrop of market volatility and continued concerns of a recession/inflation, increasing the spotlight on financial wellness initiatives.

Finally, and perhaps most important, well-being, balance, and mental health remain at the forefront. Clearly not confined to the pandemic, attention to the needs of all employees’ pursuit of the elusive “work-life balance” is more important now than ever, especially as the lines between work and home promise to be blurred for the foreseeable future given the persistence of remote/hybrid work. While many of these change-inducing events are far beyond our control, as benefits professionals, we have ridden this wave before and will continue to do so. We are reminded that change creates new opportunities to design important, sustaining benefits that serve the lives of employees and their families. Keep up the fight, and Happy Employee Benefits Day!

President Biden announced that the COVID-19 Public Health Emergency (PHE) and the National Emergency declared by President Trump in 2020 will end on May 11, 2023.  The PHE relief issued in response to the pandemic affected group health plan coverage requirements related to COVID-19 prevention and treatment.  The National Emergency relief suspended deadlines that normally apply to certain employee benefit plans.  While seemingly simple in concept, the end of the PHE and National Emergency means employers soon will enter a murky transition period requiring special administrative attention. 

Calculating Deadlines After the National Emergency

The U.S. Department of Labor and the Department of the Treasury jointly issued deadline extension relief applicable to ERISA deadlines that normally apply to HIPAA special enrollment events, claims, appeals, COBRA elections, and COBRA premium payments, among others (the “Relief Events”).  The guidance included a transition rule such that once the National Emergency ends, the relief draws to a close. 

Specifically, under the relief, the normal deadlines for the Relief Events are suspended until the earlier of:  (1) one year from the date the individual first qualifies for the relief; or (2) 60 days after the end of the National Emergency – which would be July 10, 2023, if the National Emergency ends on May 11, 2023.  Special rules apply for COBRA elections and premium payments, so employees do not benefit from stacked deadline relief. 

Practically, this means the calculation of normal deadlines will resume on July 10, 2023, for individuals whose Relief Event date was after July 10, 2022.  We estimate this date was selected to follow the week when many take vacations to celebrate the 4th of July. 

Preparing for the End of the PHE and the National Emergency

Employers rely on third-party vendors to administer many of the Relief Events.  Rarely are employers directly involved in administering claims, appeals, or requests for external reviews.  Further, many employers outsource COBRA administration.  In these cases, employers should contact their third-party administrators, insurers, or vendors to confirm they are prepared for the end of the deadline relief and understand what administration during this transition period will entail. 

For employers who administer some or all of the COBRA functions in-house, now is the time to update notices to specify election periods and COBRA premium payment deadlines.  Clearly communicating the applicable election and premium payment deadlines will be key in mitigating COBRA litigation risk and compliance issues. 

Employers would also be well served to review COBRA notices previously issued to determine if an updated notice or communication is merited in light of the impending end of the relief.  With COBRA notice litigation still swirling, time spent to clearly and accurately communicate applicable deadlines for elections and premium payment obligations will mitigate the risk of claims from disgruntled participants (or their lawyers) insisting that coverage should remain in effect.  Depending upon the circumstances, providing an updated notice to individuals informing them of the exact deadline that applies to them may be a worthwhile time and expense-saving measure. 

Employers are also often involved with mid-year election change requests.  The deadline relief does not apply to all qualified status change events specified in Code Section 125 guidance – it only applies to special enrollment events under HIPAA. 

As the relief period draws to a close, employers need to be mindful of the transition period when calculating enrollment deadlines.  It may be helpful to broadly and proactively communicate the end of the deadline relief on benefit websites and portals.  

Communicating Coverage Changes

When the PHE ends on May 11, 2023, the requirement that group health plans provide COVID-19 testing, testing-related services, and vaccinations without cost sharing, among other coverage requirements, will also end.  Employers should contact their insurers and third-party administrators regarding any needed amendments to their group health plans and the plan to communicate these changes to plan participants. 

There are a number of moving targets that require close attention to individual deadlines on a participant-by-participant basis.  Employers should take steps now to discuss compliance strategies, including clear communications and implementing processes, with their vendors.  If you have any questions related to the ending of this relief or any other benefits-related questions, please contact the Jackson Lewis attorney with whom you regularly work.

As we enter the fourth quarter of 2022, sponsors and administrators of employee benefit plans have a lot to juggle.  From open enrollment and required notices to plan document deadlines, it is a busy time of year.  Yet, there always seems to be something new to add to the mix.   This year is no different.  Following are some 4th quarter topics for consideration: 

RxDC Reporting Is Due December 27, 2022.   The Prescription Drug Data Collection (RxDC) reporting requirement was added as part of the Consolidated Appropriations Act, 2021.  It requires plans to annually submit to the Department of Health and Human Services, Department of Labor, and Department of Treasury a report detailing the plan’s prescription drug usage, including the most frequently dispensed, the most expensive, and those with the greatest increase in cost, among others.  The Centers for Medicare & Medicaid Services (CMS) is collecting this information on behalf of the Departments and has issued detailed reporting instructions.

Although plans can contract with their third-party administrators, pharmacy benefit managers or other plan providers to meet these requirements, not all providers are willing to report all of the data elements.  This means that employers may need to register for a Health Insurance Oversight System (HIOS) account to submit some of the required information. 

With the first RxDC reporting deadline of December 27, 2022, fast approaching, plan administrators should discuss RxDC reporting with their providers now to develop a compliance plan.  As the CMS warns, HIOS accounts can take up to two weeks to create.  So, waiting until December to start working on this is not recommended.  

HDHP Amendments to Cover Insulin.  Making a splash across the headlines was the Inflation Reduction Act of 2022 (IRA), which President Biden signed on August 16, 2022.  The 273 pages of text make sweeping changes.  However, few will affect employer-sponsored benefit plans, and most of those will have only indirect effects. 

One change that does directly affect a High Deductible Health Plan (HDHP) is the exception added to Section 223 of the Internal Revenue Code effective for plan years beginning after December 31, 2022, to enable HDHPs to cover the cost of insulin without first meeting the deductible.  This first dollar coverage for insulin will protect Health Savings Account (HSA) eligibility for those who require an insulin regimen.  Employers should determine if their plan requires an amendment to implement this change. 

Contraceptive Coverage Requirements, Reimbursements.  On July 28, 2022, the Departments of Labor, Treasury, and Health and Human Services (collectively, the Departments), jointly issued Frequently Asked Questions About Affordable Care Act Implementation Part 54 (the FAQs).  The FAQs address required coverage of contraceptives by non-grandfathered group health plans and insurers, including guidance designed to:

  • Confirm the contraceptive coverage mandate;
  • Clarify the rules regarding medical management techniques for contraceptive coverage;
  • Address federal preemption of state law; and
  • Discuss enforcement actions for noncompliance. 

The FAQs also confirm that health reimbursement arrangements, health savings accounts, and health flexible spending accounts can reimburse the costs of over-the-counter contraception that is not otherwise paid or reimbursed by a health plan or issuer.  Employers should review their plans to determine if any amendments are needed to conform to the FAQs. 

Sponsors of retirement plans will get some welcome relief, however:

The CARES Act and Relief Act Amendment Deadline for Retirement Plans generally is delayed until December 31, 2025.  In August, the IRS issued IRS Notice 2022-33 extending the deadline for sponsors to amend their retirement plans to reflect certain changes under the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), Section 104 of the Bipartisan American Miners Act (Miners Act), and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). That guidance failed to delay the deadline to adopt other amendments due by the end of 2022, including amendments to implement certain optional pandemic-related distribution and loan provisions permitted under the CARES Act and the provisions of Section 302 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act) affording favorable tax treatment to qualified individuals with respect to qualified disaster distributions.

To align the amendment deadlines for the referenced Acts, the IRS issued Notice 2022-45 on September 26, 2022.  Notices 2022-33 and 2022-45, together, postpone the deadline for sponsors of nongovernmental plans to adopt amendments to conform their retirement plans to the Acts until December 31, 2025. The deadline for governmental plans likewise is extended generally until 90 days after the close of the third regular session of the applicable legislative body that begins after December 31, 2023. 

By that time, sponsors may have additional amendments to make, owing to a number of legislative proposals (referred to colloquially as SECURE 2.0) that have been under consideration since the passage of the SECURE Act of 2019.  These proposals include the Securing a Strong Retirement Act, the RISE & SHINE Act, and now the Senate’s Enhancing American Retirement Now (EARN) Act, which was approved by the Finance Committee in June, but not formally introduced until the Act language was released in September.  Monitor our blog for more on these developing laws and 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.

The No Surprises Act (Act), which establishes protections for health plan participants from surprise medical billing, was passed in late 2020 as part of the 2021 Consolidated Appropriations Act. On October 7, 2021, the Departments of Labor, the Treasury, and Health and Human Services (collectively, Departments) issued Interim Final Rules implementing certain provisions of the Act. On February 23, 2022, and then again on July 26, 2022, the District Court for the Eastern District of Texas vacated several key provisions of the Interim Final Rules. Following the February 23 ruling, the Departments issued a Memorandum Regarding Continuing Surprise Billing Protections for Consumers, stating the Departments’ intent to act “promptly” to release revised guidance under the Act.

Making good on that intent, on August 19, the Departments released the Requirements Related to Surprise Billing: Final Rules (Final Rules) and simultaneously issued guidance in the form of Frequently Asked Questions (FAQs) to clarify the Final Rules.

The FAQs cover a range of topics, some of which are summarized below:

Applicability to No-Network Plans

The Act’s protections against surprise billing generally apply when a participant receives emergency or air ambulance services from an out-of-network provider or certain non-emergency services from an out-of-network provider at an in-network facility. The FAQs clarify that because all emergency and air ambulance services provided under a no-network plan are necessarily out-of-network services, the Act applies to all emergency and air ambulance services provided under a no-network plan.

The protections applicable to non-emergency services from an out-of-network provider at an in-network facility will never be triggered because a no-network plan does not have in-network facilities.

Applicability to Closed-Network Plans

The Departments clarify that the Act’s requirements apply to plans that do not cover out-of-network services. Therefore, a closed-network plan may be required to pay for out-of-network emergency or air ambulance services.

Emergency Services Furnished in a Behavioral Health Crisis Facility

The Departments recognize that individuals receiving care for a behavioral health crisis may not be best served in a traditional hospital setting. Thus, the FAQs provide that the Act’s requirements apply to coverage for emergency services provided in response to a behavioral health crisis in an out-of-network facility that is licensed by the state to provide services in response to a behavioral health crisis, whether or not the facility is licensed as an emergency department or facility or whether the facility’s license includes the term “emergency services.”

Methodology for Determination of QPA

Generally, the qualifying payment amount (QPA) is the median contracted rate for a service or item.  The QPA may determine the applicable rate for cost-sharing. In addition, the QPA will help determine the appropriate provider payment rate during the Federal IDR Process.  The FAQs clarify that plans that vary their contracted rates based on specialty must calculate the QPA separately for each specialty if there is a “material difference” between the median contracted rates for a service code between providers of different specialties. Whether there is a “material difference” is a facts and circumstances determination.

This determination methodology prevents plans from calculating contracted rates in a way that artificially lowers the values. For example, suppose a plan pays a higher contracted rate for an anesthesiologist to provide anesthesia and a lower contracted rate for all other providers to provide anesthesia (because other providers rarely provide anesthesia). In that case, the plan must only use the anesthesiologist contracted rate to determine the QPA for an out-of-network anesthesiologist providing anesthesia.

Plans have 90 days to come into compliance with this requirement.

Federal IDR Process

The Federal IDR Process establishes an arbitration process for plans and providers that cannot agree on pricing for out-of-network emergency and air ambulance services and for certain out-of-network non-emergency services rendered at in-network facilities. The Interim Final Rules used the QPA as the primary factor in the arbitrator’s decision under the Federal IDR Process. The District Court for the Eastern District of Texas struck down the presumption in favor of the QPA in the Interim Final Rules. Upon revision, the Final Rules specify that arbitrators should “select the offer that best represents the value of the item or service under dispute after considering the QPA and all permissible information submitted by the parties.”

The FAQs further expand on the Federal IDR Process, including requirements for initial payment amounts, deadlines for initial payments or denial notices, and other notification requirements.

Transparency in Coverage Machine-Readable Files

The Transparency in Coverage Rules (TiC Rules), issued before the Act, require plans to publicly post machine-readable files, including negotiated and historical out-of-network rates for specific services and procedures effective as of July 1, 2022. The Departments included TiC guidance in the FAQs.

The FAQs clarify that the TiC Rules do not require a plan without a public website to create a website to post the information required by the TiC Rules.

In addition, the TiC Rules do not require an employer to post a link to the machine-readable files on its client-facing public website. Instead, a plan may satisfy the TiC posting requirement by entering into a written agreement under which a service provider posts the machine-readable files on its public website on behalf of the plan. The plan will remain liable if the service provider does not fulfill the posting requirement.

We are available to help plan administrators understand and implement the New Rule’s requirements. 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.

Earlier this week, Senators Manchin and Schumer reached an agreement securing the former’s support for a tax bill proposed by Senate Democrats entitled the “Inflation Reduction Act of 2022” (the “Act”).  Included in the Act are several provisions intended to increase tax revenue, among them a provision designed to raise $14 billion in tax revenue over 10 years by closing the so-called “carried interest loophole.”

The term “carried interest” generally refers to a profits interest in an investment-focused partnership or limited liability company taxed as a partnership for federal income tax purposes (each, an “Investment Pass-Through Entity”) that is held by a manager providing investment management services to such entity for a fee (the “Fund Manager”) (e.g., the general partner of the partnership or the managing member of the limited liability company).  Under current federal income tax law, the Fund Manager generally can qualify for long-term capital gains treatment on distributions to it by the Investment Pass-Through Entity if the assets giving rise to such distributions have been held for over three years before being sold.  That means taxation at a maximum rate of 23.8%, as opposed to the 37% maximum rate that ordinarily applies to compensation paid for the performance of services.  It is this differential treatment in tax rates that proponents of the Act argue creates a “loophole.”

Putting aside whether a “loophole” genuinely exists (the private equity industry certainly would disagree with such assessment and perhaps argue that other policy concerns, e.g., the cost of investment in business, have not been adequately considered by Congress), the Act seeks to expand the holding period to qualify for long-term capital gains treatment to over five years.  In addition, the holding period would be calculated in a manner potentially making it more difficult for a Fund Manager to qualify for long-term capital gains treatment.

The Act, if enacted into law, would not end carried interest, but it would make the tax benefits of carried interest more difficult for the Fund Manager to achieve.  It is unclear whether the Act will pass, as Senate Republicans appear united in their opposition to it.  Senator Kyrsten Sinema has not indicated whether she will vote for it.  Senator Sinema previously has noted her opposition to tax increases, including those related to carried interest.

Stay tuned!

Investment, private equity, and real estate fund managers should consider becoming familiar with the complex final regulations on the preferential tax treatment of “carried interest” under Section 1061 of the Internal Revenue Code (Code) that are generally effective for taxable years beginning on or after Jan. 1, 2022.  More…

On April 19, 2022, the Departments of Labor, Health and Human Services, and the Treasury issued additional guidance under the Transparency in Coverage Final Rules issued in 2020.  The guidance, FAQs About Affordable Care Act Implementation Part 53, provides a safe harbor for disclosing in-network healthcare costs that cannot be expressed as a dollar amount.  They also serve as a timely reminder of the pending July 1, 2022, deadline to begin enforcing the Final Rules.


The Final Rules require non-grandfathered health plans and health insurance issuers to post information about the cost to participants, beneficiaries, and enrollees for in-network and out-of-network healthcare services through machine-readable files posted on a public website.  The Final Rules for this requirement are effective for plan years beginning on or after January 1, 2022 (an additional requirement for disclosing information about pharmacy benefits and drug costs is delayed pending further guidance).   The Final Rules require that all costs be expressed as a dollar amount.  After the Final Rules were published, plans and issuers pointed out that under some alternative reimbursement arrangements in-network costs are calculated as a percentage of billed charges.  In those cases, dollar amounts cannot be determined in advance.

FAQ Safe Harbor

The FAQs provide a safe harbor for disclosing costs under a contractual arrangement where the plan or issuer agrees to pay an in-network provider a percentage of billed charges and cannot assign a dollar amount before delivering services.  Under this kind of arrangement, they may report the percentage number instead of a dollar amount.  The FAQs also provide that where the nature of the contractual arrangement requires the submission of additional information to describe the nature of the negotiated rate, plans and issuers may describe the formula, variables, methodology, or other information necessary to understand the arrangement in an open text field.  This is only permitted if the current technical specifications do not support the disclosure via the machine-readable files.

Public Website Requirement

This guidance is pretty narrow and of most interest to plans, issuers, and third-party administrators responsible for the technical aspects of the disclosure.  Still, it is a helpful reminder to plan sponsors that the July 1st enforcement deadline for these requirements is rapidly approaching.  Plans sponsors should remember that these machine-readable files must be posted on a public website.  The Final Rules clearly state that the files must be accessible for free, without having to establish a user account, password, or other credentials and without submitting any personal identifying information such as a name, email address, or telephone number.  If a third-party website hosts the files, the plan or issuer must post a link to the file’s location on its own public website.  Simply posting the files on an individual plan website or the Plan Sponsor’s company intranet falls short of these requirements.  Regardless of how a plan opts to comply, enforcement begins in two months.

We are available to help plan administrators understand these requirements.  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.