Each year, National Employee Benefits Day offers a chance to reflect on the ever-changing landscape of employer-sponsored benefits. This year may be the most pivotal since the COVID-19 relief guidance of 2020. The landscape of employee benefits has seen significant changes, particularly in areas such as health and welfare plan administration, compliance with mental health parity, and transparency in coverage. For a comprehensive understanding, read the full article.

Takeaways

  • Employers who sponsor group health plans should review and revise, as needed, their consumer-facing pricing information for any compliance issues under the Executive Orders and applicable regulations.

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On February 25, 2025, President Trump signed “Making America Healthy Again with Clear, Accurate, and Actionable Healthcare Pricing Information,” an Executive Order with the stated purpose of making group health plans and health insurance issuers accountable for compliance with price transparency rules implemented during the first Trump administration.

Specifically, during his first administration, President Trump signed Executive Order 13877 – “Improving Price and Quality Transparency in American Healthcare to Put Patients First,” seeking to address what the new Executive Order describes as “opaque healthcare pricing arrangements” and insufficient accountability concerning healthcare pricing practices.  Under Executive Order 13877, regulations were created requiring group health plans to:

  • Post their negotiated rates with providers;
  • Post out-of-network payments to providers;
  • Post the actual prices the plan or its pharmacy benefits manager pays for prescription drugs; and
  • Maintain a “customer-facing” internet tool through which individuals can access price information. 

The new Executive Order referenced an unidentified 2023 economic analysis that estimated full implementation of the regulations might result in as much as $80 billion in healthcare savings by 2025 for consumers, employers, and insurers.  An unidentified 2024 report was also referenced for the proposition that price transparency could help employers reduce healthcare costs across 500 common healthcare services.

To address what was described as “stalled” progress on price transparency during the intervening administration, the new Executive Order gave the Secretaries of the Treasury, Labor, and Health and Human Services 90 days to act to:

  • Instead of estimates, require the disclosure of actual prices of items and services;
  • Ensure pricing information is standardized and easily comparable across health plans and hospitals by issuing updated guidance or proposed regulations; and
  • Ensure compliance with transparency requirements by issuing guidance or proposed regulations updating enforcement policies.

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.

Takeaways

  • Employers may post a notice on their website instead of automatically furnishing Forms 1095-B and 1095-C to all full-time employees.  The first due date for such a notice is March 3 for 2024 forms, and the notice must remain accessible until October 15.

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The Employer Reporting Improvement Act and the Paperwork Burden Reduction Act (the Acts) introduced significant changes to the reporting and enforcement rules of the Affordable Care Act (ACA).  We discussed the Acts in an earlier blog.  Recently, the IRS issued Notice 2025-15, which provides the promised guidance for reporting entities on how to furnish Forms 1095-B and 1095-C.  Here is what plan sponsors need to know:

Alternative Method for Furnishing Forms

  • Rather than automatically sending out Forms 1095-B and 1095-C, sponsors may post a notice on their website indicating that such forms are available upon request.
  • Sponsors must ensure the notice is clear, conspicuous, and accessible to anyone entitled to such a form.
  • Forms must be provided within 30 days of any request or by January 31, whichever is earlier.
  • In order to ensure compliance with the new IRS guidance, we recommend posting the notice to the sponsor’s website, even if the notice is also provided via email or otherwise.

Additional Compliance Requirements

  • Notices must be posted by the due date for delivering the forms, including the automatic 30-day extension.
    • For example, for 2024 forms, sponsors must post the notice by March 3, 2025.
  • Entities must also adhere to any state requirements for furnishing the forms, and some states do require that the forms (or their state equivalent) be sent to all individuals.
    • Note that forms still must be filed with the IRS, even if they are not provided to all employees.

Effective Date

  • The guidance is effective starting with the 2024 calendar year forms.

Following these steps can help ensure compliance with IRS requirements for ACA forms.  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.

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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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. 

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.