America’s cultural wars may be opening up a new front, and group health plans may be caught in the fray. Since the US Supreme Court decision in Dobbs ended almost fifty years of constitutional protection for abortion rights and gave states the authority to regulate abortion, lawmakers (or citizens) have either enacted new prohibitions on abortions or created new legal protections for women seeking abortions. And in anticipation of the Supreme Court possibly eroding protections for transgender people, lawmakers in many states are expanding their efforts to include prohibitions against or protections for gender-affirming treatments. Some states have drafted their prohibitions so broadly that many sponsors of group health plans are concerned about criminal liability for offering reproductive and gender-affirming treatments under their health plans to employees who work in states with these broad prohibitions. But employees, advocacy groups, some courts, and the Biden administration are all working to make sure transgender people have access to gender-affirming care. 

Many employers feel caught between a rock and a hard place. 

Some employers want to continue to provide their female workers with a full array of healthcare services, including abortion services, even if they must travel to another state to access those services. However, some states have drafted their laws so that an employer who pays for travel expenses so a woman can obtain an abortion in a neighboring state might be “aiding and abetting” an illegal act. Employers may take some comfort from Supreme Court Justice Kavanaugh’s concurring opinion in Dobbs, saying that interstate travel is a constitutional right, and no state could prohibit a resident from traveling to another state for an abortion. In response, Idaho has passed an “abortion trafficking” law making it a crime to help a minor cross state lines for an abortion without her parents’ consent, although a federal court recently blocked enforcement of that law. ERISA’s preemption clause may also provide some protection for self-insured plans, although ERISA does not preempt “generally applicable criminal” state laws. Given these uncertainties, employers may feel they must either deny their female workers full healthcare benefits or face a lawsuit or even criminal charges. Further complicating the issue is the fact that more than half of the abortions in the United States are medication abortions, according to the Guttmacher Institute. Some states are acting to ban pharmacies from dispensing or mailing abortion medications to their residents, and there are two conflicting federal court rulings in Texas and Washington State on the provision of mifepristone, the primary drug used for medication abortion.

More recently, many states are banning specified gender-affirming treatment for individuals under a certain age. According to the Human Rights Campaign, twenty-two states have passed laws banning gender-affirming care for individuals up to age eighteen. For employers who believe that providing these benefits is critical to attracting and retaining a diverse workforce, this creates another dilemma. If a young person is seeking gender-affirming treatment, and the employer wants to cover the treatment and pay for travel expenses if the state where the individual lives prohibits the procedure, the employer could face a lawsuit or possibly even criminal charges. Meanwhile, on the federal level, the trend seems to be moving in the opposite direction. The Biden administration has adopted a position supportive of gender-affirming treatments, and some believe that health plans must cover gender-affirming treatments because Section 1557 of the Affordable Care Act prohibits discrimination on the basis of sex (which includes gender identity). As a result, employers that may have legitimate concerns about covering gender-affirming treatments are feeling pressured to offer them under their plans. 

With things developing so rapidly and no clear direction, employers are understandably confused about whether they may or must provide benefits to employees seeking abortions or gender-affirming treatments. We recommend keeping an eye on developments at the state and federal levels, deciding what is right for your company (including what your employees want and how much risk you are willing to take), and being ready to pivot in response to important developments. 

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.

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As discussed in a previous blog, the Patient-Centered Outcomes Research Institute (PCORI) is an independent nonprofit research organization that funds comparative clinical research, among other things. PCORI is funded through annual fees — provided for in the Affordable Care Act — paid by insurers of fully insured health plans and sponsors of self-insured health plans, including health reimbursement arrangements (HRAs) that are not excepted benefits (i.e., that do not reimburse certain coverage premiums and limit contributions to no more than $1,800 annually, as indexed, among other requirements). The PCORI fee originally applied only to health plans with plan years ending after September 30, 2012, and before October 1, 2019. However, the Bipartisan Budget Act of 2019 extended PCORI fees through 2029.

Dental plans and vision plans that are excepted benefits (i.e., are offered through a stand-alone insurance policy or are not integrated with a health plan) are not subject to PCORI fees. Similarly, health flexible spending accounts that are excepted benefits (i.e., the maximum benefit payable does not exceed two times the participant’s salary reduction election or $500 plus the participant’s salary reduction election and other qualifying health plan coverage is provided to participants) are also excepted benefits not subject to PCORI fees.

For plan years ending in 2023, the PCORI fee is due July 31, 2024.

IRS Notice 2023-70 recently provided the adjusted PCORI fees. For plans with plan years that ended on or after October 1, 2023, and before October 1, 2024, the fee is $3.22 per covered life. Employers who maintain self-insured health plans and HRAs (both with the same plan year) need not pay a separate PCORI fee for HRA-covered lives. However, employers who provide coverage through a fully insured plan (the PCORI fee for which will be paid by the insurer) and an HRA must pay a PCORI fee based on the HRA, but covered lives are limited to employees.

The IRS provides helpful FAQs about PCORI fees, including information about permitted methods for counting covered lives.  Permitted methods include:

  • Actual count method. Add the total number of lives covered under the plan for each day of the plan year and divide by the total number of days in the plan year.
  • Snapshot method. Add the total lives covered on one or more days during each quarter of the plan year and divide by the number of days used.
  • Snapshot factor method. The number of lives covered on a date equals (a) the number of employees with self-only coverage and (b) the number of employees with other than self-only coverage multiplied by 2.35.
  • Form 5500 method. The method used for calculating participants for Form 5500 reporting. 

The PCORI fee is reported using IRS Form 720, Quarterly Federal Excise Tax Return.  The PCORI fee can be remitted to the IRS electronically or by mail.

If you need more information about PCORI fees, please contact the author or the Jackson Lewis attorney with whom you normally work.

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 2024 (see IRS Notice 2023-75). Most notably, the limitation on annual salary deferrals into a 401(k) or 403(b) plan will increase to $23,000, and the dollar threshold for highly compensated employees will increase to $155,000. The more significant dollar limits for 2024 are as follows:

LIMIT20232024
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.$22,500$23,000
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.$22,500$23,000
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.		$7,500$7,500
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 2024$66,000$69,000
Defined Benefit Plan Limit (IRC § 415(b)) The limitation on the annual benefits from a defined benefit plan.$265,000$275,000
Annual Compensation Limit (IRC § 401(a)(17)) The maximum amount of compensation that may be taken into account for benefit calculations and nondiscrimination testing.$330,000 ($490,000 for certain gov’t plans)$345,000 ($505,00 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.$150,000 (for 2024 HCE determination)$155,000 (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 2024 $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.$215,000$220,000
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.$15,500$16,000
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.		$3,500$3,500
Social Security Taxable Wage Base See the 2024 SS Changes Fact Sheet. 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).$160,200$168,600

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

When the original SECURE Act was passed in 2019, compliance with its new long-term part-time employee rule seemed far in the future—way out to January 1, 2024. Well, that time is nearly upon us, so sponsors of 401(k) plans should be ready to let these long-term part-time employees start participating in their plans with the start of the New Year.

Under this long-term part-time employee rule, part-time employees who work at least 500 hours during three consecutive 12-month periods must be eligible to participate in the plan for purposes of elective deferrals (subject to any applicable age requirement). The 12-month periods began as of January 1, 2021, so the first time an employee could become eligible under this rule is January 1, 2024.

 Plan sponsors should have started counting and tracking part-time employee hours as of January 1, 2021. Now is the time to look at that data to determine which employees may be required to be eligible to make elective deferrals as of January 1, 2024. Don’t forget that certain employees may be excluded from this new eligibility rule (such as employees subject to a collective bargaining agreement) and that these employees can be excluded from certain nondiscrimination testing.

 While these long-term part-time employees may be newly eligible for elective deferrals, the IRS has clarified that employers generally must include all years of services with the employer to determine the employee’s vesting rights to employer contributions. To be clear, the employees becoming eligible under this new rule are only required to be eligible to make employee deferrals—they are not also required to qualify for employer contributions. Whether to expand eligibility for employer contributions to these employees is up to the plan sponsor. As with eligibility, a year of vesting services for these employees is based on a 500-hour threshold.

 To help with the administrative burden of tracking these periods of 500 hours, plan sponsors should count hours on the date the employee’s employment begins. If the employee does not complete the required hours of service during the initial 12-month period of employment, plan sponsors may then use the first day of the plan year for hours-counting purposes going forward.

 As a reminder, SECURE 2.0 created a variation to the long-term part-time rule set forth in the original SECURE Act, as we wrote about here. Plan sponsors should ensure compliance with both the original SECURE Act rule and the SECURE 2.0 rule.

 If you have questions about the rules for long-term part-time employees under either the original SECURE Act or SECURE 2.0 or if your plan does not let part-time employees save for retirement, please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work.

On August 9, the IRS issued a news release, IR-2023-144, warning taxpayers and advisors of “numerous compliance issues” with ESOPs, such as “valuation issues with employee stock,” “prohibited allocation of shares to disqualified persons,” “failure to follow tax law requirements for ESOP loans causing the loan to be a prohibited transaction” and “promoted arrangements using ESOPs that are potentially abusive.” Naturally, this out-of-nowhere release caused quite a bit of bad blood in the ESOP community because the tone of the release made it sound like ESOPs were in trouble. We fielded questions from several ESOP clients asking what this was about and if they should be concerned about an IRS agent arriving to audit their plans – which, if timed right, could lead to a cruel summer.

Since then, the IRS has provided more insight into what triggered the news release, and as expected, most ESOP sponsors should be able to shake it off. We’ve learned that the IRS issued the release to alert interested parties and the employee ownership community that they’ve identified what they’ve termed a “questionable transaction” sold by a small number of promoters. These generally involve small medical or dental practices in which an ESOP is set up through a management company that provides services to the practice (which, in most states, can’t have an ESOP due to ownership restrictions). The management company then charges fees to the practice for management services, but at a level that takes most or all of the profit out of the practice, resulting in the group’s income flowing into a 100% ESOP S corporation, which is exempt from income taxes. Then, the management company loans its retained earnings to the practice’s owners, giving those owners cash flow without taxes. How or when those loans ever get paid back is somewhat of a mystery. 

The good news is that the IRS has made an effort to let the ESOP world know that its concerns only involve a few promoters, and the broader community still has a good reputation. Most plan sponsors who set up ESOPs for the right reason have no need for concern about enhanced IRS enforcement activities. The release is only about those promoters who twist the law to a point where the transactions toe the line of abusiveness, which happens with nearly every other part of the tax code. It sounds like karma will ultimately catch up to those promoters.

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.

The new Illinois Transportation Benefits Program Act (HB 2068; P.A. 103-291) aims to promote the commuter benefits available to employees who use public transportation to commute to and from work.

Beginning January 1, 2024, certain employers located within designated Illinois counties and townships will be required to provide employees a “pre-tax commuter benefit.”

The pre-tax benefit means that employers must allow covered employees to use pre-tax dollars for the purchase of a transit pass through payroll deduction. A transit pass is any pass, token, care card, and the like entitling the employee to take public transit. Participating transit programs may include those offered by the Chicago Transit Authority (CTA) or the Regional Transportation Authority. More…

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 a multitude of questions surrounding implementation and administration, late on a summer Friday afternoon, the IRS issued Notice 2023-62 (Notice), providing Plan Sponsors with a transition period until 2026 to implement Roth catch-up contributions.

Catch-up contributions are a defined contribution plan feature many 401(k) and 403(b) Plan Sponsors are familiar with. Since being introduced in 2001 as part of the Economic Growth and Tax Reconciliation Act (EGTRRA), a catch-up contribution feature allows participants who are age 50 or over in a plan year to make elective contributions that exceed an otherwise applicable limit under the Internal Revenue Code, a plan-imposed limit, or the actual deferral percentage (ADP) limit for Highly Compensated Employees. For 2023, the limit on catch-up contributions is $7,500, subject to indexing in future years.

Enter one of the many tax-qualified retirement plan-related changes enacted as part of the SECURE 2.0 Act of 2022 (SECURE 2.0). SECURE 2.0 provides, among many other things, that effective January 1, 2024, catch-up contributions for participants whose wages (for FICA/FUTA purposes) from the employer sponsoring the plan were more than $145,000 in the prior year must be made on a Roth (after-tax) basis. Further, when the plan provides for mandatory Roth catch-up contributions for those earning over $145,000 in the prior year, the plan must also allow Roth catch-up contributions for all eligible participants.

How hard could it be?

Although simple enough in concept, “flipping a switch” to require Roth catch-up contributions for those earning over $145,000 in the prior year has raised several questions and proved administratively tricky for many.

Not insignificantly, wages for determining which participants must be subject to mandatory Roth catch-ups is not something plans already capture. Designing and testing compliance systems requires a complicated and coordinated effort between Plan Sponsors, recordkeepers, and payroll vendors. With only four months until the statutory effective date, Plan Sponsors have expressed consternation over participant communications, sequencing of which dollars are considered catch-up, obligations related to collectively bargained plans, and the need for further guidance on open questions about whether new participant elections would be needed and mid-year amendment implications for safe harbor plans.

These issues and others have led some Plan Sponsors to consider eliminating all catch-up contributions or at least for those earning over $145,000 in the prior year as a route to compliance. Certainly, not an intended consequence of SECURE 2.0. Other Plan Sponsors considered requiring that any catch-up contribution made only be as Roth for all participants, regardless of wage level.

What is next?

The relief provides important breathing room for plans to work towards compliance by explicitly providing that any catch-up contributions made between January 1, 2024, and December 31, 2025, will be treated as meeting the requirements of SECURE 2.0, even if made only as pre-tax contributions.

The Notice also confirmed that for plan years after 2023, those 50 and over will remain eligible to make catch-up contributions. A technical error in the Secure 2.0 legislation inadvertently eliminated the catch-up provision from the Internal Revenue Code.

The Notice clarifies that additional guidance will be forthcoming. The guidance is expected to include (1) guidance stating that the Plan Administrator and Employer are permitted to treat an election by the participant to make catch-up contributions on a pre-tax basis as an election to make catch-up contributions that are designated Roth contributions and (2) guidance stating that in a plan maintained by more than one employer (including a multiemployer plan), wages are not aggregated between participating employers to determine whether a participant reaches the $145,000 threshold.

The IRS specifically invites comments and suggestions on whether a plan that offers Roth catch-up contributions in order to comply, but not the ability to make Roth contributions generally, violates the provisions of the Code requiring that all eligible participants must be allowed to make the same election regarding catch-up contributions, or whether restricting catch-up contributions to only those participants whose prior year earnings do not exceed $145,000 is permissible.

For those plans that are not far along in implementation, and certainly, for those who have never offered a Roth contribution or Roth in-plan conversion approach, Plan Sponsors may choose to proceed with implementing some design features that move towards compliance. Introducing Roth contributions generally, including the acceptance of Roth amounts in rollover contributions and the ability of all participants to designate catch-up as Roth, may be viewed as plan enhancement before the mandate to require only Roth catch-up contributions for high-wage earners.

We will continue to provide updates on all forthcoming IRS guidance on this issue and other changes introduced by SECURE 2.0. 

If you have questions about this subject matter or any other employee-benefits-related question, members of the Jackson Lewis Employee Benefits Practice Group 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.

On July 25, 2023, the tri-agencies of the Departments of Treasury, Labor, and Health and Human Services (the Departments) issued a compendium of guidance designed to facilitate compliance with the Nonquantitative Treatment Limitation (NQTL) comparative analysis requirements added by the Consolidated Appropriations Act, 2021 (CAA, 2021) as they relate to the Mental Health Parity and Addiction Equity Act (MHPAEA). The guidance signals that employer-sponsored group health plans will have some work to do to improve their mental health and substance abuse treatment provider networks, their data collection efforts to better evaluate the parity in care, and the production of sufficient NQTL comparative analysis reports. 

Provider Access

The guidance is massive and will take time for employers, insurers, and advisors to distill. But, it is clear the Departments have identified access to mental health and substance abuse disorder treatment as a root cause for what they describe as “a mental health and substance use disorder crisis that worsened during the COVID-19 pandemic.”  As noted in the preamble, “ensuring that people seeking mental health and substance use disorder treatment do not face greater barriers to access to benefits for such treatment is central to the fundamental purpose of MHPAEA.” 

To implement this purpose, the regulations require plans or issuers to collect, evaluate, and consider the impact of data on access to mental health and substance abuse benefits before imposing an NQTL in a care classification. Obtaining data has been one of the greatest challenges of the NQTL comparative analysis requirement. The Departments recognize this and specifically request comments on how best to ensure plans and issuers can obtain the information they need from all the entities involved in designing and administrating the plan in support of their MHPAEA compliance efforts. 

Special New Rule Focused on Network Composition

The preamble notes that “[a] key component of access is the availability of an adequate number of appropriate providers within a plan’s network.” Citing a Millman 2019 report that points to a growing disparity of in-network reimbursement rates for primary care providers versus those providing behavioral health care, the proposed regulations conclude that low rates coupled with the high demand for services are negatively impacting access to care. Suppose covered persons cannot access an in-network mental health or substance abuse disorder provider due to limited options, travel, scheduling challenges, or otherwise. In that case, they may not seek the care they need, with the resultant data showing a lack of parity with medical/surgical benefits. 

Therefore, the proposed regulations require that plans and issuers collect and analyze network adequacy data and provider reimbursement rates. Realizing plans and issuers may face significant challenges in ensuring their mental health and substance abuse disorder networks are not more restrictive than their medical/surgical networks, the Departments are soliciting comments in the proposed regulations and the accompanying Technical Release 2023-01P on ways to evaluate parity in networks, including the prospect of a potential enforcement safe harbor for plans and issuers that include data related to network composition in their comparative analyses.   

New NQTL Comparative Analysis Content Requirements. 

The guidance also builds on the 2020 Self-Compliance Tool to address specific content and delivery requirements related to the required NQTL comparative analysis and establishes minimum data collection requirements. In their July 2023 Report to Congress, the Departments again describe the failing grade they are giving the plans related to the NQTL comparative analysis requirements. From not including sufficient information in the initial report to waiting to start the comparative analysis when the investigation began, plans and issuers are not meeting expectations. 

The proposed regulations attempt to bridge this gap, describing specific data and information that is required to be included in the NQTL comparative analysis and specifying when and how the reports must be provided. This falls short of the safe harbor many hoped would be included in the implementing guidance, but the insight is generally welcome.  

Definitions. Examples. And Standards. Oh My!   

The 395 pages of proposed regulations also include countless definitions, examples, and guidelines. They shed light on what the Departments believe to be the problem areas. 

For example, there are specific examples addressing Applied Behavior Analysis (ABA) Therapy. If a plan excludes ABA therapy, a primary treatment for autism spectrum disorder, and that exclusion is separately applicable to autism spectrum disorder benefits and does not apply to any medical or surgical benefits in the same classification, the Departments believe this is a prohibited treatment limitation. 

The regulations are not yet the law. 

The regulations are proposed in form, and the Departments seek stakeholder comments that may result in minor or significant refinements. Employers, therefore, should simply begin to digest these vast resources with their advisors with a keen focus on their network providers. Again, access to mental health and substance abuse disorder care appears to be the number one driving force.

If you have any questions, 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.