HEALTH AND WELFARE PLAN UPDATES
U.S. Departments Release Final Mental Health Parity Rule
On September 9, 2024, the U.S. Departments of Labor (DOL), Health and Human Services and the Treasury (collectively, the Departments) issued the highly anticipated Final Rule implementing the non-quantitative treatment limit requirements of the Mental Health Parity and Addiction Equity Act. The Final Rule largely mirrors the Proposed Rule that the Departments' released in August 2023, but it includes some modifications. The Final Rule is generally effective for plan years beginning on or after January 1, 2025. However, certain provisions are effective for plan years beginning on or after January 1, 2026. For additional details regarding the Final Rule and what it means for plan sponsors, see our alert.
Third Circuit Affirms Dismissal of ERISA Class Action Regarding Retention of Prescription Rebateslass Action Lawsuit Regarding Improper Use of ERISA Forfeitures
In Knudsen v. MetLife Grp., Inc., (3d Cir. Sept. 25, 2024), the U.S. Court of Appeals for the Third Circuit upheld the dismissal of a putative class action lawsuit asserting that MetLife Group, Inc. improperly retained $65 million in prescription drug rebates generated by its self-funded health plan. Two former participants in MetLife's health plan filed the class action asserting that the prescription drug rebates that were earned by the plan should have been retained by the plan and used for participants' benefit. Furthermore, the plaintiffs asserted that because MetLife retained the rebates, participants paid excessive amounts toward out‑of‑pocket costs.
The Third Circuit held that the plaintiffs lacked Article III standing because they failed to establish a concrete financial injury. Specifically, the court noted that the plaintiffs failed to allege "which out-of-pocket costs increased, in what years, or by how much."
However, the Third Circuit declined to hold that the U.S. Supreme Court's holding in Thole v. U.S. Bank requires dismissal, under Article III, whenever a participant in a self-funded health plan brings a lawsuit alleging that mismanagement of plan assets increased out-of-pocket expenses in violation of ERISA. According to the court, a participant could theoretically allege a concrete financial injury sufficient to establish Article III standing where, for example, an employer charged participants more for their coverage than is allowed under plan documents.
Eleventh Circuit Vacates Title VII Decision Regarding Gender Reaffirming Surgery
In Lange v. Houston County, Georgia (11th Cir. 2024), the U.S. Court of Appeals for the Eleventh Circuit vacated its prior holding that an employer-sponsored group health plan violated Title VII of the Civil Rights Act because it excluded coverage for gender-affirming surgery. In 2019, a plan participant brought suit after being repeatedly denied coverage for gender‑affirmation surgery. In May 2024, a three-judge panel of the Eleventh Circuit held that the plan violated Title VII, citing the U.S. Supreme Court's decision in Bostock v. Clayton County in which the Court held that Title VII's protections against sex discrimination included discrimination based on sexual orientation and gender identity. Following the decision, the employer petitioned for a rehearing by the full Eleventh Circuit. In August 2024, the court issued an order vacating the panel's prior decision and ordered a rehearing. Oral arguments will now be heard by the full Eleventh Circuit in February 2025.
Fifth Circuit Holds that United Healthcare Insurance Improperly Denied Eating Disorder Benefits and Failed to Provide a Full and Fair Review
The Fifth Circuit for the U.S. Court of Appeals recently reversed the district court's decision in Dwyer v. United Healthcare Ins. Co., (5th Cir. Sept. 19, 2024) and concluded that United Healthcare Insurance (UHC) improperly terminated coverage for inpatient care for a minor beneficiary who was diagnosed with anorexia nervosa. The Fifth Circuit held that the benefits denial in this case was both substantively and procedurally deficient. Regarding the medical necessity of treatment, the Fifth Circuit concluded that UHC's denial letters were not supported by, and in some respects, contradicted by, the underlying medical evidence. As to the procedural adequacy of the claim, the court noted that ERISA requires a full and fair review and a "meaningful dialogue" between the administrator and participants. The court concluded that UHC failed to provide a full and fair review because its denial letters failed to provide: (1) specific reason or reasons for the adverse determination, (2) the specific plan provisions on which the determination was based, and (3) the specific reasoning in its clinical judgment of medical necessity. The case serves as a reminder to plan sponsors to ensure their plans' claims and appeals procedures and notices satisfy ERISA requirements, as modified by the Affordable Care Act.
RETIREMENT PLAN UPDATES
Court Dismisses Lawsuit Regarding Improper Use of 401(k) Plan Forfeitures
On September 19, 2024, in Dimou v. Thermo Fisher Scientific Inc., et al. the U.S. District Court for the Southern District of California granted Thermo Fisher Scientific Inc.'s motion to dismiss plaintiff's claims regarding the improper use of forfeitures in the company's 401(k) plan. The plaintiff alleged that by using forfeitures to offset future employer contributions rather than 401(k) plan expenses that were charged to participant accounts, the plan fiduciaries breached their fiduciary duties and engaged in prohibited transactions under ERISA. The plan document allows forfeitures to be allocated for two purposes: (1) "to pay [the] reasonable expenses of the Plan" or (2) "to reduce [the Company's] Discretionary Contributions, Matching Contributions and/or other contributions payable under the Plan."
The court determined that the fiduciaries did not breach their fiduciary duties by using forfeitures to pay administrative expenses because ERISA does not "require a fiduciary to maximize pecuniary benefits" and ERISA fiduciaries do not have an "unqualified duty to pay administrative expenses, especially when the plan document does not create an entitlement to such benefits." The court concluded that the plaintiff's claims were too broad to be plausible because ERISA's fiduciary provisions neither created a benefit nor abrogated the forfeiture regulations. Ultimately, the court dismissed plaintiff's fiduciary breach claims, but left the door open for the plaintiff to amend the complaint to allege more particularized facts or special circumstances.
DOL Revises Information Requests and Posts Template and Instructions Regarding Retirement Savings Lost and Found
The DOL issued a revised information collection request (ICR) to the Office of Management and Budget regarding the Retirement Savings Lost and Found (RSLF). In response to public comments received on its initial proposal in April 2024, the DOL issued the new revised ICR which significantly reduces the amount of data the DOL is requesting that plans provide for the RSLF Database. Specifically, the revised ICR requests only basic plan information and information regarding terminated vested participants who are age 65 and older. The revised ICR requests additional public comments on the RSLF by October 15, 2024.
In connection with the revised ICR, instructions and a template to upload data to populate the RSLF Database have been posted. The instructions explain how to provide information to the DOL for the RSLF Database and reiterate that the provision of such information is voluntary. The instructions indicate that retirement plan administrators and authorized third parties, such as a plan's recordkeeper, may provide information for the RSLF Database. The instructions further note that plans should file information at least annually; however, the DOL strongly encourages plans to provide updated information more frequently, such as quarterly. The instructions provide information on how to complete and file the RSLF template and a link to a website to complete the filing. In contrast to its initial request, the DOL now states that plans should not file the RSLF template as part of the plan's annual Form 5500.
IRS Issues Guidance on Long-Term, Part-Time Employees in 403(b) Plans
On October 3, 2024, the Internal Revenue Service (IRS) issued Notice 2024-73 (the Notice) with guidance addressing long-term, part-time employees in 403(b) retirement plans under the SECURE 2.0 Act of 2022. The Notice addresses application of the nondiscrimination rules for 403(b) plans with respect to long-term, part-time employees, including rules permitting the exclusion from participation for certain part-time employees. According to the Notice, a 403(b) plan that is subject to ERISA must allow ERISA long-term, part-time employees to make elective deferrals; however, a plan may exclude individuals who do not qualify as ERISA long‑term, part-time employees and such an exclusion will not cause the plan to violate the section 403(b) consistency requirement, which prevents a plan from selectively applying the part-time employee exclusion to some, but not all, part-time employees. The Notice applies for plan years beginning in 2025.
The Notice announces that the IRS plans to issue additional guidance with respect to the rules discussed in the Notice, including proposed regulations. The Notice also states that the final regulations for 401(k) plans on long-term, part-time employees will apply no earlier than to plan years beginning on or after January 1, 2026.
COMPLIANCE DEADLINES AND REMINDERS
General Compliance
Form 5500 Deadline for Calendar Year Plans with Extensions. Plan administrators generally have seven months after the end of a plan year to file a Form 5500, including applicable schedules and attachments. For plan years ending December 31, 2023, the Form 5500 filing deadline was July 31, 2024. However, for plans that obtained an extension, the Form 5500 must be filed by October 15, 2024.
Summary Annual Report Deadline for Calendar Year Plans. Plan administrators whose plans must provide Summary Annual Reports generally must distribute them within nine months after the plan's year‑end (e.g., for plan years that ended December 31, 2023, the deadline is September 30, 2024). However, if a plan has received an extension for filing its Form 5500, the nine‑month deadline is extended by two months.
Retirement Plan Compliance Deadlines and Reminders
- Annual Funding Notice. Calendar year defined benefit plans with 100 or fewer participants generally must provide an Annual Funding Notice to required recipients by the Form 5500 filing deadline, including filing extensions.
- QDIA Notice. Plan sponsors of defined contribution retirement plans that utilize a Qualified Default Investment Alternative (QDIA) must provide an annual notice to all participants at least 30 days, but not more than 90 days, before the beginning of the plan year. Plan sponsors of calendar year plans must provide this notice between October 3, 2024, and December 2, 2024.
- Retirement Plan Automatic Enrollment Notice. Plan sponsors of defined contribution retirement plans with an eligible automatic contribution arrangement or a qualified automatic contribution arrangement must provide an annual notice to all participants on whose behalf contributions may be automatically made to the plan, at least 30 days, but not more than 90 days before the beginning of the plan year. Plan sponsors of calendar year plans must provide this notice between October 3, 2024 and December 2, 2024. Plan sponsors may combine the automatic enrollment notice with the QDIA notice.
- Safe Harbor 401(k) Plan Notice. Plan sponsors of safe harbor 401(k) plans must provide participants with an annual safe harbor notice that describes the safe harbor contribution and other material plan features at least 30 days, but not more than 90 days before the beginning of the plan year. Plan sponsors of calendar year plans must provide this notice between October 3, 2024 and December 2, 2024. Plan sponsors may combine the safe harbor notice with other required notices, such as the QDIA notice.
Health Plan Compliance Deadlines and Reminders
- Medicare Part D Notice of Creditable Coverage. All group health plans offering prescription drug coverage to Medicare‑eligible employees (under either an active plan or a retiree plan) must provide an annual creditable coverage disclosure notice to their Medicare‑eligible participants and dependents by October 15, 2024. The Centers for Medicare & Medicaid Services (CMS) provides a model notice that can be accessed through the CMS website. Plan sponsors should review the model notice to ensure it accurately reflects their plan.
- Health Plan Open Enrollment Requirements.
- Plan sponsors of group health plans must issue a new Summary of Benefits and Coverage (SBC) to participants and beneficiaries covered under the plan in conjunction with open enrollment. Group health plans without open enrollment must issue the SBC no later than 30 days before the beginning of the plan year (December 2, 2024, for calendar year plans).
- Plan sponsors of health reimbursement arrangements (HRAs) must offer participants an annual opportunity to opt out of and waive all future reimbursements from their HRA. This notice of opt‑out can be provided with open enrollment materials.
- Notice of Fixed Indemnity Excepted Benefits Coverage. Beginning in 2025, plan sponsors that offer hospital or other fixed indemnity benefits must provide a new consumer protection notice. The required notice is designed to highlight the differences between fixed indemnity products and traditional health insurance coverage and must be prominently displayed in any marketing, application and enrollment materials. The mandatory notice can be found online within the Short-Term, Limited-Duration Insurance regulations: 89 FR 23338, 234111.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
