Benefits Counselor – April 2022 – Employment and HR & More News Here – Upjobsnews

HEALTH PLAN DEVELOPMENTS

Ninth Circuit Reverses Wit  Decision
Addressing Standards for Behavioral Health Coverage

In Wit v. United Behavioral Health, the U.S. Court
of Appeals for the Ninth Circuit recently reversed the federal
district court’s ruling that United Behavioral Health (UBH)
breached its fiduciary duty to health plan participants by
administering claims related to mental health and substance abuse
using internal guidelines that were overly restrictive and
inconsistent with generally accepted standards of care (GASC).

As discussed in our April 2019 Benefits Counselor, participants
alleged that UBH: (1) improperly denied treatments for mental
health and substance use disorders by using internal guidelines
that were inconsistent with its insurance policies (which required
coverage consistent with GASC); (2) violated its fiduciary duty
under the Employee Retirement Income Security Act of 1974 (ERISA)
by arbitrarily and capriciously denying benefits; and (3) violated
standards of care required by state laws. The district court agreed
that UBH’s guidelines deviated from GASC and found that
UBH’s restrictive claim guidelines constituted a breach of
fiduciary duty and an arbitrary and capricious denial of benefits
under ERISA. As a result, the court ordered UBH to reprocess 67,000
denied claims using independent claim guidelines and not UBH’s
internal guidelines.

Among other arguments, UBH argued on appeal that the district
court incorrectly applied the abuse of discretion standard. The
Ninth Circuit agreed and reversed the lower court’s decision
and the reprocessing order. The court concluded that the district
court misapplied the standard of review by substituting its
interpretation of the plans for UBH’s rather than reviewing the
insurer’s determinations for an abuse of discretion. In this
case, because the plans gave UBH discretionary authority to
interpret the terms of the plans, UBH’s application of the
plan’s standards could be reviewed only for abuse of
discretion, and the court could only overturn UBH’s decision if
it was unreasonable. According to the Ninth Circuit, UBH’s
interpretation—that the plans do not require consistency with
the GASC—was not unreasonable. The court noted that although
the plans excluded treatment for coverage inconsistent with GASC,
the plans did not mandate coverage for all treatment that is
consistent with GASC.

The Ninth Circuit also ruled that an alleged conflict of
interest based on UBH serving as the plan administrator and insurer
for insured plans (which are its main revenue source) would not
change the outcome on the facts of the particular case.

HHS Increases Civil Monetary Penalties for HIPAA, SBC
and MSP Violations

The Department of Health and Human Services (HHS) has announced
its annual inflation adjustments to civil monetary penalties in its
regulations. These adjustments apply to penalties assessed on or
after March 17, 2022, for violations occurring on or after November
2, 2015.

The following key changes could affect sponsors of group health
plans:

• Health Insurance Portability and Accountability Act of
  1996 (HIPAA) Administrative Simplification. The HIPAA
  administrative simplification rules include standards for privacy,
  security, breach notification and electronic health care
  transactions. HIPAA includes four tiers of culpability for
  violations. The indexed penalty amounts for each violation of a
  HIPAA administrative simplification provision are as follows:

Culpability	Minimum Penalty/Violation	Maximum Penalty/Violation	Annual Limit
Lack of Knowledge	$127 (up from $120)	$63,973 (up from $60,226)	$1,919,173 (up from $1,806,757)
Reasonable Cause	$1,280 (up from $1,205)	$63,973 (up from $60,226)	$1,919,173 (up from $1,806,757)
Willful neglect, corrected within 30 days	$12,794 (up from $12,045)	$63,973 (up from $60,226)	$1,919,173 (up from $1,806,757)
Willful neglect, not corrected within 30 days	$63,973 (up from $60,226)	$1,919,173 (up from $1,806,757)	$1,919,173 (up from $1,806,757)

• Medicare Secondary Payer (MSP). The indexed
  amounts for certain violations of the MSP rules applicable to group
  health plans are as follows:
  
  • Incentives. The maximum penalty for offering
    incentives to Medicare-eligible individuals not to enroll in a
    group health plan that would otherwise be primary to Medicare is
    $10,360 (up from $9,753) per individual.

  
  

  • Nondisclosure. The daily maximum penalty for
    the failure of responsible reporting entities to provide
    information identifying situations where the group health plan is
    or was primary to Medicare is $1,325 (up from $1,247) for each
    failure.

CMS Issues Guidance on HIPAA Electronic Transaction
Standards

On March 22, 2022, the Centers for Medicare & Medicaid
Services’ (CMS) National Standards Group (NSG) issued two
guidance letters regarding HIPAA administrative simplification
provisions related to electronic health care transactions. NSG is
responsible for administering compliance with the standards for
electronic transactions.

One of the guidance letters clarifies covered entities’
obligation to require that business associates comply with HIPAA
regulations. This letter includes a reminder that engaging a
business associate to provide services related to a transaction for
which an electronic transaction standard has been adopted does not
relieve a covered entity from its responsibility to also comply
with all applicable requirements. The guidance notes that NSG may
find a covered entity noncompliant if its business associate fails
to comply with the electronic transaction standards.

The second guidance letter clarifies the transaction standards
for electronic funds transfer (EFT) and electronic remittance
advice (ERA). According to the guidance, if a provider requests
that a health plan conduct a payment transaction in accordance with
HIPAA’s EFT and ERA transaction standards, the health plan must
do so. When a provider makes such a request, the health plan must
comply regardless of whether the provider is in the plan’s
network or otherwise affiliated with the plan. In contrast, if a
provider does not request that the health plan use EFT and ERA
standards or does not complete the plan’s enrollment process,
the plan’s use of such standards is not required. Instead, a
health plan may pay claims consistent with its usual practice,
including by using virtual credit cards, which are not covered by
the EFT standards.

RETIREMENT PLAN DEVELOPMENTS

DOL Announces Plan to Investigate Cryptocurrency-Based
Investments in 401(k) Plans

On March 10, 2022, the U.S. Department of Labor (DOL) issued
Compliance Assistance Release No. 2022-01 warning plan
fiduciaries to exercise extreme care before considering adding a
cryptocurrency option to a 401(k) plan’s investment lineup. The
guidance reminds fiduciaries of their obligations of prudence and
loyalty in selecting and monitoring investment options and
reiterates that fiduciaries may not shift responsibility to
participants to avoid imprudent investment options.

The guidance highlights five “serious concerns” with
including cryptocurrencies and other related products as a 401(k)
investment option:

• Speculative and Volatile Investments: The
  Securities and Exchange Commission has cautioned that investment in
  a cryptocurrency is highly speculative. Also, cryptocurrencies have
  been subject to extreme price volatility, which can have a
  devastating impact on participants.




• The Challenge for Plan Participants to Make Informed
  Investment Decisions: It can be extraordinarily difficult
  for participants to make informed decisions about cryptocurrencies
  because they are novel and it can be challenging to separate facts
  from “hype.”




• Custodial and Recordkeeping Concerns:
  Cryptocurrencies are not held like traditional plan assets in trust
  or custodial accounts, and methods of holding cryptocurrencies can
  be vulnerable to hackers and theft. Furthermore, with some
  cryptocurrencies, misplacing a password can result in the asset
  being lost.




• Valuation Concerns: It is challenging to
  reliably and accurately value cryptocurrencies as there is no
  generally accepted model for valuing cryptocurrencies. Relatedly,
  there is a potential for inconsistent accounting treatment with
  respect to these investments.




• Evolving Regulatory Environment: Because the
  legal landscape governing cryptocurrency markets is evolving,
  fiduciaries will need to evaluate how regulatory requirements can
  be met and address the possibility that other agencies could limit
  or prevent the use or trading of cryptocurrency investments in
  response to illegal activity.

Based on these concerns, the DOL anticipates that it will
investigate plans that offer participant investments in
cryptocurrencies and related products. The guidance further
cautions that plan fiduciaries overseeing or allowing such
investments through brokerage windows should expect questioning
from the DOL regarding how they can square their actions with their
fiduciary obligations.

IRS Reissues Proposed Regulations for Multiple Employer
Plans

On March 25, 2022, IRS released proposed regulations regarding
multiple employer plans (MEP) under section 413(c) of the Internal
Revenue Code and withdrew the proposed regulations the IRS issued
in July 2019. The new proposed regulations would provide an
exception from the “unified plan rule” for defined
contribution MEPs. Under the unified plan rule (also known as the
“bad apple” rule), the failure by one or
more participating employers to satisfy a qualification
requirement results in the disqualification of the MEP.

The 2022 proposed regulations provide an exception to the
unified plan rule in two situations: (1) a failure to provide
information, which occurs when a participating employer fails to
provide information necessary to determine whether the MEP meets
the plan qualification requirements upon reasonable request by the
MEP administrator; or (2) a failure to take action, which is a
failure of a participating employer to timely comply with the MEP
administrator’s request to take action needed for the MEP to
meet the plan qualification requirements.

If one of the above failures occurs, an MEP could invoke the
exception to the unified plan rule to avoid disqualification
provided certain conditions are met. One condition is that the plan
document must include a description of the procedures that would be
followed to address a participating employer failure. Another
requirement is that the MEP administrator send up to three notices
with specific information regarding the failure to an unresponsive
participating employer. The last of these notices, if applicable,
must be provided to participants who are employees of the
participating employer (and their beneficiaries) as well as the
DOL. After the third notice is sent, the unresponsive employer has
the opportunity to either take remedial action or initiate a
spinoff of plan assets and account balances held on behalf of
employees of the employer to a separate single employer plan
established and maintained by the employer. If the employer elects
a spinoff, it must generally be completed within 180 days of the
date on which it was initiated.

If the participating employer fails to take remedial action or
initiate a spinoff, the MEP administrator must stop accepting
contributions from the employer and its employees, provide notice
to participants (and their beneficiaries) and provide participants
with an election with respect to their plan benefits. The
participants may roll over their accounts into an eligible
retirement plan or leave their accounts in the plan until they are
eligible for a distribution under the terms of the plan.

Finally, the regulations provide that if the MEP has a pooled
plan provider (PPP), the PPP must perform all the administrative
duties that are required of it during the year of the participating
employer failure for the unified plan exception to apply.

Among other changes, the 2022 proposed regulations removed the
provision providing that an MEP is ineligible for the exception to
the unified plan rule if it is under examination before the first
notice is sent. Additionally, under the 2022 proposed regulations,
the MEP is no longer required to take action to initiate a spin-off
and plan termination to address an unresponsive participating
employer. As noted, the participating employer must elect a
spin-off under the 2022 proposed regulations.

The IRS will accept comments on the 2022 proposed regulations
until May 27, 2022. A public hearing on the proposed regulations is
scheduled for June 22, 2022. The regulations will be effective once
they are published as final regulations in the federal registrar;
however, the proposed regulations can be relied upon until the
regulations are finalized.

House Approves SECURE 2.0

On March 29, 2022, the House of Representatives voted to approve
the Securing a Strong Retirement Act of 2022 (SECURE 2.0). SECURE
2.0 includes most provisions from an earlier version of the bill
approved by the Ways and Means Committee and similar legislation
approved by the Education and Labor Committee known as the
Retirement Improvement and Savings Enhancement Act.

SECURE 2.0 builds on the Setting Every Community Up for
Retirement (SECURE) Act of 2019 and includes a variety of measures
aimed at increasing retirement savings and streamlining plan
administration. Among other provisions, the SECURE 2.0 includes the
following measures: (1) requires new 401(k) and 403(b) plans
to include automatic enrollment and escalation features;
(2) increases the catch-up contribution limit and mandates
that catch-up contributions are made as Roth contributions;
(3) increases the required beginning date age;
(4) expands coverage of long-term, part-time workers;
(5) treats student loan repayments as elective deferrals for
matching purposes; (6) creates a retirement savings lost and
found database; (7) increases the cap on mandatory
distributions; (8) simplifies reporting and disclosure
requirements; (9) relaxes the required minimum distribution
rules; and (10) expands the self-correction program.

The bill now heads to the Senate, where a group of lawmakers is
currently working on its own SECURE 2.0 proposals.

GENERAL DEVELOPMENTS

Fourth Circuit Rules Administrator’s Failure to
Respond to Information Request Demonstrated Futility

In Wilson v. UnitedHealthcare Ins. Co.,  the
U.S. Court of Appeals for the Fourth Circuit ruled that
UnitedHealthcare Insurance Co. (United)—the plan
administrator and insurer—breached its fiduciary duties under
ERISA by failing to respond to a participant’s document request
even though HIPAA prevented the administrator from providing some
of the documents requested.

This case involved a health plan’s denial of coverage for
residential treatment for a participant’s minor dependent.
During the claims review process, the participant’s attorney
wrote to the plan requesting various documents related to the
claims, including the plan document and the minor’s medical
records. The attorney’s letter included a HIPAA authorization
to allow the documents to be released on the minor’s behalf.
However, the plan administrator did not respond to the letter and
document request because the signature on the HIPAA authorization
was illegible, and the minor signed it on his own behalf. After the
plan administrator failed to respond to the attorney’s letters
and document request, the participant filed suit in federal court
under ERISA challenging the claim denial. The lower court dismissed
the participant’s claims for a failure to exhaust the
plan’s administrative remedies.

On appeal, United argued that it had no obligation to produce
the requested documents because the HIPAA authorization was fatally
defective and the requested documents were all protected by HIPAA.
The court rejected this argument finding that ERISA required the
administrator to produce the requested plan documents that did not
contain the minor’s individually identifiable health
information, regardless of the validity of the HIPAA authorization.
The court held that by failing to respond to the letter and
document request the administrator impeded the appeal process and
put the participant “at a distinct disadvantage in
understanding how to proceed.” As a result, the administrator
made a clear showing of futility and the participant was excused
from the exhaustion requirement.

Besides arguing that the HIPAA authorization was invalid, United
asserted that it could not contact the participant’s attorney
regarding the HIPAA authorization without violating HIPAA by
disclosing information about the minor. The court rejected this
argument noting that contacting the attorney would not disclose any
of the minor’s individually identifiable health information.
Furthermore, according to the court, although HIPAA did not require
United to inform the participant’s attorney of the issues with
the HIPAA authorization, ERISA’s fiduciary duties did require
such a notification.

Ultimately, the court remanded the case to United as the
administrator to perform a full and fair review of the
participant’s claim.

UPCOMING COMPLIANCE DEADLINES AND REMINDERS

Retirement Plan Deadlines

Required Minimum Distributions. Plans must
begin to pay initial required minimum distribution payments by
April 1, 2022.

Corrective Distributions for Excess Elective
Deferrals. The deadline for processing corrective
distributions for elective deferrals in excess of the Code
section 402(g) limit is April 15, 2022. The elective
deferral limit for 2021 was $19,500 ($26,000 with catch-up
contributions).

Annual Funding Notice. Calendar year defined
benefit plans with over 100 participants must provide the
Annual Funding Notice by April 30, 2022.

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.

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