The Time Has Come, A Fact’s A Fact: Consider Adding a Welfare Plan Committee

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by Brenda Berg

The time may have come to add a welfare plan committee to your company’s governance of employee benefit plans. New legal obligations and other developments impose fiduciary risks for welfare plans similar to what already exist for retirement plans.

Most employers that sponsor a 401(k) plan or other retirement plan set up a committee to administer and oversee the plan. This is generally a best practice to ensure that the plan is properly administered in compliance with employee benefits laws and, for plans subject to the Employee Retirement Security Act of 1974 (ERISA), to have a process for following ERISA fiduciary duties. Fiduciary duties include acting prudently and in the best interests of participants, such as in overseeing service providers and monitoring plan fees. Read more

Better Hide the Wine … Employer Considerations as the DOL Doubles Down on Mental Health Parity Compliance in New Proposed Regulations

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by Alex Smith

The Department of Labor (DOL), the Department of Health and Human Services (HHS), and the Department of Treasury (collectively, the Departments) recently issued proposed Mental Health Parity and Addiction Equity Act (MHPAEA) regulations and their second joint report to Congress regarding their MHPAEA enforcement activities as required under the MHPAEA and the Consolidated Appropriations Act, 2021 (CAA).

In addition, the DOL issued Technical Release 2023-01P, requesting comments on potential data requirements related to non-quantitative treatment limitations (NQTLs) and network composition. The proposed regulations and Technical Release indicate that employers can expect increased compliance obligations related to NQTLs and the NQTL comparative analysis reporting and disclosure requirements established by the CAA. For additional information about the CAA’s MHPAEA NQTL comparative analysis reporting and disclosure requirements, please see our blog posts from 2022 and 2021. Read more

You Can Count On Me…But Check Your Math When Counting Participants for the 5500 Audit Rule!

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by Becky Achten

Bruno Mars may be crooning “Count on me,” but make sure you don’t overcount your retirement plan participants! New rules may allow you to leave some employees out of the count, which could save you the expense of the annual audit.

If your retirement plan is considered “large” – generally 100 or more participants – you’re probably in the middle of the Department of Labor required annual independent audit of the financial statements that must accompany the Form 5500. There are a few exceptions to the audit requirement – plans that have less than 100 participants at the beginning of the year and those with between 80 and 120 who filed as a small plan in the prior year. If your plan is just over that 100-participant level, there may be relief on the horizon from the required audit and another reason to keep track of those separated participants. Read more

Should I Pay Or Should I No(t) Now: Which Expenses Can be Paid with Plan Assets?

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by Brenda Berg

One question that often comes up is whether an expense related to an ERISA plan can be paid with plan assets. The decision of whether to use ERISA plan assets to pay an expense is an ERISA fiduciary decision. With the recent IRS guidance clarifying the timing of use of forfeitures, this question may come up even more.[1] Using plan assets inappropriately is a fiduciary breach and subject to possible DOL and IRS penalties. It is important to have a fiduciary process in place for reviewing expenses and determining whether a payment is proper. Read more

What Happens In A Small Town Stays In A Small Town … Until The Tenth Circuit Rejects ERISA Arbitration Provision

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by Alex Smith

While case law regarding the enforceability of arbitration provisions in ERISA retirement plans has been mixed, since the Ninth Circuit’s 2019 decision in Dorman v. Charles Schwab Corp. enforcing a 401(k) plan’s arbitration provision, some employers and plan sponsors have given increased consideration to adding arbitration provisions to their retirement plans based on that decision and the proliferation of class action ERISA lawsuits.  However, following the Tenth Circuit’s February 9 decision in Harrison v. Envision Management Holding, Inc. Board, which appears to be the first time the Tenth Circuit considered the issue, employers based in the Tenth Circuit’s jurisdiction (Colorado, Kansas, New Mexico, Oklahoma, Utah and Wyoming) may want to think twice before adding an arbitration provision to their plans.

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Closing Time…for the COVID-19 National Emergency and Public Health Emergency

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by Benjamin Gibbons

The Biden administration announced on January 30 that the COVID-19 national emergency and the public health emergency will be coming to an end after May 11, 2023. The national emergency is currently set to expire on March 1, while the public health emergency is set to expire on April 11. The President intends to extend both of these emergency declarations through May 11, at which point in time he will issue a declaration to end the emergencies. Read more

I Want a New Drug…Prescription Drug Data Collection Reporting is Due December 27th

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by Becky Achten

Plan sponsors are ultimately responsible for compliance with the Prescription Drug Data Collection (RxDC) required reporting for their group health plans—and there’s no time to waste since the reporting is due by December 27, 2022. But information to complete one of the data files, the D1 (premium/cost information), may not be available to the Third Party Administrator (TPA) filing the report and, thus, may be incomplete. What’s a plan sponsor to do?

As background, the Consolidated Appropriations Act, 2021 (CAA) requires group health plans and health insurance issuers to submit certain information about health care and prescription drug spending to the Department of Health and Human Services, Department of Labor, and Department of the Treasury (collectively, the Departments) annually. The reporting consists of a plan identifier file, eight separate data files, and a narrative response. Read more

Hole in the Bottle … Protecting Against 401(k) Cybersecurity Leakage

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by Alex Smith

Both the Department of Labor (DOL) and plaintiffs’ lawyers have taken an interest in retirement plans’ cybersecurity in recent years. Last year, the DOL issued guidance on the cybersecurity considerations plan fiduciaries should be mindful of. In addition, cyber theft in recent years has led to multiple lawsuits. A specific recordkeeper involved in many of these lawsuits is currently being investigated by the DOL with respect to cybersecurity incidents that have impacted certain of its retirement plan clients. Read more

Every Little Thing … Considerations Before Adding Crypto to a 401(k) Plan

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by Alex Smith

Fidelity Investments recently announced that it will offer its 401(k) plan clients the opportunity to offer bitcoin as a 401(k) plan investment option later this year.  While this may sound intriguing to some plan fiduciaries and participants, plan fiduciaries should proceed with extreme caution.

Based on the Department of Labor’s (DOL) public pronouncements, it appears the DOL has serious doubts about whether 401(k) plan fiduciaries who include cryptocurrency among their 401(k) plan’s investment options comply with their ERISA fiduciary duties.  In March, the DOL issued Compliance Assistance Release No. 2022-01, in which it expressed “serious concerns” about the prudence of 401(k) plan fiduciaries including cryptocurrency as a 401(k) plan investment option and announced it plans to conduct an investigative program related to cryptocurrency investments by 401(k) plans.  For more information on Compliance Assistance Release No. 2022-01, please see our prior blog post Can’t Touch This … DOL Discourages Plans From Investing in Cryptocurrency.  Following Fidelity’s announcement, a DOL official expressed “grave concerns” about the offering and indicated that the DOL intends to meet with Fidelity to discuss its concerns in comments to the Wall Street Journal. Read more

How Much is that (Investment) in the Window…A Higher Level of Fiduciary Oversight Could be Required for 401(k) Plan Brokerage Windows

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by Brenda Berg

Fiduciaries of 401(k) plans and other retirement plans know that they must prudently monitor the investment options available to participants in the plan, but are they monitoring participants’ investments made through a plan’s brokerage window? Recent commentary from the Department of Labor (DOL) on cryptocurrency investments suggests maybe fiduciaries should be – and that the DOL may check in on that soon.[i]

A “brokerage window” or “self-directed brokerage account” can allow participants access to a broad array of investments beyond the regular investment menu under the plan. Most plan fiduciaries have not paid much attention to the actual brokerage window investments. This is not surprising given the DOL’s relative lack of focus on the matter. The DOL had issued guidance in 2012 that the investment disclosure portion of the fee disclosure rules could apply to brokerage window investments in certain cases but after pushback due to the administrative burdens, the DOL withdrew that guidance. In 2014 the DOL issued a Request for Information about brokerage window practices but no further guidance was issued. Read more