Benefits Monthly Minute
New Guidance For DC Plan Lifetime Income Illustrations
As reported in the February, 2020 Legal Alert and related Webinar: What You Need to Know About the Secure Act, the SECURE Act added two lifetime income illustration (LII) requirements, to be furnished at least annually, to pension benefit statements for individual account (i.e., 401(k)) plans. In response to requests for clarification, the DOL recently released Temporary Implementing FAQs, which are summarized below.
- Deadline to Comply:
- For participant-directed plans that must issue quarterly statements, the first lifetime illustration can be incorporated on any quarterly statement up to the second calendar quarter of 2022 (ending June 30, 2022).
- For non-participant-directed plans (plans under which a participant or beneficiary has his or her own account, but does not have the right to direct the investment of assets in that account), the LII must be on the statement for the first plan year ending on or after September 19, 2021 – usually, the statement for calendar year 2021 that is furnished no later than October 15, 2022.
- Additional LIIs: additional LIIs are permitted in recognition of the fact that many plans have been providing similar types of illustrations for several years.
- Final Rule and Transition Relief: the Interim Final Rule (IFR) explaining how to calculate the LII becomes effective September 18, 2021. The original intent was for the Department to adopt a final rule sufficiently before this effective date, but time is running out. Although the Department did not indicate when the final rule would be released, it did acknowledge the likelihood of compliance challenges for plan sponsors if the final rule were to materially differ from the IFR.
KMK Comment: Plan sponsors should work with their record-keepers to make sure the lifetime income illustration is provided by the applicable deadline. Given the absence of a final rule less than a month before the effective date, additional guidance in the form of transition (e.g., good faith) relief or a delay in enforcement would be welcome news. We will keep you informed as additional information is released.
ARPA COBRA Subsidy Expiration and Notice Deadline
In March, 2021, the American Rescue Plan Act of 2021 (“ARPA”) was signed into law. As reported in the March, 2021 Monthly Minute, the ARPA COBRA premium subsidy is available for periods of COBRA coverage from April 1, 2021 to September 30, 2021. As we near the expiration of the subsidy period, note that ARPA requires that all COBRA subsidy recipients must be provided a “Notice of Expiration of Premium Assistance” between August 16, 2021, and September 15, 2021 (45 to 15 days before the subsidy expires on September 30, 2021). Additional information about the ARPA COBRA subsidy and a model “Notice of Expiration of Premium Assistance” is available at https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy.
KMK Comment: Plan sponsors should work with service providers to ensure timely distribution of the “Notice of Expiration of Premium Assistance.”
Enforcement Delays for Health Plan Transparency
On August 20, 2021, the DOL, HHS and Treasury Department jointly released new FAQs addressing various health plan transparency rules under the ACA, and the No Surprises Act and Transparency titles of the Consolidated Appropriations Act of 2021 (CAA). While the FAQs include various clarifications on the requirements under these health plan transparency rules, the Departments have also announced numerous enforcement delays. A few noteworthy delays include the following:
- The machine-readable file requirements generally applicable for plan years beginning on and after January 1, 2022, are subject to two exceptions: 1. enforcement of the requirement that plans publish machine-readable files relating to prescription drug pricing will be deferred pending further rulemaking; and, 2. enforcement of the requirement to publicly disclose information related to in-network rates and out-of-network allowed amounts and billed charges will be deferred until July 1, 2022.
- Certain price comparison tool requirements under the CAA will be more closely aligned with similar requirements under the Transparency in Coverage rules and subject to a delayed applicability date of January 1, 2023.
- Advanced explanation of benefits (EOB) requirements under the CAA are now subject to an indefinite enforcement delay, pending additional notice and comment rulemaking. However, interim requirements may be forthcoming.
KMK Comment: This new guidance provides substantial relief for plan sponsors as to select compliance deadlines and certain implementation requirements. Nevertheless, these rules are very complex, and not all health plan transparency deadlines have been extended (for example, the comparative analysis requirement under the MHPAEA is already in effect). As a result, employers will want to work closely with service providers to ensure timely and complete compliance.
The KMK Law Employee Benefits & Executive Compensation Group is available to assist with these and other issues.
KMK Employee Benefits and Executive Compensation email updates are intended to bring attention to benefits and executive compensation issues and developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.