Benefits Monthly Minute
This Will Only Hurt a Bit! New FAQs Offer COVID-19 Vaccine Clarification
Newly released FAQs confirm that a group health plan may offer participants a premium discount for receiving a COVID-19 vaccination as long as the premium discount complies with federal wellness program regulations. To refresh, a premium discount that requires an individual to perform or complete an activity related to a health factor to obtain a reward, in this case obtaining a COVID-19 vaccination, would be considered a wellness program that must comply with the five criteria for activity-only wellness programs:
- The program must be reasonably designed to promote health or prevent disease.
- The program must provide a reasonable alternative standard to qualify for the discount. For example, offer a waiver or the right to attest to following other COVID-19-related guidelines to individuals for whom it is unreasonably difficult due to a medical condition or medically inadvisable to obtain the COVID-19 vaccination.
- The program must also provide notice of the availability of the reasonable alternative standard.
- The reward (together with the reward for other health-contingent wellness programs) must not exceed 30% of the total cost of employee-only coverage.
- The program must give individuals eligible for the program the opportunity to qualify for the reward at least once per year.
The FAQs also provide other vaccine-related clarifications:
- Plans must now cover COVID-19 vaccines and their administration, without cost sharing, immediately once the particular vaccine becomes authorized under an Emergency Use Authorization (EUA) or approved under a Biologics License Application (BLA).
- Plans may not discriminate in eligibility for benefits or coverage based on whether or not an individual obtains a COVID-19 vaccination.
- Wellness incentives that relate to the receipt of COVID-19 vaccinations are treated as not earned for purposes of determining ACA-related affordability. For example, if the individual premium contribution under a COVID-19 vaccination wellness program was reduced by 25%, this reduction is disregarded for purposes of determining whether the coverage is affordable. Conversely, if an individual’s premium contribution is increased by a 25% surcharge under a COVID-19 vaccination wellness program for a non-vaccinated individual, that surcharge would not be disregarded in assessing affordability.
KMK Comment: While certain aspects of the October FAQs may come as no surprise, given the rapidly changing COVID-19 vaccination and benefits environment, it is helpful to have this clear guidance from the DOL. We will continue to monitor the guidance in the coming weeks.
Playing Regulatory Ping-Pong: Biden ESG Proposal Hits Back at Trump-Era Regulations
Earlier this month, the Biden administration released a proposed rule to upend current regulations finalized under the Trump administration (see the November, 2020 Monthly Minute) that generally require plan fiduciaries to select investments and investment courses of action based solely on consideration of “pecuniary factors.” In response to the 2020 final regulations, the EBSA announced in March of 2021, that pending further guidance, the Department would not enforce the Trump-era 2020 rules against any plan fiduciary based on a failure to comply with respect to an investment, including a QDIA. The newly proposed rule, published October 14, 2021, opens the door to allow fiduciaries to focus on environmental, social and corporate governance (ESG) factors when selecting investments or exercising proxy voting rights.
Specifically, the new regulatory text makes it clear that, when considering projected returns, a fiduciary’s duty of prudence may require an evaluation of the economic effects of climate change and other ESG factors on the particular investment. The proposal would also remove the special rules for QDIAs that apply under the current rule, and instead, would apply the same standards to QDIAs as apply to other investments. Another important change is to the “tie-breaker” standard, which permits fiduciaries to consider collateral benefits as tie-breakers in some circumstances. The existing rule imposes a requirement that the competing investments be economically indistinguishable before fiduciaries can turn to collateral factors as tie-breakers. The proposal would replace those provisions with a standard that requires the fiduciary to conclude prudently that competing investments, or competing investment courses of action, equally serve the financial interests of the plan over the appropriate time horizon. Lastly, the proposed rule also makes several changes to the current rule’s provision on exercises of shareholder rights, including proxy voting. Pending further action, enforcement of the 2020 regulations remains suspended.
KMK Comment: Whether the proposed rule will ultimately counteract the negative perceptions anchored by the 2020 regulations’ treatment of ESG considerations in retirement plan investing is unclear. We will keep you updated once the rules become final.
Trick or Treat? New COBRA Outbreak Period Guidance
In IRS Notice 2021-58, the IRS (in collaboration with the DOL and HHS) provide clarification as to the extension of COBRA election and premium payment periods, as well as the interaction of COBRA under the Outbreak Period guidance with premium assistance under the American Rescue Plan Act of 2021 (ARPA).
Under previous Outbreak Period guidance, up to one year must be disregarded in determining the due dates for individuals to elect COBRA continuation coverage and pay COBRA premiums during the Outbreak Period. IRS Notice 2021-58 clarifies that the disregarded period for an individual to elect COBRA and the disregarded period for the individual to make initial and subsequent COBRA premium payments generally run concurrently; therefore, individuals who delay electing COBRA may not have more than one year of total disregarded time for the COBRA election and initial COBRA payment.
The later-enacted ARPA provides for temporary COBRA premium assistance for certain individuals. The Notice makes clear that the Outbreak Period extensions do not apply to the periods for providing the required notice of the ARPA extended election period or for electing COBRA continuation coverage with COBRA premium assistance under the ARPA. An individual who has a disregarded period may generally elect retroactive COBRA coverage, and may elect COBRA coverage with premium assistance for any period that the individual is eligible for COBRA premium assistance. However, the disregarded periods continue to apply to payments of COBRA premiums after the end of the ARPA COBRA premium assistance period, to the extent that the individual is still eligible for COBRA and the Outbreak Period has not ended.
KMK Comment: In response to the highly technical nature of these rules, the IRS has provided numerous examples to shed more light on their practical application. Plan sponsors should be sure to review those examples or consult with their legal counsel to ensure continued 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.