Benefits Monthly Minute
The May Monthly Minute brings you up-to-date on mental health parity enforcement relief, as well as smoker surcharge and prohibited transaction litigation.
Nonenforcement of 2024 Mental Health Parity Regulations
Earlier this year, the ERISA Industry Committee (ERIC) filed a complaint against the DOL, HHS, and the Treasury Department seeking to invalidate the 2024 final regulations under the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) and the Consolidated Appropriations Act, 2021 (CAA). Subsequently, the DOJ requested the court suspend its review of the case in light of the government’s pending review of the 2024 mental health parity regulations. On May 15, 2025, the DOL, HHS, and IRS released an Announcement that they are reconsidering the 2024 regulations and stated that the 2024 regulations will not be enforced for at least 18 months after a final decision in the ERIC litigation is made. The Departments also intend to reexamine enforcement of the MHPAEA, including those provisions amended by the CAA.
KMK Comment: This new enforcement relief comes as welcomed news to plans struggling to comply with the increased complexity of the 2024 regulations, as well as the fiduciary certification requirement. However, despite this nonenforcement and related reexamination, the MHPAEA's statutory requirements, as amended by the CAA, continue to apply. Accordingly, the preparation of written nonquantitative treatment limitation (NQTL) comparative analyses continues to be required until further notice. The KMK Benefits Group is available to advise on the details of these requirements.
Tobacco Surcharge Cases Continue to Surge
Late this month, another tobacco surcharge class action was filed. In Janosky v. United Surgical Partners, plaintiff alleged multiple failures under her Kentucky employer’s tobacco surcharge program, including a failure to offer retroactive surcharge refunds for completing an alternative standard and a failure to provide the required notice as mandated under wellness program regulations. Plaintiff paid roughly $50 per month in additional premiums in connection with the tobacco surcharge program and is seeking recovery of these amounts as well as plan-wide equitable relief.
KMK Comment: As previously reported in the January 2025 Monthly Minute, while numerous complaints have been lodged disputing the legality of charging higher health plan premiums in connection with smoker status, many employers hope to use Loper Bright as a sword in arguing that the wellness regulations are inconsistent with the statutory requirements underpinning wellness programs as a whole. However, this case makes plain that smoker surcharge cases continue to thrive while the impact of Loper Bright works its way through the court system. For this reason, it is imperative to continue to review these programs with legal counsel from a documentary and operational perspective to ensure compliance and avoid costly litigation.
Cornell 401(k) Fee Case Paves the Way for Prohibited Transaction Litigation
In Cunningham v. Cornell University, the question was raised whether, to state a prohibited transaction claim, plaintiffs must plead that an exemption does not otherwise apply to an alleged transaction between a plan and a party-in-interest. In this case, plaintiffs sued Cornell and other plan fiduciaries alleging that defendants engaged in prohibited transactions with respect to recordkeeping services provided by Fidelity and TIAA. Plaintiffs claimed that a reasonable fee would have been about $35 per participant per year while the plans paid between $115 and $200 per participant per year. In this definitive opinion, the Supreme Court reversed the Second Circuit. In allowing the case to proceed, the Court ultimately ruled that it is the defendant-fiduciary who bears the burden of pleading and proving that an exemption to the prohibited transaction rules applies, and that plaintiffs “need do no more than plead the violation[.]”
KMK Comment: The Supreme Court’s decision seems likely to open the floodgates for prohibited transaction lawsuits and sharpens the focus on the defensive posture plan fiduciaries must take when handling fiduciary duties. It is essential for plan fiduciaries to engage in careful service provider selection and scrutinize the reasonableness of fees with an eye towards defending (possibly baseless) litigation in the years to come as a result of this Supreme Court decision.
The KMK Law Employee Benefits & Executive Compensation Group is available to assist with these and other issues.
Lisa Wintersheimer Michel
513.579.6462
lmichel@kmklaw.com
John F. Meisenhelder
513.579.6914
jmeisenhelder@kmklaw.com
Antoinette L. Schindel
513.579.6473
aschindel@kmklaw.com
Kelly E. MacDonald
513.579.6409
kmacdonald@kmklaw.com
Rachel M. Pappenfus
513.579.6492
rpappenfus@kmklaw.com
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.
