Benefits Monthly Minute

What Lies Ahead for Your Rx Accumulator Program? | It's Inevitable: No Exclusion for Uncashed Distribution Checks | DOL Paves the Way for Combined Small Business Retirement Plans

What Lies Ahead for Your Rx Accumulator Program?

Accumulator programs have become a popular utilization management technique that enables health plans to exclude the cost of drug manufacturer coupons or copay assistance cards when calculating a participant’s out of pocket costs. In essence, these programs allow health plans to more accurately determine a participant’s true out of pocket costs, as opposed to amounts that are subsidized by drug companies.  However, in recently released regulations (effective 2020), HHS appears to have limited the use of such programs to circumstances in which there is also an available and medically appropriate generic equivalent.  What’s more, while the new regulation expressly permits (but does not require) accumulator programs where there is an available and medically appropriate generic equivalent, HHS makes its position clear in the preamble that under certain other circumstances, plans are prohibited from using accumulators.  Now may be a good time to evaluate your prescription drug coverage to determine whether your plan’s current accumulator program is consistent with HHS’ new rules.

It's Inevitable: No Exclusion for Uncashed Distribution Checks

What tax treatment applies when a participant fails to cash a distribution check?  In Rev. Rul. 2019-19, the IRS recently confirmed that the distribution is taxable in the year distributed, whether or not the check is cashed.  Thus, when a distribution is made to an individual and the individual could cash the check, the amount is included in income (provided that no exception to income inclusion applies), subject to withholding, and the distribution must be reported on a 1099-R for the year of distribution.  What’s more, the result is the same whether the individual keeps the check, sends it back, destroys it or cashes it in a later year.  Although this guidance does not address under what circumstances an individual would be considered unable to cash the check, the language of the ruling seems to leave the door open to reach a different result in special circumstances.

DOL Paves the Way for Combined Small Business Retirement Plans

The DOL recently released a final rule intended to provide small businesses with greater access to quality and affordable retirement plans.  The new rule, effective September 30, 2019, clarifies that a small employer group (association) -- such as employers in the same locale or particular industry/trade -- can band together and offer a defined contribution retirement plan to their employees through an Association Retirement Plan (“ARP”).  This significantly relaxes the “commonality” standard previously required for separate employers to offer a combined retirement plan.  Further, working owners without employees, including sole proprietors, can also participate in ARPs.  Although various restrictions apply, it is expected that ARPs will allow employer groups to achieve economies of scale when negotiating with providers as well as lower administrative fees.  The end result is expected to provide a means for small employers to offer more competitive benefit packages to their employees.

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.

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