Benefits Blast

While recent regulatory developments—including the Departments’ nonenforcement policy, proposed legislation, and new transparency rules—offer employers and plan fiduciaries greater flexibility and potential relief, they also underscore the need for continued vigilance. From ensuring compliance with longstanding MHPAEA obligations to evaluating benefit design changes, managing PBM relationships, and addressing nondiscrimination concerns in self-funded plans, stakeholders must stay proactive and informed to navigate the evolving health and welfare benefits landscape effectively.While recent regulatory developments—including the Departments’ nonenforcement policy, proposed legislation, and new transparency rules—offer employers and plan fiduciaries greater flexibility and potential relief, they also underscore the need for continued vigilance. From ensuring compliance with longstanding MHPAEA obligations to evaluating benefit design changes, managing PBM relationships, and addressing nondiscrimination concerns in self-funded plans, stakeholders must stay proactive and informed to navigate the evolving health and welfare benefits landscape effectively.

In Cunningham v. Cornell University, the U.S. Supreme Court rejected efforts by plan fiduciary defendants, previously endorsed by several courts of appeals, to require plaintiffs to allege more than the mere existence of a contract with a service provider to withstand early motions to dismiss prohibited transaction claims in excessive fee lawsuits. The decision appears likely to lead to increased litigation, and plan fiduciaries should review their processes and procedures to ensure plans are only paying reasonable fees for necessary services.

Amid a recent resurgence in litigation targeting pension risk transfer (PRT) transactions, plan sponsors and fiduciaries should take extra care in selecting annuity providers to ensure compliance with fiduciary duties. Read on for a summary of recent developments and insights.   

Earlier this year, the Department of Labor (DOL) announced updates to the Voluntary Fiduciary Correction Program (VFCP), which are set to take effect March 17, 2025. As an alternative to the more onerous VFCP Application Process, certain common plan errors will soon be eligible for a streamlined self-correction process, known as the Self-Correction Component (SCC). In addition, the DOL amended the associated Prohibited Transaction Exemption, PTE 2002-51, to extend relief to certain corrections under the new SCC.

In the past few months, group health plans have experienced a surge of litigation challenging premium surcharges based on participants’ tobacco use.

In recent weeks, fires have devastated communities in and around Los Angeles, California. 

Last month, the United States (U.S.) Court of Appeals for the Fifth Circuit partially upheld a lower court ruling in Braidwood Management, Inc. v. Becerra that invalidated the preventive care mandate under the Affordable Care Act (ACA). 

On October 26, 2022, the Securities and Exchange Commission (“SEC”) adopted the long-awaited new Rule 10D-1 (the “Final Rule”), implementing the incentive-compensation clawback rules mandated by Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), originally added to the Exchange Act by Section 954 of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd–Frank Act”). The Final Rule is separate and distinct from the clawback mandates set forth in the Sarbanes–Oxley Act.

Rule 10b5-1 trading plans in essence provide corporate insiders an affirmative defense to insider trading liability in circumstances where, subject to certain conditions, a trade was executed pursuant to a written plan adopted when the executive was not aware of material nonpublic information. Executive officers and directors are not required to complete trades using 10b5-1 plans, but they are quite popular with executive officers and directors because of the protection they provide.

The Benefits Bulletin provides timely and consistent updates on industry hot topics.

Autumn’s chill has settled in, which means the 2022 proxy season is just around the corner. Given (1) the continuing impact of the COVID-19 pandemic and related supply chain issues and (2) the unprecedented interest in issues surrounding executive compensation, it is important to prepare early to avoid any unanticipated hitches and take advantage of opportunities to proactively address compensation matters through effective proxy disclosures, well-executed shareholder engagement, and informed compensation committee actions. 

Recently released FAQs confirm the view of the Departments of Labor, Treasury, and Health and Human Services (the “Departments”) that employers can provide incentives under a group health plan (either in the form of premium discounts or surcharges) to encourage employees to receive COVID-19 vaccines. Such premium discounts or surcharges are permissible if offered through a wellness program as described under the Affordable Care Act (“ACA”) final wellness program regulations.