The Washington Report
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December 16, 2020
Note to subscribers: Due to the current environment, information is changing at a rapid rate. While we do our best to provide timely updates, it is possible that the information shared in the newsletter may change or be revised after our publication deadline. Stay healthy and safe! ~The Washington Report team
Note to Subscribers: Holiday Publication Schedule
The Washington Report will be taking a holiday hiatus beginning December 23, 2020, through January 6, 2021. Look for your next Washington Report on Wednesday, January 13, 2021. Happy holidays and New Year!
Executive
President Signs Stopgap Funding Measure Into Law; Congress Returns to Consider Another Budget Bill With Possible COVID Relief Provisions
On December 11, 2020, President Trump signed a stopgap bill (H.R. 8900) that funds the government through December 18. The Senate approved the measure on December 10, and the House approved the bill on December 9. The bill continues to provide short-term funding to various government programs and agencies as support was set to expire on December 11. The one-week extension allows Congress to return this week and consider a longer-term funding measure that could include COVID relief provisions.
The full text of H.R. 8900 is available here.
Health
Departments Publish Final Regulations on Grandfathered Group Health Plans and Grandfathered Group Health Insurance Coverage
On December 11, 2020, the Departments of Labor, Health and Human Services, and the Treasury (the Departments) published final regulations that amend the requirements for grandfathered group health plans and grandfathered group health insurance coverage to preserve their grandfather status. The Affordable Care Act (ACA) provides that certain grandfathered group health plans and health insurance coverage that existed as of the law’s enactment are subject to some of the ACA’s requirements, such as the prohibition on preexisting condition exclusions, but are exempt from certain other requirements.
President Trump signed an Executive Order (13765) on January 20, 2017, directing the Departments to mitigate fiscal burdens of the ACA. Consistent with this direction, “the final regulations provide greater flexibility for grandfathered group health coverage. First, the regulations clarify that grandfathered group health coverage that is a high- deductible health plan (HDHP) may increase fixed-amount cost-sharing requirements, such as deductibles, to the extent necessary to maintain its status as an HDHP without losing grandfather status. This change ensures that participants and beneficiaries enrolled in that coverage remain eligible to contribute to a health savings account. Second, the final regulations provide an alternative method of measuring permitted increases in fixed-amount cost-sharing that allows plans and issuers to better account for changes in the costs of health coverage over time.” The regulations become effective on January 14, 2021. The regulations are applicable June 15, 2021. For additional details, please refer to the final regulations.
The news release is available here.
The final regulations are available here.
The January 20, 2017, Executive Order (13765 - Minimizing the Economic Burden of the ACA Pending Repeal) is available here.
HHS Releases NPRM Proposing Modifications to the HIPAA Privacy Rule; Improving Coordinated Care and Reducing Regulatory Burdens
On December 10, 2020, the Office for Civil Rights at the Department of Health and Human Services (HHS) announced proposed changes to the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule to “support individuals’ engagement in their care, remove barriers to coordinated care, and reduce regulatory burdens on the health care industry.”
“The proposed changes to the HIPAA Privacy Rule include strengthening individuals’ rights to access their own health information, including electronic information; improving information sharing for care coordination and case management for individuals; facilitating greater family and caregiver involvement in the care of individuals experiencing emergencies or health crises; enhancing flexibilities for disclosures in emergency or threatening circumstances, such as the Opioid and COVID-19 public health emergencies; and reducing administrative burdens on HIPAA-covered health care providers and health plans, while continuing to protect individuals’ health information privacy interests.” Comments on the Notice of Proposed Rule Making (NPRM) will be due 60 days after publication in the Federal Register (date unknown).
The HHS news release is available here.
The NPRM is temporarily available here.
(This HHS-approved document is being submitted to the Office of the Federal Register (OFR) for publication and has not yet been placed on public display or published in the Federal Register. This document may vary slightly from the published document if minor editorial changes are made during the OFR review process. The document published in the Federal Register is the official HHS-approved document.)
Retirement
PBGC Releases FY 2020 Annual Report; Multiemployer Program Projected to Be Insolvent in FY 2026 While Single-Employer Program Improves
On December 10, 2020, the Pension Benefit Guaranty Corporation (PBGC) released its Fiscal Year (FY) 2020 Annual Report. The report notes, among other things, that the agency’s Multiemployer Insurance Program expected insolvency date has been delayed from FY 2025 to sometime in FY 2026. Meanwhile, the Single-Employer Insurance Program is improving, driven primarily by investment income and premium income. The PBGC states it continues to meet its financial obligations and provide excellent customer service to a record number of retirees this year.
“This year’s report illustrates that PBGC’s two insurance programs are in dramatically different financial positions,” PBGC Director Gordon Hartogensis said. “I remain incredibly proud of how the agency has navigated these challenging times while continuing operations and supporting our mission…In particular, it remains clear that legislative reform is necessary to avert insolvency of the Multiemployer Program, and PBGC continues to provide technical support to policymakers, stakeholders, and plan sponsors.”
The PBGC FY 2020 annual report is available here.
IRS Provides Guidance on Sections 102 and 103 of the SECURE Act With Respect to Safe Harbor Plans
On December 9, 2020, the Internal Revenue Service (IRS) issued Notice 2020-86 that addresses certain provisions of the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) affecting safe harbor plans, including safe harbor 401(k) plans and certain 403(b) plans. A safe harbor 401(k) plan is similar to a traditional 401(k) plan but is structured in a way that certain compliance testing can be avoided. Notice 2020-86 is written in the form of questions and answers to assist small businesses and other employers that maintain safe harbor plans to comply with the SECURE Act.
The SECURE Act generally increases from 10% to 15% the maximum automatic elective deferral under an automatic enrollment safe harbor plan. It also eliminates certain safe harbor notice requirements for plans that provide safe harbor non-elective contributions and adds new provisions for the retroactive adoption of safe harbor status for those plans. Notice 2020-86 provides initial guidance on these provisions of the SECURE Act and impacts certain safe harbor 401(k) and 401(m) plans (including 403(b) plans that apply the 401(m) safe harbor).
IRS Notice 2020-86 is available here.
IRS Releases Final Regulations on Rollover Rules for Qualified Plan Loan Offset Amounts
On December 7, 2020, the IRS released final regulations relating to amendments made to Section 402(c) of the Internal Revenue Code by Section 13613 of the Tax Cuts and Jobs Act (TCJA). Section 13613 of the TCJA provides an extended rollover period for a qualified plan loan offset from 60 days to the individual’s tax filing due date (including extensions). These regulations affect participants, beneficiaries, sponsors, and administrators of qualified employer plans. The final regulations are effective when published in the Federal Register (date unknown).
The final regulations are temporarily available here.
(This document is in the process of being submitted to the Office of the Federal Register (OFR) for publication and will be pending placement on public display at the OFR and publication in the Federal Register. The version of the final regulations released today may vary slightly from the published document if minor editorial changes are made during the OFR review process. The document published in the Federal Register will be the official document.)
Other HR/Employment
Treasury and IRS Release Final Regulations on the Deduction for Qualified Transportation Fringe and Commuting Expenses
On December 9, 2020, the Treasury and Internal Revenue Service (IRS) released final regulations on the deduction for qualified transportation fringe and commuting expenses following changes made by the Tax Cuts and Jobs Act (TCJA). The 2017 TCJA generally disallows deductions for qualified transportation fringe (QTF) expenses and does not allow deductions for certain expenses of transportation and commuting between an employee's residence and place of employment.
The final regulations address the disallowance of the deduction for expenses related to QTFs provided to an employee of the taxpayer, including providing guidance and methodologies to determine the amount of QTF parking expenses that is nondeductible. The final regulations also address the disallowance of the deduction for expenses of transportation and commuting between an employee's residence and place of employment. The regulations are effective on December 16, 2020. The regulations apply to taxable years beginning on or after December 16, 2020.
The news release is available here.
The final regulations are temporarily available here.
(The final regulations will be published in the December 16, 2020, Federal Register.)
Updates on the implementation of the TCJA can be found on the Tax Reform page of IRS.gov, available here.
DOL Publishes Final Rule Implementing Legal Requirements for Religious Exemption
On December 8, 2020, the Department of Labor’s (DOL’s) Office of Federal Contract Compliance Programs (OFCCP) released its “Implementing Legal Requirements Regarding the Equal Opportunity Clause’s Religious Exemption” final rule (to be published in an upcoming Federal Register, date unknown). This rule “will encourage the full and equal participation of religious organizations as federal contractors.” Executive Order 11246 (Equal Employment Opportunity), which OFCCP enforces, generally requires federal contractors to abide by nondiscrimination and affirmative action requirements. Yet the order also acknowledges that religious organizations may prefer in employment “individuals of a particular religion,” so that they can maintain their religious identity and integrity. The rule “provides clearer interpretation of the parameters of the religious exemption by adding definitions of key terms. It adds a rule of construction to provide the maximum legal protection of religious exercise permitted by the Constitution and law, including the Religious Freedom Restoration Act. The rule also adds several examples within the definition of ‘religious corporation, association, educational institution, or society’ to better illustrate which organizations may qualify for the religious exemption.” The final rule becomes effective on January 8, 2021.
The news release is available here.
The final rule is available here.
Executive Order 11246 (Equal Employment Opportunity) is available here.
Aon Publications
IRS Issues Adjusted PCORI Fee for Plans
The Internal Revenue Service (IRS) issued Notice 2020-84 on November 24, 2020. The Notice announced the applicable Patient-Centered Outcomes Research Institute (PCORI) fee for plan years that end on or after October 1, 2020, and before October 1, 2021 (e.g., the applicable PCORI fee for 2020 calendar year plans).
The Aon bulletin is available here.
New HHS Regulations Establish Payment Rules for Part B Drugs and New Rebate Rules
The Department of Health and Human Services (HHS) recently published two regulations intended to reduce the prices that Medicare pays for prescription drugs.
The Aon bulletin, which provides an overview of these two regulations that establish payment rules for Part B drugs and new rebate rules, is available here.
It’s Unanimous—SCOTUS Says ERISA Does Not Preempt Arkansas’ Pharmacy Reimbursement Law
On December 10, 2020, the U.S. Supreme Court (SCOTUS) unanimously ruled in Rutledge v. Pharmaceutical Care Management Association that ERISA does not preempt an Arkansas state law requiring pharmacy benefit managers (PBMs) to reimburse Arkansas pharmacies for the cost of prescription drugs at a price equal to or higher than the pharmacy’s wholesale cost. With other states maintaining similar laws, the decision may prompt a nationwide patchwork of reimbursement requirements for PBMs, which could result in employer-sponsored prescription drug plans paying higher prices for prescription drugs.
The Aon bulletin is available here.
2021 Limits for Benefit Plans
Each year, the U.S. government adjusts the limits for retirement plans, Social Security, Medicare, and other benefit programs to reflect price and wage inflation and changes in the law. As a result, employee benefit plans must be adapted annually to accommodate the new limits. All of the numbers in this report are official unless otherwise indicated.
The 2021 Limits for Benefit Plans bulletin is available here.
Departments Inject Another Round of Vaccine Guidance for Employers
The U.S. Departments of Labor, Treasury, and Health and Human Services (the Departments) issued an Interim Final Rule (IFR) on the COVID-19 vaccine, including rules on coverage of the vaccine by group health plans and cost provisions for group health plans for COVID-19 diagnostic testing. The IFR is effective as of November 6, 2020. Comments are being solicited until January 4, 2021.
The Aon bulletin, which provides a brief overview of the guidance, is available here.