Industry & Regulatory NewsHealth Care Equality and Modernization Act Introduced in House
Representative Peter Sessions introduced the Health Care Equality and Modernization Act of 2022 (the “Act”) in the House of Representatives. The Act contains various provisions that would amend the Affordable Care Act (ACA), redefine individual health coverage HRAs (“ICHRAs”), limit premium tax credits, and improve health savings accounts (HSAs).
The Act would repeal the ACA employer mandate and related information reporting, limit consumer protections, and impose a 20 percent penalty assessed as a premium increase for any individual that does not have continuous health insurance coverage for a period of 12 months. The Act would redefine ICHRAs to no longer treat them as group health plans pursuant to the ACA, ERISA, or the IRC. In addition, the Act would not require ICHRAs to comply with various federal laws, including ERISA, the IRC, the ACA, COBRA, and HIPAA. The Act would also limit premium tax credits to those individuals in states that have expanded the Exchange to all areas. Premium tax credits may also be used, at the discretion of the individual, to fund an HSA. Related to HSAs, the Act would increase the individual contribution limit to $5,000 and the family limit based on the number of individuals enrolled in family coverage. Upon the death of the account holder, the Act would also permit for easier transfer by treating the surviving spouse as the named account holder.
Industry & Regulatory NewsDOL Issues Compliance Release on Cryptocurrencies
The Department of Labor (DOL) has issued Compliance Assistance Release 2022-01 pertaining to the use of cryptocurrencies as plan investments in 401(k) plans. In it, the DOL cautions fiduciaries to exercise extreme care before considering the addition of cryptocurrency options in a plan’s investment menu and elaborates that the failure to remove an imprudent investment option from a menu of options is a breach of fiduciary duty.
The DOL expresses concerns about significant risks and challenges related to fraud, theft, and loss due the following factors
- Speculative and volatile investments due to early stage of development
- Ability for participants to make informed investment decisions due to the unique nature of cryptocurrencies and lack of investor knowledge
- Custodial and recordkeeping concerns related to the asset not being held in a trust or custodial account but rather, stored as “lines of computer code in a digital wallet”
- Valuation concerns with reliability and accuracy, citing disagreements by experts
- Evolving regulatory environment that could result in unlawful transactions or inadequate disclosures
The DOL intends to conduct an investigative program aimed at plans that offer participant investments in cryptocurrencies and related products—including those within brokerage windows and take “appropriate action” to protect the interests of plan participants and beneficiaries.
Industry & Regulatory NewsHouse Passes Spending Bill That Would Include Telehealth Extension
The House of Representatives on Wednesday passed a substantial $1.5 Trillion omnibus spending package to fund the government. Included in the bill is a provision that would temporarily allow expenses for telehealth and other remote care services to continue be paid from a health savings account (HSA) without first meeting the deductible under the high deductible health plan (HDHP). The provision would allow the deductible to be disregarded for the period April 1, 2022, through December 31, 2022.
Previously, the Coronavirus Aid, Relief, and Economic Security (CARES) Act amended the same provision to temporarily cover telehealth and remote care services without meeting the deductible for the period after January 1, 2020, for plan years beginning on or before December 31, 2021.
While the provision, if enacted, would allow additional temporary flexibility for HSA owners to cover telehealth expenses from their accounts before meeting deductibles, it is important to note that due to the timing of the expiration of the CARES relief and the extension proposed in the legislation, telehealth services for the period January 1, 2022, through March 31, 2022, would be subject to the HDHP deductible requirements before they would be considered a qualified medical expense for HSA purposes.
The bill now heads to the Senate, where a vote is expected by a Friday funding deadline. However, House lawmakers also passed a stopgap measure by voice vote that lasts until Tuesday to ensure that the Senate has enough time to clear the omnibus package without risking a government shutdown.
Industry & Regulatory NewsDOL Releases Proposed Rule Updating Davis-Bacon Regulations
The Department of Labor’s (DOL’s) Wage and Hour Division has released a proposed rule Updating the Davis-Bacon and Related Acts Regulations. The DOL indicates that the proposal is the most comprehensive review of the Davis-Bacon Act regulations in 40 years.
The Davis-Bacon Act generally requires payment of locally prevailing wages under direct federal contracts and for covered contractors and their subcontractors. The employer’s obligation can be met by paying the applicable prevailing wage entirely as cash wages or by a combination of cash wages and employer-provided bona fide fringe benefits—including pension and health benefits.
All comments must be received within 60 days of the rule being posted in the Federal Register. While the Wage and Hour Division solicits comments from across the construction industry, it encourages all stakeholders to participate in the process.
Industry & Regulatory NewsPBGC Issues Interest Rate Assumptions for DB Plans
The Pension Benefit Guaranty Corporation (PBGC) has issued updated interest rate assumptions for benefit payments in terminating single-employer defined benefit (DB) pension plans. Specifically, these interest assumptions are for benefit payments with valuation dates in the second quarter of 2022, and apply to plans insured by PBGC.
Industry & Regulatory NewsDOL Final Rule on SECURE Act Group of Plan Reporting at OMB
Final regulations entitled, Implement SECURE Act and Related Revisions to Employee Benefit Plan Annual Reporting on the Form 5500, issued by the Department of Labor’s Employee Benefits Security Administration (EBSA), have been received by the federal Office of Management and Budget (OMB). The OMB’s Office of Information and Regulatory Affairs (OIRA) provides final review of regulatory guidance before its official release.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act included a provision that would allow employers sponsoring defined contribution plans that have the same trustee, administrator, fiduciaries, plan year, and investment options, to file one common Form 5500 beginning in 2022. Proposed guidance was issued last fall under a larger guidance package, with details shared in a Washington Pulse.
Industry & Regulatory NewsIRS Issues Temporary Suspension of Prototype IRA Opinion Letter Program
The Internal Revenue Service (IRS) has issued Announcement 2022-6, providing that effective March 14, 2022, and until further notice, the IRS will not accept applications for opinion letters on prototype IRAs (Traditional, Roth, and SIMPLE IRAs), SEP plans (including salary reduction SEPs (SAR-SEPs)), and SIMPLE IRA plans. Adopters of these arrangements may rely on a previously received favorable opinion letter, and can use existing model forms to maintain or establish plans and accounts.
The temporary suspension will allow the IRS to update the prototype IRA opinion letter program, issue revised model forms and Listings of Required Modifications (LRMs), and issue published guidance to reflect recent legislation. This is essentially the first step in a larger process requiring document updates for these arrangements pursuant to the Setting Every Community Up for Retirement Enhancement (SECURE) Act, details of which will be provided in future guidance.
Industry & Regulatory NewsDOL Issues Proposed Rule on Prohibited Transaction Exemption Procedures
The Department of Labor (DOL) has released a proposal that would supersede the Department’s existing procedure governing applications for exemptions from the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. The Secretary of Labor is authorized to grant such exemptions and provide procedures for relief. Highlights of the proposal suggest substantially stricter standards and additional criteria for obtaining prohibited transaction relief, if implemented.
The DOL emphasizes that it will apply a high level of scrutiny to any retroactive exemption—including ensuring that no participants were harmed—and suggests contacting the agency before engaging in the transaction. Any information provided to the Office of Exemption Determinations, including during the pre-submission process, becomes part of an administrative record that is open for public inspection.
The DOL states that a previously issued exemption is not determinative of whether a future exemption would be approved under the same fact pattern. The DOL also proposes additional requirements in the application for exemption, several of which are highlighted below.
- The reason(s) for engaging in the exemption transaction
- Any material benefit that a party involved in the exemption transaction may receive because of the transaction
- The costs and benefits of the exemption transaction to the affected plan(s), participants, and beneficiaries—including quantification of those costs and benefits, if possible
- A detailed statement that describes possible alternatives to the exemption transaction and why the applicant did not pursue those alternatives
- A description of each conflict of interest or potential instance of self-dealing that would be permitted if the exemption is granted
- A statement that the transaction will be in the best interest of the plan and its participants and beneficiaries
- A statement that all compensation received, directly or indirectly, by a party involved in the exemption transaction will not exceed reasonable compensation within the meaning of ERISA and the Internal Revenue Code
- All statements made to the DOL, the plan, or, if applicable, the qualified independent fiduciary or qualified independent appraiser cannot be materially misleading at the time the statements are made
- A statement whether any prior transactions have occurred between the plan or plan sponsor and a party involved in the exemption transaction
The proposal modifies the definition of a qualified independent appraiser. It also addresses contractual obligations, prohibits indemnifications, and requires detailed information regarding relationships with any party or its affiliates (including past engagements) in an effort to determine independence. Similarly, the proposal expands requirements of qualified independent fiduciaries by prohibiting indemnifications, requiring fiduciary liability insurance sufficient to cover damages resulting by a breach of the independent fiduciary, and certifying that the exemption transaction complies with impartial conduct standards and the independent fiduciary has no conflicts of interest that could affect their judgement.
Under the proposal, applicants would have a duty to promptly notify the DOL of any material changes to representations made during the application process or after approval of the exemption, including disclosing whether a participating party in the exemption is the subject of an investigation or enforcement action. The changes would apply 90 days following receipt of a final rule in the Federal Register. Comments on the proposed rule must be submitted to the DOL by April 14, 2022.
Industry & Regulatory NewsIRS Updates Yield Curves and Segment Rates for DB Plan Calculations
The IRS has issued Notice 2022-14, which contains updated guidance on factors used in certain defined benefit (DB) pension plan minimum funding and present value calculations. Updates include the corporate bond monthly yield curve, the corresponding spot segment rates used under Internal Revenue Code Section (IRC Sec.) 417(e)(3), and the 24-month average segment rates under IRC Sec. 430(h)(2). IRC Sec. 417 contains definitions and special rules for minimum survivor annuity requirements in DB plans. IRC Sec. 430 addresses minimum funding standards for single-employer DB plans.
Industry & Regulatory NewsSEC Proposes ESG Reporting for Publicly Traded Companies
The SEC has issued a proposed rule that would require publicly traded companies to include certain climate-related disclosures in their registration statements and periodic reports, such as the annual Form 10-K.
The proposed rule would in part require disclosure about the following.
- The registrant’s governance of climate-related risks and relevant risk management processes.
- How any climate-related risks identified by the registrant have had or are likely to have a material impact on its business and consolidated financial statements.
- How any identified climate-related risks have affected or are likely to affect the registrant’s strategy, business model, and outlook.
- The impact of climate-related events (such as severe weather and other natural conditions) and transition activities on the line items of a registrant’s financial statements and estimates used in financial statements.
The rule would also require disclosures about direct greenhouse gas admissions and indirect emissions from purchased electricity or other forms of energy, as well as disclosure of greenhouse gas emissions from upstream and downstream activities in its value chain if material or if the registrant has set an emissions target. Accelerated filers would be required to include an attestation report from an independent attestation service provider covering emission disclosures.
A fact sheet provides an overview of requirements and the applicable phase-in period—depending on the type of registrant and type of emission disclosure required. The comment period will remain open for the longer of 1) 30 days after publication in the Federal Register, or 2) 60 days after the date of issuance and publication on sec.gov.