Health and Welfare

DOL Proposes Delay of Effective Date for Independent Contractor Final Regulations

The Department of Labor (DOL) Wage and Hour Division has proposed a delay of the effective date for final regulations on independent contractor status, regulations that were due to become effective March 8, 2021. The DOL is seeking to delay the effective date to May 7, 2021. Comments on the request to delay the effective date must be received by February 24, 2021.

In its request for a delayed effective date, the DOL stated that this action will not have negative effects because the final regulations have not yet been implemented, and the existing public guidance—Wage and Hour Division Fact Sheet #13, Employment Relationship under the Fair Labor Standards Act (FLSA)—“will continue to be available to all.”

The final regulations were published January 7, 2021, in the Federal Register. Their intended purpose, as described by the DOL, was to clarify distinctions between employee and independent contractor status in employment situations. Businesses sometimes use independent contractors to control costs and create efficiencies. Some have run afoul of federal and state laws by classifying workers as independent contractors when they are actually employees. Because various definitions of “independent contractor” have emerged under federal and state laws, determining whether workers are independent contractors or employees has, under some circumstances, been confusing at times, resulting in inconsistent worker classifications. The delivery of employee benefits, such as retirement savings and certain other benefits, is often tied to a determination of independent contractor or employee status.

The newly proposed delay is a response to a directive by President Biden in a January 20, 2021-issued memorandum entitled, Regulatory Freeze Pending Review. These final regulations are among several items of federal agency guidance expected to be examined for possible revision.

New Executive Order Revokes Previous Administration’s Health Policy Directives

On January 28, 2021, President Biden issued an Executive Order entitled Strengthening Medicaid and the Affordable Care Act. Included within the Order was what was described as an objective to “make high-quality healthcare accessible and affordable for every American.” Of particular interest in this Order is the revocation of two Executive Orders issued by former President Trump.

Executive Order 13765, Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal, which was issued on January 20, 2017, gave federal agencies the authority to grant waivers, deferrals, or exemptions in an effort to delay implementation of the Affordable Care Act provisions that would impose fiscal burdens on states, individuals, healthcare providers, health insurers, and others.

Executive Order 13813, Promoting Healthcare Choice and Competition Across the United States, which was issued on October 12, 2017, directed federal agencies to identify actions that could be taken to facilitate the provision of high-quality healthcare at affordable prices and prioritized improvements in respect to association health plans, short-term limited-duration insurance, and health reimbursement arrangements.

President Biden’s Executive Order further directs the heads of agencies to review actions that are related to or that arose based on Executive Orders 13765 and 13813 and consider whether to suspend, revise, or rescind such actions.

Opinion Letter Addresses Interaction Between ADEA and Individual Coverage HRAs

The Equal Employment Opportunity Commission (EEOC) has issued an Opinion Letter dated January 7, 2021, to clarify whether the Age Discrimination in Employment Act (ADEA) prohibition against requiring older workers to bear a greater proportion of the cost of a fringe benefit than younger workers will affect contributions to Individual Coverage Health Reimbursement Arrangements (ICHRAs).

The Opinion Letter reviews two scenarios: (1) a defined contribution amount (i.e., fixed), and (2) a contribution based on a percentage of premium cost (with premium cost increasing with age).

In its Opinion Letter, the EEOC clarifies that the ADEA prohibition applies to fringe benefit plans that require employee contributions. Because ICHRAs are funded completely by employer contributions, they are not subject to the ADEA prohibition, and an employer could offer an ICHRA under either of the scenarios described above. In addition, the EEOC clarified that the individual insurance coverage selected by the employee is not administered or selected by the employer, and, therefore, does not trigger a prohibition under ADEA. The EEOC opinion did not consider whether the contribution formulas would be permissible under the requirements of the final health reimbursement arrangement regulations, only the restrictions imposed by the ADEA.

CAA Requires Disclosure of Compensation Paid by Employer-Sponsored Health Plans

The Consolidated Appropriations Act, 2021 (CAA), signed into law on December 27, 2020, contained many provisions, including a transparency provision that requires the disclosure of compensation paid to brokers and consultants who provide services to employer-sponsored health plans.

Section 202 of the CAA amends the Employee Retirement Income Security Act (ERISA) Section 408(b)(2) to incorporate “reasonableness” compensation standards for group health plans, mirroring those that apply to retirement plans when negotiating contracts or service arrangements. These disclosure requirements are to become effective one year after the enactment of the CAA and require the Department of Labor to finalize the notice and comment rulemaking process by the same date. However, the CAA provides a transition rule under which these disclosure requirements will not apply to any contract executed prior to one year after the December 27, 2020, enactment of the CAA.

ERISA Section 408(b)(2) provides a statutory exemption from the party-in-interest prohibitions for any “reasonable” contract or arrangement with a “party-in-interest.” A broker or consultant receiving such compensation is considered a party-in-interest. Pursuant to regulations finalized in 2012, but applicable to retirement plans only, a contract was not considered “reasonable” unless the “covered service provider” disclosed its direct or indirect compensation. Similarly, Section 202 of the CAA requires the disclosure of compensation paid by group health plans—excluding qualified small employer health reimbursement arrangements (QSEHRAs)—in order to meet the reasonableness standard of ERISA and qualify for the statutory exemption. A group health plan covered by Section 202 of the CAA would include a welfare plan that provides medical care to an employee and/or his dependents through insurance, reimbursement, or otherwise. Generally, a group health plan will include a health reimbursement arrangement, a health flexible spending arrangement, and an employer payment plan.

Pursuant to Section 202 of the CAA, a “covered service provider” is defined as a service provider that enters into a contract or arrangement with the covered plan and reasonably expects $1,000 or more in direct or indirect compensation in connection with providing either brokerage or consulting services or both. The CAA defines brokerage and consulting services as follows.

Brokerage Services: Selection of insurance products (including vision and dental), recordkeeping services, medical management vendor, benefits administration (including vision and dental), stop-loss insurance, pharmacy benefit management services, wellness services, transparency tools and vendors, group purchasing organization preferred vendor panels, disease management vendors and products, compliance services, employee assistance programs, or third party administration services.

Consulting Services: Development or implementation of plan design, insurance or insurance product selection (including vision and dental), recordkeeping, medical management, benefits administration selection (including vision and dental), stop-loss insurance, pharmacy benefit management services, wellness design and management services, transparency tools, group purchasing organization agreements and services, participation in and services from preferred vendor panels, disease management, compliance services, employee assistance programs, or third party administration services.

If an entity determines that it is a covered service provider, it must disclose certain information to the plan fiduciary no later than the date that is reasonably in advance of the date on which the contract or arrangement is entered into, extended or renewed. A covered service provider must disclose a change of any information as soon as practicable, but not later than 60 days from the date on which the covered service provider is informed of such change, unless precluded by extraordinary circumstances. In addition, the covered service provider is required to provide information requested by a plan fiduciary or a covered plan administrator to comply with disclosure and reporting requirements pursuant to ERISA.

Finally, a contract or arrangement does not cease to be reasonable if the covered service provider acted in good faith and with “reasonable diligence” but makes an error or omission if the covered service provider discloses the information to the plan fiduciary as soon as practicable, but not later than 30 days from the date the covered service provider knows of the error or omission.

Section 202 of the CAA also provides that a plan fiduciary will not have engaged in a prohibited transaction if, upon learning of an error or omission, the plan fiduciary requests the relevant information in writing from the covered service provider. Moreover, if the plan fiduciary does not receive the information within 90 days of the request, it must notify the Secretary of Labor within 30 days following the earlier of

  • the covered service provider’s refusal to furnish the information; or
  • 90 days after the written request.

If a covered service provider fails to comply with a written request for information within 90 days, the plan fiduciary must determine whether to terminate or continue the contract or arrangement, or, if the notice relates to future services, the plan fiduciary must terminate the contract or arrangement.

DOL Updates Q&As for Pandemic-Related Paid Leave

The Department of Labor’s (DOL’s) Wage and Hour Division has issued an update to its question-and-answer guidance on paid employee leave under provisions of the Families First Coronavirus Response Act (FFCRA). Specifically, this update includes the addition of the following.

Q&A-104 provides that employers are not required to provide FFCRA leave after December 31, 2020. However, employers may still provide such leave voluntarily. Employer tax credits for paid sick leave and expanded family and medical leave voluntarily provided to employees until March 31, 2021, are available for those employers that voluntarily offer FFCRA leave after December 31, 2020.

Q&A-105 provides that employees whose employers granted FFCRA leave but did not pay it may file complaints with the DOL’s Wage and Hour Division. Q&A-105 also clarifies that the statute of limitations for both the paid sick leave and expanded family and medical leave provisions of the FFCRA is two years from the date of the alleged violation (or three years in cases involving alleged willful violation).

Congress Approves Additional COVID Relief as Part of Government Funding Package

Following lengthy, intense negotiations that delayed the pre-Christmas adjournment of the 116th Congress, the U.S. Senate and House of Representatives have reached agreement and passed legislation on a new round of economic relief for victims of the coronavirus (COVID-19) pandemic. The relief provisions are combined with a larger omnibus spending package that includes funding for federal government agencies. Due to the massive size of the bill and the extra time needed to print and prepare it for signature, President Trump has until December 28 to sign the combined legislation into law.

The primary focus of the pandemic relief is an extension of unemployment benefits, direct economic stimulus payments to American taxpayers, support for small businesses, and funding for schools and the COVID-19 vaccination. There are limited provisions that directly affect tax-advantaged savings or health and welfare arrangements, but among them are the following.

PPP Extension

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020, provided financial support to businesses adversely affected by the pandemic. Under the Paycheck Protection Program (PPP) provisions, qualifying businesses could borrow funds for payroll and other specified purposes—including retirement and health benefit funding—through approved lenders, with the potential for forgiveness of these loans. These loans are subject to the Small Business Administration’s rules and oversight.

  • This legislation provides an additional $284 billion for the PPP program, including a second round of potentially forgivable loans, under these conditions.
  • Businesses with 300 or fewer employees that have experienced at least a 25 percent revenue loss in any quarter of 2020 are eligible.
  • Expenses now can include supplier costs and the cost of providing coronavirus protection (e.g., personal protective equipment).
  • Business expenses paid with PPP loans are tax deductible, even if forgiven.
  • The loan forgiveness process for PPP loans of $150,000 or less is simplified.

This legislation includes rescinding approximately $146 billion in unspent allocations for the CARES Act PPP and depositing it into the general fund of the Department of the Treasury.

CRDs for Money Purchase Pension Plans

 The legislation extends to money purchase pension plans the option to permit coronavirus-related distributions (CRDs), which provides an in-service distribution trigger, as well as exemption from the early distribution penalty tax, three-year ratable taxation, and the option to repay such distributions over three years.

Partial Plan Termination Relief

Employers will be provided relief from partial plan terminations that could result from a reduction in workforce due to the COVID-19 pandemic. Under current guidance, a reduction in participant number of 20 percent or more during a plan year generally is considered to be a partial plan termination. The result is full vesting for those employees whose job loss has triggered the partial termination. This legislation would assist employers in avoiding this consequence by granting a grace period to March 31, 2021, to reach a participant count at least 80 percent of the number when the National Emergency was declared in March 2020.

Qualified Future Transfers – Pension Plans

Under the qualified future transfers provision, up to 10 years of retiree health and life benefit costs can be transferred from a defined benefit pension plan to a retiree health benefits account and/or a retiree life insurance account within the pension plan, if certain requirements are met.

Study of DOL Electronic Disclosure Final Regulations 

The Department of Labor (DOL) is directed to complete a comprehensive study and issue a report within one year on the impact of its electronic disclosure final regulations on “individuals residing in rural and remote areas, seniors, and other populations that either lack access to web-based communications or who may only have access through public means.”

Temporary Special Rules for Health FSAs and Dependent Care FSAs

  • For health flexible spending arrangements (FSAs) and dependent care FSAs (DCAPs) for plan years ending in 2020, the plan can permit a carryover of all unused benefits to the plan year ending in 2021.
  • For health FSAs and DCAPs for plan years ending in 2021, the plan can permit a carryover of all unused benefits to the plan year ending in 2022.
  • For health FSAs and DCAPS that have a grace period associated with the plan year that ends in 2020 or 2021, that grace period can be extended for 12 months after the end of the plan year (the normal maximum grace period is 2½ months after the end of the plan year).
  • For health FSAs and DCAPs, a plan can permit an employee who stops participating in the plan mid-year in 2020 or 2021 to continue to receive reimbursements of their unused contributions through the end of the plan year in which their participation ceased (if their plan adopts the 12 month grace period they would also get the extended grace period).
  • For DCAP plans, if the dependent ‘aged-out’ during the pandemic, the plan can substitute age 14 for age 13 (as the maximum age for the child could be considered a qualifying person under the plan), as long as the employee was enrolled in the DCAP for a plan year where the end of the regular enrollment period was on or before January 31, 2020, and the employee had one or more dependents who attained age 13 during the plan year, and the employee had an unused balance for a plan year that will be carried forward to the subsequent plan year.
  • For health FSAs and DCAPs that end in 2021, participants will be permitted to prospectively modify their contribution elections (without regard to a change in status).
  • To adopt the specified relief, health FSAs and DCAPs must be amended by the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective. In the interim, the plan must operate consistent with the terms of the amendment.

Modification to Internal Revenue Code Section 213

The medical expense deduction floor is reduced from 10 percent to 7.5 percent for taxable years beginning after December 31, 2020.

Preventing Surprise Medical Bills

  • A group health plan or a health insurance issuer that offers group or individual health insurance coverage to cover emergency services is required to provide such services without the need for prior authorization or other limitations, whether or not the healthcare provider is a participating provider. Any limitation cannot be more restrictive than requirements that apply to emergency services received from participating providers and facilities with respect to such plan or coverage.
  • A high deductible health plan (HDHP) will not be prevented from being treated as an HDHP if it provides medical care in accordance with this provision. This applies to plan years beginning on or after January 1, 2022.
  • Expand consumer protections through an external review process beginning in 2022 in cases of adverse determinations by group plans and health issuers.

Additional (Non-COVID-Related) Disaster Relief

The legislation provides limited non-COVID-related disaster relief for certain federal disasters declared on or after January 1, 2020, and ending 60 days after enactment of this bill. Relief includes the following.

Qualified Disaster Distributions

Distributions of up to $100,000 (less certain disaster distributions taken in prior tax years) may be taken by those whose principal residence is within the disaster area and who sustained an economic loss due to the disaster.

  • Provides for three-year taxation of the distribution, and three years to repay
  • Provides a distribution trigger for 401(k), 403(b), 457(b), and money purchase pension plans
  • Will not be subject to 20 percent mandatory withholding or 402(f) notice requirements

Hardship or First-Time Homebuyer Distributions

Such distributions that were taken to purchase or construct a principal residence may be repaid if the distribution was taken within the period 180 days before the disaster incident and 30 days after the disaster incident period, and are repaid between the first day of the disaster incident period and no later than 180 days after enactment.

Increased Retirement Plan Loan Limit

Plan loans taken within 180 days following the legislation’s enactment because of a disaster declaration will have an increased loan limit of up to the lesser of $100,000 or the vested account balance, if the borrower’s principal residence is in the disaster area and an economic loss was sustained as a result of the disaster.

Delay in Loan Repayment

Loan payments that are due within the period beginning on the first day of the disaster and ending 180 days after the disaster period may be delayed for one year (or, if later, 180 days after the legislation’s enactment), with the loan’s term extended by the period of the delay.

Amendments to implement these provisions will be required by the end of the 2022 plan year (2024 for governmental plans).

Multiemployer Pension Plan In-Service Distributions

One unanticipated provision is a change to certain multiemployer (union) pension plans that allows for a subset of individuals in the construction industry to take an in-service distribution at age 55 if several service and plan provisions are satisfied. Specifically, it would apply to distributions to individuals who were participants in the plan on or before April 30, 2013, if

  • the trust was in existence before January 1, 1970, and
  • prior to December 31, 2011, in-service distributions were permitted at age 55 when the plan received at least one written IRS determination that the trust in the first bullet constituted a qualified trust.

Because the circumstances are so specific, it is not likely to have broad applicability.

Education Related Provisions

  • A CARES Act provision that permitted employers to provide student loan repayment benefits of up to $5,250 to employees on a tax-free basis has been extended to December 31, 2025.
  • Made changes to the FAFSA program intended to simplify the application process and make aid more predictable
  • Increased the income limitations for phase-out of the lifetime learning credit
  • Repealed the deduction for qualified tuition and related expenses

Final Regulations Issued Affecting Group Health Plan Grandfathered Status

The Departments of Labor, Treasury, and Health and Human Services have issued final regulations expanding the flexibility of grandfathered group health plans and grandfathered group health insurance coverage to make changes to cost-sharing requirements, without causing loss of grandfathered status. The guidance is in response to Presidential Executive Order 13765, “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal,” which required agencies to minimize what the order described as “unwarranted” economic and regulatory burdens imposed by the Affordable Care Act (ACA). The final regulations are effective January 13, 2021, and are applicable June 15, 2021.

Pursuant to the ACA, a group health plan in existence as of March 23, 2010, was grandfathered if it continuously provided coverage at all times since enactment of the ACA, and the group health plan had not taken actions to relinquish its status.  Grandfathered health plans are not required to comply with various provisions of the ACA, including coverage of essential health benefits or preventive services without cost-sharing. Pursuant to 2015 regulations, a group health plan could lose its grandfathered status as a consequence of one of the following changes.

  • Elimination of all, or substantially all, benefits for diagnosis or treatment of a particular condition
  • Increase in a cost-sharing percentage
  • Increase in a fixed-amount cost-sharing requirement that exceeds certain thresholds
  • Increase in a fixed-amount copayment that exceeds certain thresholds
  • Decrease in contribution rate by an employer or employee organization toward the cost of coverage by more than 5 percentage points
  • Imposition of annual limits on the dollar value of all benefits for group health plans and insurance coverage

These final regulations generally preserve the 2015 regulations, but introduce two changes. First, a grandfathered group health plan that is a high deductible health plan (HDHP) is able to modify the fixed-amount cost-sharing requirements as necessary to comply with the requirements applicable to HDHPs contained in Internal Revenue Code Section 223(c)(2). The final regulations address concerns that HDHP deductibles could potentially exceed the permitted cost-sharing threshold, and either 1) cause a group health plan to lose its grandfathered status, or 2) cause a grandfathered group health plan to lose its status as an HDHP.

Second, these final regulations introduce an alternative method to calculate the “maximum percentage increase” for determining the permitted change based on a premium adjustment percentage. Pursuant to the 2015 regulations, group health plans use a medical cost inflation percentage measured in accordance with the Consumer Price Index for Urban Consumers. The final regulations offer an alternative formula that yields a higher dollar value to maintain compliance with the ACA, that is expected to be easier to administer and offer a clearer measure of change. Finally, the final regulations provide 11 examples to illustrate the alternative method to calculate the maximum percentage increase.

Proposed Changes to HIPAA Privacy Rule Announced

The Office of Civil Rights within the U.S. Department of Health and Human Services (HHS) has announced proposed changes to the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule, changes the agency claims will “support individuals’ engagement in their care, remove barriers to coordinated care, and reduce regulatory burdens on the health care industry.” The changes are part of an Advance Notice of Proposed Rulemaking (ANPR) drafted by HHS.

Public comments on the proposal will be received for a 60-day period that will begin upon the ANPR’s publication in the Federal Register.

Proposed Regulations Affect ACA Insurance Exchanges and State Innovation Waivers

On December 4, 2020, the Department of Health and Human Services and the Department of the Treasury jointly issued proposed regulations that permit states to leave a state-sponsored insurance exchange, and permit private agents and brokers to conduct enrollments beginning in 2023. The proposed regulations streamline Affordable Care Act (ACA) Section 1332 State Innovation Waivers, and permit states to accelerate approval of modifications to their exchange programs. Moreover, the guidance includes the following changes affecting these exchanges.

  • Sets forth payment paraments and provisions related to the risk adjustment program, cost-sharing parameters, and cost sharing reductions
  • Modifies the special enrollment periods, navigator program standards, and administrative appeals process
  • Clarifies network adequacy standards for qualified health plans that do not use provider networks
  • Proposes changes to the regulations requiring reporting of certain prescription drug information by qualified health plans and their pharmacy benefit managers

Comments on the proposed regulations must be received by December 30, 2020.



In 2018, the Trump administration issued guidance affecting ACA Section 1332 State Innovation Waivers, replacing guidance issued in 2015. Pursuant to the 2018 guidance, states may make broader changes to the exchange coverage offered to their residents, including the promotion of sales, the use of premium and cost subsidies, and the administration of other policies and procedures.

ACA Section 1332 permits states to strategize their own exchange coverage and waive certain provisions, including essential health benefits, bronze/silver/gold tiers, and cost sharing. While the 2015 guidance was strict regarding how modifications could be made, the 2018 guidance was less stringent, permitting changes that likely would not have otherwise been approved by the Obama administration. These proposed rules would further support the 2018 guidance issued by the Trump administration but could be reversed under a new administration.

The following outlines some differences between the 2015 and 2018 guidance.

  • Coverage: The 2015 guidance limited coverage to minimum essential coverage. The 2018 guidance includes health insurance coverage, which expands coverage to include short-term, limited duration insurance.
  • Affordability: The 2015 guidance requires affordability to be measured by comparing residents’ net out-of-pocket spending on premiums and cost sharing. The 2018 guidance measures affordability based on the individual’s expected out-of-pocket spending on premiums, cost sharing, and direct payments.
  • Comprehensiveness: The 2015 guidance requires coverage offered to meet the state’s essential health benefit (EHB) standards or standards imposed by Medicaid or CHIP. The 2018 guidance grants states flexibility to select an EHB benchmark, and coverage offered would be compared to the elected EHB benchmark or any other benchmark chosen by the state.


Changes Affecting HRAs

The proposed regulations would require qualified health plan issuers in the exchange to accept premium payments on behalf of enrollees from individual coverage health reimbursement arrangements (ICHRAs) or qualified small employer health reimbursement arrangements (QSEHRAs). The clarification is intended to reduce issuer confusion regarding receipt of direct payments on behalf of enrollees.

In addition, the proposed rules would permit states to develop consumer-friendly comparison tools to assist consumers in their review and election of individual health plans on and off the exchange.

Federal Agencies Jointly Issue Final Rule on Transparency In Healthcare Coverage

In response to President Trump’s Executive Order, Improving Price and Quality Transparency in American Healthcare to Put Patients First, the IRS, Department of Labor, and Department of Health and Human Services have jointly issued a Transparency In Coverage final rule. This guidance is intended to make healthcare price information accessible to consumers and other stakeholders to permit comparison-shopping.

The final rule requires that most healthcare plans make available to participants, beneficiaries, and enrollees (or their authorized representative) personalized out-of-pocket cost information, and the underlying negotiated rates for all covered healthcare items and services, including prescription drugs, through an Internet-based, self-service tool and in paper form upon request.

The guidance also requires most healthcare plans to make available to the public, including stakeholders such as consumers, researchers, employers, and third-party developers, three separate machine-readable files that include detailed pricing information. The detailed pricing information is to include 1) negotiated rates for all covered items and services between the plan or issuer and in-network providers; 2) historical payments to, and billed charges from, out-of-network providers; and 3) in-network negotiated rates and historical net prices for all covered prescription drugs by plan or issuer at the pharmacy location level.