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The ERISA Edit: DOL Releases New Regulatory Agenda

Employee Benefits Alert

New Year, New DOL Regulatory Agenda 

Earlier this month, the U.S. Department of Labor (DOL) published its Fall 2023 Regulatory Agenda, which provides insight into what will be keeping DOL's leadership and regulation writers busy in early 2024. Let's jump into which rulemaking projects have been added to the agenda, which items have advanced, and which rules DOL may finalize soon.

New Additions: The agenda now includes the August 2023 Request for Information (RFI) entitled "SECURE 2.0 Reporting and Disclosure" (RIN: 1210-AC23). This RFI sought comments by October 10, 2023, on the impact of the SECURE 2.0 Act on ERISA's existing reporting and disclosure framework. Several sections of SECURE 2.0 establish new, or revise existing, ERISA reporting and disclosure requirements, including those on: notices to participants regarding pension-linked emergency savings accounts; lump sum distribution options, defined benefit plan liability funding, and blended performance benchmarks for investments with mixed asset classes; disclosures to "unenrolled participants"; paper statements; and pooled employer plan registration. Information received in response to the RFI is under analysis by DOL.

Proposed Rules: Two items also stemming from SECURE 2.0 have advanced to the Proposed Rule stage on the agenda. SECURE 2.0 amended section 4975 of the Internal Revenue Code to add a statutory exemption for the receipt of fees and compensation in connection with automatic portability transactions. Section 120 permits a retirement plan service provider to provide employer plans with automatic portability services, such as an automatic transfer of a participant's default individual retirement account (IRA) into the participant's new employer's retirement plan. The agenda lists a proposed DOL and Department of the Treasury (Treasury) regulation forthcoming before the end of the year (RIN: 1210-AC21) to implement this amendment. 

SECURE 2.0 also directed DOL to "issue formal guidance for acceptable standards and procedures to establish good faith fair market value for shares of a business to be acquired by an employee stock ownership plan."  According to the agenda, this proposed rulemaking (RIN: 1210-AC20) is slated for March 2024.

Final Rules: Two proposed rules have advanced to the final rule stage. The first is the long-awaited final rule amending and restating DOL's Voluntary Fiduciary Correction (VFC) Program (RIN: 1210-AB64). This rule was delayed and the comment period reopened earlier this year to account for provisions in SECURE 2.0 impacting the VFC Program and the Internal Revenue Service's (IRS) Employee Plans Compliance Resolution System (EPCRS). The agenda lists a December 2023 final rule date. The second rule advanced to the final rule stage is the rule on "Coverage of Certain Preventive Services Under the Affordable Care Act" (RIN: 1210-AC13). This rule, which has been given an August 2024 publication date, would amend existing regulations that provide religious and moral exemptions and accommodations regarding coverage of contraception as a preventive service under Title I of the Patient Protection and Affordable Care Act (ACA), previously discussed here. The agenda continues to list other rules in the final stage, including those amending DOL's abandoned plan program (RIN: 1210-AC04) and prohibited transaction exemption procedures (RIN: 1210-AC05) and a rule addressing requirements related to air ambulance services under the No Surprises Act (NSA) (RIN: 1210-AC08).

Other Items On and Off the Agenda: In 2024, DOL will continue to work on a plethora of other proposed regulations, some of which are bi- or tri-agency rules also involving the Department of Health and Human Services (HHS) and Treasury. These rules include amendments to the regulations implementing the mental health parity provisions of ERISA, amendments to the regulatory definition of an ERISA investment advice fiduciary, a rule on provider non-discrimination requirements for group health plans and insurers, a rule amending existing regulations on short-term limited duration insurance and excepted benefits, and two proposed rules impacting the NSA independent dispute resolution (IDR) process. Although these high priority rules are not listed as being in the final rule stage on the agenda, the agencies are not tied to the dates listed therein, and we anticipate that at least some of these proposed regulations will be finalized before summer 2024. 

The agenda also lists multiple SECURE 2.0-related items in the pre-rule stage, including DOL's review of Interpretive Bulletin 95-1 on fiduciary annuity provider selection for define pension plan terminations and risk transfers. Finally, the proposed rulemaking on advanced explanation of benefits (AEOB) required under the NSA (RIN: 1210-AC14) no longer appears on the agenda, but it will likely reappear in fiscal year 2025. The agencies announced in 2021 that they will defer enforcement of the AEOB requirements until after notice-and-comment rulemaking is undertaken. 

As reported last week, the Office of Management and Budget (OMB) completed its review of the closely watched DOL final rule amending the procedures governing requests for prohibited transaction exemptions – DOL is expected to issue that final rule soon. On December 20, DOL published its association health plan notice of proposed rulemaking, "Definition of Employer - Association Health Plans" (RIN: 1210-AC16), which proposes to rescind in its entirely the agency's 2018 regulatory amendments that broadened the types of employer groups and associations that could sponsor a single group health plan under ERISA. Comments on that proposal are due February 20, 2024. 

On December 18, DOL, HHS and the Treasury released a final rule setting new fees for the NSA IDR process and a methodology for amending those fees in the future.

Twenty States and the DOJ Ask the Eighth Circuit to Uphold Ruling Upending Arkansas Gender-Affirming Care Ban 

On December 14, 2023, 20 state attorneys general (amici AGs) jointly filed an amicus brief in the U.S. Court of Appeals for the Eight Circuit, urging the court to affirm a district court order permanently enjoining Arkansas's Act 626, which bans gender-affirming care for minors. In their brief, filed in Brandt v. Griffin, No. 23-2681 (8th Cir. Dec. 13. 2023), the amici AGs argue that the law discriminates on the basis of sex in violation of the Equal Protection Clause of the U.S. Constitution and therefore must be evaluated under heightened scrutiny – which, they say, the law cannot withstand. Citing numerous medical authorities, the amici AGs assert that the law harms the physical, mental, and psychological well-being of transgender youth – including by putting transgender youth at greater risk of suicide. 

The State of Arkansas first appealed the district court's grant of a preliminary injunction in 2021. In that appeal, the Eight Circuit found that "Arkansas's characterization of the Act as creating a distinction on the basis of medical procedure rather than sex" was "unpersuasive." The court concluded that "[t]he biological sex of the minor patient is the basis on which [Act 626] distinguishes between those who may receive certain types of medical care and those who may not. The Act is therefore subject to heightened scrutiny." 

In the current appeal, the amici AGs urged the Eighth Circuit to reaffirm its prior reasoning on the appropriate level of scrutiny and "join the Fourth, Seventh, and Ninth Circuits, which 'have held that various forms of discrimination against transgender individuals constitute sex-based discrimination for purposes of the Equal Protection Clause because such policies punish transgender persons for gender non-conformity, thereby relying on sex stereotypes.'" In support, they point to Bostock v. Clayton County, Georgia, 140 S. Ct. 1731 (2020), in which the Supreme Court explained that "it is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual based on sex" and "if changing the employee's sex would have yielded a different choice by the employer—a statutory violation has occurred." 

The amici AGs further urge the court to uphold determinations (by the prior panel and the district court) that the law does not withstand heightened scrutiny. They point out that "Arkansas' ban is not even plausibly—let alone substantially—related to the purported goal of protecting children from ineffective or harmful medical treatment, because those very same treatments are permitted for cisgender youth. They also point out that gender-affirming care is effectively regulated in other states where it is legal and that Arkansas's existing regulatory framework to prevent abusive, unethical, or improper medical care is sufficient to regulate gender-affirming care for minors in Arkansas without an outright ban. 

On Friday, the U.S. Department of Justice (DOJ) also filed an amicus brief in support of the appellees and, like the amici AGs, urged the court to affirm the district court's ruling that Act 626 violates the Equal Protection Clause. The DOJ argues that the lower court was correct in determining that the Arkansas law discriminates on the basis of sex and cannot survive a heightened level of scrutiny, which it asserts is the correct standard to apply. According to the DOJ, the district court did not err in finding that Act 626 is not substantially related to achieving Arkansas's asserted interests in protecting children and safeguarding medical ethics. "[P]uberty blockers and hormone therapy are widely recognized by the medical community as safe and effective care for treating gender dysphoria," the brief claims. The brief further asserts that Act 626 is underinclusive because it expressly permits non-transgender minors to access the very same treatments that it denies to transgender minors and is also overinclusive because it categorically bans necessary medical care to transgender minors when narrower regulation could address the state's concerns.

Kraft Heinz to Arbitrate Claims Against Aetna Over Claims Data, Repricing, and Cross-Plan Offsetting

On December 14, 2023, the Kraft Heinz Company Employee Benefits Administration Board (the Board) filed a notice in the U.S. District Court for the Eastern District of Texas dismissing its closely watched health plan fees and claims data lawsuit against Aetna Life Insurance Company, which served as the third-party administrator (TPA) of the company's self-funded health plans. Kraft Heinz Co. Employee Benefits Admin. Bd. v. Aetna Life Ins. Co., No. 2:23-cv-00317 (E.D. Tex. Dec. 14, 2023). The notice advises the court that the parties' dispute will be arbitrated. This case is one of a growing number of disputes involving access to plan claims data and fiduciary duties surrounding health plan fees.

In the complaint filed in June 2023, the Board alleged that Aetna violated ERISA's fiduciary duty and prohibited transaction provisions by, inter alia, refusing to turn over requested plan data associated with the processing and payment of claims, approving millions of dollars in claims with missing or incomplete medical procedure codes, and potentially charging the plans subcontractor fees not permitted under the parties' administrative services only (ASO) contracts. The Board claimed a need for the claims data to monitor and assess "Aetna's handling of funds and associated payment integrity." The Board further alleged that Aetna took steps to conceal its misconduct, claiming that "Aetna's contractual audit provisions deprive the Plans of any visibility into . . . improperly processed but unaudited claims." The complaint also took aim at Aetna's cross-plan offsetting and repricing practices. 

The complaint raised fundamental legal questions about the breadth of a TPA's fiduciary duties and whether monies are ERISA plan assets after being paid to a TPA from a plan. As a result of the Board's notice of dismissal, the case will not generate any binding legal precedent on the important fiduciary issues involved and its ultimate resolution will likely be shielded from public view.

In the News

Theresa S. (Tess) Gee, Joanne Roskey, Anthony F. Shelley, and Dawn E. Murphy-Johnson authored the 2023 edition of ERISA: Department of Labor Investigations and Litigation, published by the Practicing Law Institute. 

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