The end of 2021 brings important deadlines for employers that sponsor 401(k) plans, 403(b) plans, cafeteria plans, and group health plans.
- December 31, 2021 is the deadline to adopt a 401(k) or 403(b) plan amendment regarding certain hardship distribution changes.
- December 31, 2021 is the deadline to adopt a cafeteria plan amendment implementing certain COVID-19 relief changes for plan years ending in 2020.
- January 1, 2022 is the deadline for calendar-year group health plans to comply with certain transparency disclosure requirements.
401(k) and 403(b) Plans: Hardship Distribution Amendment
Under the Bipartisan Budget Act of 2018 and related IRS regulations, for 401(k) and 403(b) plans using the hardship distribution safe harbor, there are a number of changes, some required and others optional. The plan:
- Must eliminate the requirement that a participant's elective deferrals be suspended for six months after taking a hardship distribution;
- Must make changes to the criteria for demonstrating a need for the hardship distribution;
- May permit hardship distributions without requiring that a participant first obtain a plan loan; and
- May expand the circumstances qualifying as hardships.
In addition, with or without the safe harbor, the plan may expand the types of contributions that are available for hardship distributions.
An employer must amend its plan by December 31, 2021 for these changes.
Cafeteria Plans: COVID-19 Relief Amendment
Under the Consolidated Appropriations Act of 2021 (CAA), employers are allowed to modify their cafeteria plans' health care and dependent care flexible spending account (FSA) arrangements to:
- Allow participants to make mid-year changes without a qualifying life event;
- Adopt a grace period or extend the length of a grace period, which may now last up to 12 months after the end of the plan year;
- Adopt a carryover or increase the amount of a carryover, which may now be as high as the full account balance at the end of the plan year (carryovers were previously limited to health care FSAs);
- Expand the coverage of a health care FSA to include a spend-down, which allows participants to be reimbursed for expenses incurred after participation ends but before the end of the plan year (spend-downs were previously limited to dependent-care FSAs); and
- Expand the coverage of a dependent care FSA to include reimbursement for the care of certain children under age 14 (instead of 13), subject to certain additional requirements.
In addition, the CAA allows employers to modify their cafeteria plans so that participants may make certain mid-year changes to their health coverage elections without a qualifying life event.
To implement any of these changes retroactively—for a plan year ending in 2020—an employer must amend its plan by December 31, 2021.
Group Health Plans: Transparency Disclosures
Under the CAA, group health plans must comply with certain transparency requirements. Some of these requirements will be effective on January 1, 2022. Other requirements were expected to be effective around the same time, but their enforcement has been delayed by the applicable federal agencies.
For calendar-year group health plans, the following requirements will be effective on January 1, 2022. A group health plan must:
- Ensure that the plan's identification cards include applicable deductibles and out-of-pocket maximums, as well as a customer assistance telephone number and web address;
- Establish a process for updating and verifying the accuracy of provider directory information, and establish a protocol for responding to participant inquiries about a provider's network status;
- Make publicly available, post on a public website, and include on each Explanation of Benefits information regarding balance billing protections for participants; and
- Adopt continuity-of-care protections for participants when their provider or facility loses in-network status during the course of treatment.
The following transparency requirements are subject to enforcement delays:
- A group health plan must publish machine-readable files for in-network rates and out-of-network allowed amounts and billed charges. This requirement will be effective on July 1, 2022.
- A group health plan must make a price comparison tool available by website or telephone. This requirement is effective for plan years beginning on or after January 1, 2023.
- A group health plan must submit prescription drug expenditure information to the government. Enforcement is delayed until guidance is issued. (However, the enforcement agencies strongly encourage plans to be able to satisfy the reporting requirements by December 27, 2022.)
- A group health plan must send participants an advanced Explanation of Benefits upon receiving a good faith estimate from a provider. Enforcement is delayed until guidance is issued.
- A group health plan must publish machine-readable files relating to prescription drug pricing. Enforcement is delayed until guidance is issued.
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If you have questions or concerns regarding this client alert, please contact the authors, any member of Venable's Employee Benefits and Executive Compensation Group, or your regular Venable lawyer.