Employee benefits are constantly evolving, challenging employers to keep up with the latest developments and best practices. In a recent webinar, Nixon Peabody employee benefits attorneys shared updates for benefit plan sponsors and fiduciaries, ranging from retirement plan design and compliance to health plan coverage and litigation.
Watch the Nixon Peabody Employee Benefits Briefing (June 2024) webinar
Here are some of the key takeaways from the webinar.
SECURE 2.0 presents many new optional plan features. Employers should be aware of the different effective dates for the mandatory and elective changes under SECURE 2.0. Now is the time to review these optional features and start making plans with the plan recordkeeper to implement the changes that make the most sense for your organization.
Group health plans may face increasing demand and scrutiny for covering GLP-1 receptor agonists, a class of drugs that can treat obesity and diabetes. These drugs are very effective but also very expensive, and employers need to weigh the costs and benefits of including them in their plans. There are various strategies to manage the costs and utilization of these drugs, such as establishing coverage criteria, imposing prior authorization requirements, or simply waiting for more market competition to potentially drive down costs.
Mental health parity compliance remains a high priority for the Department of Labor, which has issued new guidance and conducted employee benefit plan audits to ensure that they do not impose more restrictive limitations or requirements on mental health and substance use disorder benefits than on medical and surgical benefits. If you sponsor a self-funded health plan, you are required to conduct comparative analyses of your plans' non-quantitative treatment limitations. Legal counsel can work with you to get these analyses completed.
Recent legislative and regulatory activity seeking to improve health plan cost/price transparency will undoubtedly give rise to ERISA litigation alleging fiduciary breaches with respect to the management of health and welfare plans. In fact, a major class action lawsuit against a major international corporation recently alleged numerous fiduciary breaches in connection with the management of a pharmacy benefit plan. You should consider forming health and welfare plan committees (or expanding existing benefit plan committees) to monitor health plan activities and service providers.
ERISA litigation poses significant risks and challenges for plan sponsors and fiduciaries, especially in excessive fees, pension risk transfers, and environmental, social, and governance (ESG) factors. Employers should monitor the developments and trends in these cases and adopt prudent practices to select and monitor their plan service providers, investments, and expenses. They should also consider establishing or expanding their plan committees to oversee their health and welfare and retirement plans.
Pension reversion transactions, which involve terminating an overfunded defined benefit plan and reclaiming the surplus assets, may become more attractive for some employers in light of the favorable market conditions and interest rates. However, these transactions are complex and subject to high tax rates and regulatory hurdles. Employers should explore other alternatives to use their pension surplus, such as reopening their plan, providing enhanced benefits, or leveraging it in corporate transactions.
Cryptocurrency and digital assets are gaining popularity and attention in the retirement plan space, as the Securities and Exchange Commission has approved the offering of Bitcoin and Ether exchange-traded funds (ETFs). However, these assets also pose significant volatility, regulatory, and implementation issues for plan sponsors and fiduciaries. Employers should be prepared to respond to participants' requests or inquiries about including these assets in their plans and follow a careful fiduciary process to evaluate their suitability and risks.