Changes are coming for Health and Welfare (H&W) plans as a result of the recently passed Consolidated Appropriations Act 2023.
While these changes may be familiar to retirement plan fiduciaries, they are new additions to the world of H&W plans. In a recent webinar hosted by Sentinel Group, Alan Pfeffer and Greg Puig shared some best practices that can help employers as they start building out H&W plan committees.
This webinar was part of a three-part series and offered SHRM credits for attending the webinars live. For the full conversation of Alan and Greg, you can watch the webinar recording here.
This article summarizes their understanding of the upcoming legislation.
There are a number of similarities between retirement plans and H&W plan regarding the obligations of being a fiduciary. Fiduciaries of these plans have certain responsibilities under ERISA law and should be governed by a plan committee. The best practices you employ as a retirement Plan Sponsor will be applicable for H&W plans following the passage of CAA 2023.
Plan committees should prepare to run their plans to the exclusive benefit of plan participants. They should establish prudent policies and practices, which can include taking minutes of meetings to prepare for future requests by auditors.
Plan committees should also plan to monitor provider fees for ‘reasonableness’ to determine if the cost of services provided is reasonable. This does not necessarily mean the lowest-cost option is optimal – fiduciaries should instead assess the services provided and compare their quality to the associated cost.
Keep in mind that, as a fiduciary, if you breach your fiduciary duties your liability is personal. This applies to both retirement and H&W plans.
Brokers are now required to provide a compensation disclosure for their clientele.
The Department of Labor made clear that all service providers to H&W plans must disclose expenses and fees to the participant in all cases when that insurance agent/agency or consultant expects to receive at least $1,000 in “direct” or “indirect” compensation. Furthermore, the law dictates that employers have a legal fiduciary responsibility to ensure receipt of this disclosure from their insurance brokers.
To date, exact details on what information is required in this broker compensation disclosure have not been released, however, many firms are highlighting specific dollar figures.
Two major components of the CAA were its emphasis on the Mental Health Parity Act and transparent health care pricing.
The CAA created more parity for mental health services. Both full-insurance and self-funded employers should ensure their respective plans are abiding by the new CAA language. This change levels the playing field in regard to claims processes, fee structures and general access to mental health services.
The CAA also mandated increased transparency and reporting on health care costs. Previously, participants often found it challenging to get a projected figure on the cost of a service, let alone what that service may cost an employer. Employer-sponsored group health plans are now required to be more transparent on pricing and reporting on pharmacy benefit drug costs.
As a fiduciary, there are certain takeaways and next steps you can prioritize to implement these changes. For starters, consider applying your retirement plan best practices to your H&W plans. Start a H&W plan committee, create a disclosure statement and formalize the process you have in place.
By taking action now to organize and heed your fiduciary duties, you can help mitigate risk of a fiduciary breach and do the right thing for your employees. You may find the process to be easier by working with a holistic benefits provider and considering your health and wealth benefits as one.
Reach out to your respective consultants for specific compliance information relative to your plans. For more details on H&W plan committees or implementing changes from the CAA, contact us.
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