• Civil Monetary Penalties for HIPAA, MSP, and SBC Violations Updated

    The Department of Health and Human Services has announced adjustments of civil monetary penalties for statutes within its jurisdiction. The latest adjustments are based on a cost-of-living increase of 1.07745%. These adjustments are effective for penalties assessed on or after October 6, 2023, for violations occurring on or after November 2, 2015. Following are highlights of the adjustments potentially affecting employee benefit health plans.
     

    HIPAA

    The HIPAA administrative simplification provisions encompass standards for privacy, security, breach notification, and electronic health care transactions. HIPAA has four tiers of violations that reflect increasing levels of culpability, with minimum and maximum penalty amounts outlined within each tier and an annual cap on penalties for multiple violations of an identical provision. The newly indexed penalty amounts for each violation of a HIPAA administrative simplification provision are as follows:
     

    Minimum Penalty Maximum Penalty Calendar Year Max
    Tier1
    Lack of knowledge
    $137 $68,928 $2,067,813
    Tier 2
    Reasonable cause and not willful neglect
    $1,379 $68,928 $2,067,813
    Tier 3
    Willful neglect, corrected within 30 days
    $13,785 $68,928 $2,067,813
    Tier 4
    Willful neglect, not corrected within 30 days
    $68,928 $2,067,813 $2,067,813


     

    Medicare Secondary Payer 

    The Medicare Secondary Payer statute prohibits a group health plan from “taking into account” the Medicare entitlement of a current employee or a current employee’s spouse or family member and imposes penalties for violations. The indexed amounts for violations applicable to employer-sponsored health plans are as follows:
     

    Annual Penalty
    Offering Incentives
    Offering incentives to Medicare-eligible individuals not to enroll in a plan that would otherwise be primary
    $11,162
    Failure to Respond
    Failure of responsible reporting entities to provide information identifying situations where the group health plan is primary
    $1,428


     

    Summary of Benefits and Coverage (SBC)

    An SBC generally must be provided to participants and beneficiaries before enrollment or re-enrollment in a group health plan.
     

    Per Incident Penalty
    Willful Failure
    Willful failure to provide an SBC as required
    $1,362


     

    Timing of Penalty Changes

    The annual adjustments to penalties are designed to preserve their deterrent effect in the face of inflation. The HHS’s “annual” adjustments are supposed to be made by January 15 of each year, but in practice have come at irregular intervals. The last adjustment was made on March 17, 2022.
     

    Employer Action

    These monetary penalties are significant; thus, we recommend that employers assess their group health plan HIPAA compliance program and confirm that policies and procedures are effectively deployed and that HIPAA training is in place for all employees with access to PHI.

    As a reminder, Vita provides a HIPAA Compliance Program for group health plans. In addition, a 20-minute Critical HIPAA Training video is available on demand for employees who have access to PHI and need to be trained.
     

    Reference

    HHS, Annual Civil Monetary Penalties Inflation Adjustment, 45 CFR Part 102, 88 Fed. Reg.69531 (Oct. 6, 2023)



     

  • IRS Announces Retirement Plan Limits for 2024

    The Internal Revenue Service has announced the 2024 cost-of-living adjustments (COLAs) to the various dollar limits for retirement plans. The Social Security Administration (SSA) has also announced the taxable wage base for 2024:
     

    2024

    2023

    Elective Deferral Limit (401(k) & 403(b) Plans)

    $23,000

    $22,500

    Catch-Up Contributions (Age 50 and over)

    $7,500

    $7,500

    Annual Defined Contribution Limit

    $69,000

    $66,000

    Annual Compensation Limit

    $345,000

    $330,000

    Highly Compensated Employee Threshold

    $155,000

    $150,000

    Key Employee Compensation

    $220,000

    $215,000

    Social Security Wage Base

    $168,600

    $160,200

     

    Definitions 

    • Elective Deferral Limit means the maximum contribution that an employee can make to all 401(k) and 403(b) plans during the calendar year (IRC section 402(g)(1)).
    • Catch-up Contributions refers to the additional contribution amount that individuals age 50 or over can make above the Elective Deferral and Annual Contribution limits if permitted by the company’s retirement plan.
    • Annual Contribution Limit means the maximum annual contribution amount that can be made to a participant's account (IRC section 415). This limit is expressed as the lesser of the dollar limit or 100% of the participant's compensation and is applied to the combination of employee contributions, employer contributions, and forfeitures allocated to a participant's account.
    • Annual Compensation Limit means the maximum compensation amount that can be considered in calculating contribution allocations and nondiscrimination tests. A plan cannot consider compensation in excess of this amount (IRC Section 401(a)(17)).
    • Highly Compensated Employee Threshold means the minimum compensation level established to determine highly compensated employees for purposes of non-discrimination testing (IRC Section 414(q)(1)(B)).
    • Social Security Wage Base is the maximum amount of earnings subject to Social Security payroll taxes.




  • CMS Requests Extended Special Enrollment Period

    The COVID era brought multiple deadline extensions for participants of employee benefit plans. Employers are all too aware of these changes and of the many special communications and administrative procedure changes that they require.

    The special COVID rules extended certain ERISA deadlines as well as COBRA, HIPAA Special Enrollment, and benefits claims and appeals timelines. These changes were effective March 1, 2020. 

    With the end of the COVID national emergency, those deadline extensions ended. Specifically, they terminated at the end of the Outbreak Period, which is the earlier of 60 days after the end of the National Emergency (May 11 + 60 days = July 10, 2023) or one year from the date an individual first became eligible for the extension.
     

    Encouragement to Extend Special OE Period

    A joint letter from the Center for Medicare and Medicaid Services (CMS), Treasury, and DOL dated July 20, 2023, was issued to employers, plan sponsors, and issuers. In it, the Biden Administration encouraged entities to extend the 60-day special enrollment period required by HIPAA for individuals losing Medicaid and CHIP and to offer additional enrollment opportunities in group health plans for employees and their dependents who are losing coverage under Medicaid and CHIP. Ideally, this extension would match the temporary special enrollment period on HealthCare.gov that runs from March 31, 2023 – July 31, 2024.
     

    Why This? Why Now?

    During the COVID-19 Public Health Emergency, Medicaid programs paused coverage verifications and eligibility terminations to provide continuous coverage subsidized by enhanced federal funding. The continuous enrollment provision ended on March 31, 2023, and Medicaid is now resuming regular eligibility operations, including terminating coverage for those who are no longer eligible.

    As a result of this, it is projected that millions of individuals will lose Medicaid and CHIP coverage. Importantly, the HHS projects that 3.8 million of these individuals will be eligible for employer-sponsored coverage. To encourage maintaining health coverage, the Biden Administration wants employers to assist these employees, specifically by easing the process of enrolling in group health plan coverage.

    Medicaid is administered by each state, and there is no uniform enrollment process or required notice to individuals when they lose Medicaid coverage. In fact, individuals may not even know they have lost coverage until they seek health care. Given this unfortunate reality, they will not know to seek other coverage within the standard 60-day window to apply for new coverage (either through an Exchange or under a group health plan) after losing Medicaid or CHIP coverage.
     

    Extended Special Enrollment Period for Enrolling in Exchange

    Recognizing this predicament, the CMS created a temporary special enrollment period for the federal Exchange. Individuals who lose Medicaid or CHIP coverage and apply for coverage under HealthCare.gov between March 31, 2023, and July 31, 2024, will be able to enroll under the extended Special Enrollment period.
     

    Recommendation for Employers to Follow Suit

    The joint letter to employers encourages them to follow suit by temporarily expanding the special enrollment periods for individuals to enroll in group health plan coverage after losing Medicaid or CHIP coverage. As with Exchange coverage, enrollment would be on a prospective basis only; there would be no retroactive coverage opportunity.
     

    Employer Decision Overview

    Employers must decide whether or not to adopt an extended Open Enrollment period to align with the Marketplace Special OE period. The decision is voluntary. If adopted, it will require plan amendment and approval from the insurance carrier as well as communication to plan participants. If not adopted, no such special enrollment opportunities can be allowed under the plan, as plan provisions must be administered uniformly. Following is a decision-tree visual:

    Employer Decision Overivew
     



    Vita Defaults

    Vita will take the action of assuming clients will NOT adopt this temporary expansion of Special Enrollment rights. This means that customizations to welfare and pre-tax Plan Documents/SPDs will not need to be made. 

    However, to the extent that employers want to amend their plans to include this provision, document updates will be made. In this case, since the expansion of rights is temporary, we will make document changes using a Summary of Material Modification (SMM), rather than making updates to the documents themselves (and then having to remove the provision in July 2024). This will allow for a “clean” update to the documentation with minimal processing. It will mean, however, that the SMM document will need to be distributed along with the SPD during the period when the special enrollment rights expansion is in effect.
     

    Employer Action Item

    For employers wishing to NOT ADOPT the provision, no action is necessary.

    For employers wishing to ADOPT the provision, please email your Vita Account Team to advise them of this election. This will activate the process of Vita creating a Summary of Material Modification document to reflect this change in your plan.
     

    References

    CMS Letter to Employers



     

  • 401(k) Update: Q4 2023

    Year-End Participant Notifications

    As we wrap up 2023, we would like to remind you of some important annual notices that may need to be delivered to Plan participants, depending on the provisions of your Plan. Below is an outline of these notices, along with the corresponding due dates, based on a calendar-year Plan.

    To be distributed to eligible participants by December 1, 2023:

    • Qualified Default Investment Alternative Notice (applicable to Plans that have a QDIA)
    • 2024 Safe Harbor Notice (applicable to Plans with a Safe Harbor feature)
    • Automatic Enrollment Notice (applicable to Plans using Automatic Enrollment)

    To be distributed to eligible participants by December 15, 2023*:

    • 2022 Summary Annual Report

    (*This is the extended due date for Plans that filed a Form 5558.)

    Download our Compliance Calendar online to see what other important dates may be approaching.
     

    Anticipated IRS Retirement Plan Deferral Limits

    In September, the IRS released its 2024 employee benefits annual limits for Health Savings Accounts (HSAs), High Deductible Health Plans (HDHPs), and Excepted Benefits Health Reimbursement Arrangements (EBHRAs).

    The limits for these benefits were raised in line with the rise in the Consumer Price Index (CPI), and we expect the limits for retirement plans to be raised similarly. See the 2024 Retirement Plan Limits [Released November 1, 2023].

     

    SECURE Act 2.0 Implementation

    As we highlighted in our webinar “Navigating SECURE 2.0 – Next Steps for Plan Sponsors” on September 27, 2023, many of the provisions of the SECURE Act 2.0 have still not been put into practice. Further administrative guidance is expected over the coming months as retirement plan recordkeepers endeavor to put processes in place to operationalize all the provisions of the Act. 

    Please note the following required provisions are already in force:

    • Required Minimum Distribution (“RMD”)
      • Initial distribution age is 73.
      • Excise tax for failure to take RMD has been lowered to 25%.
    • Long-term Part-time Employee Eligibility:
      • Employers must track hours for part-time employees if they are not already eligible.
      • Employees who satisfied at least 500 hours in 2021, 2022, and 2023 would be eligible to participate in 2024.
      • Employees who satisfied at least 500 hours in 2022 and 2023 would be eligible to participate in 2025.

    Please be on the lookout for communications from your retirement plan recordkeeper as other provisions of SECURE Act 2.0 are put into place or made available in the coming year.
     

    Market Update1

    Both equity and bond markets in the US fell in Q3 as investors re-positioned to accommodate two emerging themes: a soft landing for the US economy in 2023 and higher interest rates for longer. The US S&P 500 Index was down -3.27% in the third quarter but remained up 13.1% for the year. Bond markets reversed their previous positive results, with the Bloomberg US Aggregate Bond Index down -3.23% in Q3; this wiped out previous gains, resulting in a YTD loss of -1.21%. International equity markets mirrored the movement of the US S&P 500: the MSCI EAFE was down -3.22% for the quarter but remained up 5.34% for the year. The Bloomberg Commodity Index was up 4.7% in Q3 2023, due primarily to higher oil prices, but remained down -7.1% YTD. The resilient US economy may avoid recession in 2023 but markets still have to deal with the prospect of higher interest rates well into 2024. 

    The US Bureau of Economic Analysis (“BEA”) announced that the US economy grew at an annual rate of 2.1% in Q2 2023, on par with the growth rate of 2.2% in Q1.2 The Philadelphia Federal Reserve Bank’s survey of forecasters median forecast for Q3 2023 GDP growth is up from 0.6% to 1.9%. The median forecast for the full-year 2023 has risen to 2.1% and for 2024, to 1.3%.3 The labor market continues to be strong, with US unemployment in September 2023 at 3.8% and non-farm payrolls at 336,000, almost double the forecast. The data would indicate that both American consumers and American businesses have been able to maintain consistent economic growth over the first nine months of the year and potentially into 2024, even in the face of continued high interest rates. 

    Continued positive US economic growth allows the FED more leeway in determining its interest rate policy. The FED is still wary of the short-term impacts on inflation, such as OPEC production reductions that led to the rise of gasoline prices in Q3. The FED has stated that it may raise interest rates one more time before the end of the year but will possibly lower rates in 2024 should the need arise. In addition to the FED’s interest rate policy, markets are increasingly taking into account the funding of the US budget deficit. The US Government budget deficit is expected to be approximately $2.5 trillion for the government’s FY 2023/2024 (October 2023 to September 2024), up from $1.2 trillion in FY2018/2019. We’ve already seen the yield on the 10-year Treasury Note rise to 4.65% at the end of Q3, the highest level in 16 years. Increasingly, debt markets will look for higher returns in the face of this huge demand for capital from the US Government, which should essentially put a floor on how low real interest rates can go regardless of policy initiatives. All of this has led to the expectations of higher interest rates for longer.

    While US economic news continued to be favorable in Q3 2023, we will likely see continued divergence between equity and bond prices as markets deal with continued positive economic growth with little prospect of interest rate relief through the end of 2023. 

     

    Sources:

    1. Unless otherwise indicated, data and commentary for the Market Update is sourced from two JPMorgan Asset Management sources: 1) Guide to the Markets – U.S. Economic and Market Update, 4Q 2023, September 30, 2023, and 2) the “4Q 2023 Guide to the Markets Webcast” on October 2, 2023.
    2. https://www.bea.gov/data/gdp/gross-domestic-product
    3. https://www.philadelphiafed.org/surveys-and-data/real-time-data-research/spf-q3-2023
       

    Disclosures:

    This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.

    +The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock's weight in the index proportionate to its market value.

    ++ Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices do not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.

    The Bloomberg Barclays US Aggregate Bond Index, or the Agg, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States. Investors frequently use the index as a stand-in for measuring the performance of the US bond market.

    The MSCI All Country World Index ex USA Investable Market Index (IMI) captures large, mid and small cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 23 Emerging Markets (EM) countries*. With 6,062 constituents, the index covers approximately 99% of the global equity opportunity set outside the US.

    The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.

    The MSCI Emerging Markets Index is a float-adjusted market capitalization index that consists of indices in 21 emerging economies: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.

    The FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. Equity REITs. Constituents of the Index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property.

    The Consumer Price Index (CPI) is a measure of inflation compiled by the US Bureau of Labor Studies.





     

  • IRS Releases Updated 2023 PCORI Fees

    The IRS released the 2023 update to the annual PCORI fee. As a reminder, the PCORI fee was initiated as part of the Affordable Care Act to fund patient-centered research relating to health care. Both fully insured and self-funded health plans are required to pay the PCORI fee.
     

    Updated PCORI Fee

    The new fee is $3.23 per covered person. This is an increase from $3.00 per covered person in the prior period.
     

    The Calculation

    The annual fee is calculated by multiplying the PCORI fee by the average number of lives covered on the health plan. There are multiple methods that can be used to calculate this average, including the Actual Count method, the Snapshot method, and the 5500 method.

    Note: The calculation is based on average lives, not average employees. It is often referred to as the “belly button” tax since it is paid for every “belly button” (or person) covered by the plan, not just for employees.
     

    Effective Date

    The updated fees apply for policy years and plan years that end on or after October 1, 2023, and before October 1, 2024. For calendar year plans, this means January 1, 2024.
     

    Which plans are covered?

    The easy answer is all health plans . . . But it can be a bit more complicated when an HRA or FSA is added to the mix. HRA and FSA plans are both self-funded health plans, which means they are generally subject to PCORI fees unless an exception applies.

    HRA Integrated with Insured Coverage: Employers that maintain a fully insured major medical plan along with an HRA must pay PCORI fees on the HRA. The carrier will pay the PCORI fees on the fully insured health plan component. The HRA count is calculated as one life per participant.

    HRA Integrated with Self-Funded Coverage: There is a special PCORI rule that allows employers with multiple self-funded health plans to treat those plans as one. Therefore, employers that have a self-funded health plan and an integrated HRA may treat the two plans as a single plan for PCORI purposes (thus eliminating double fees for two plans). In this case, the employer would owe only one PCORI fee for participants covered under both self-funded plans. The participant count for fee calculation purposes would be based on the per-participant numbers of the underlying self-funded health plan, not the per-employee numbers of the integrated HRA. 

    EBHRA Plans: Excepted benefits are not subject to healthcare reform’s mandates, which means that they are not subject to PCORI fees. Such plans must be offered alongside a traditional group health plan, have a benefit cap under the federal limit, and reimburse only expenses that are not essential health benefits (such as dental, vision, infertility, or state-mandated travel benefits).

    FSA Plans: “Regular” FSA plans that are fully funded by participant salary reductions qualify as excepted benefits and thus are not subject to PCORI fees. FSA plans that do not qualify as excepted benefits, for example, plans with employer sponsorship of greater than $500 in the form of a match or seed funding, are subject to PCORI fees.

    QSHRA Plans: An employer offering a QSHRA can’t, by definition, offer a group health plan. Therefore, a QSHRA is considered a standalone HRA plan and is subject to PCORI fees. The count is calculated as one life per participant.

    Stop Loss Coverage: Stop Loss policies are not subject to PCORI fees.
     

    Employer Action

    Fully Insured Plans: Employers with fully insured plans do not need to take any action for PCORI fee filing as the fee is baked into the fully insured premium and paid by the carrier.

    Self-Funded Plans: Employers with self-funded health must calculate fees and submit payment on the second quarter Form 720. The deadline is July 31st each year.

    HRA/FSA Plans: Employers with HRA/FSA plans must first determine whether the plan is subject to PCORI fees (or exempted by the single plan rule or the excepted benefit rule). If subject, employers must calculate fees and submit payment on the second quarter Form 720. The deadline is July 31st each year.
     

    References

    IRS Notice 2023-70




     

  • Reproductive Loss Events: New Leave Entitlement in California

    On October 11, 2023, California Governor Gavin Newsom signed S.B. 848, which creates a new leave category for reproductive loss. The new law, which piggybacks onto California’s Bereavement Leave law, requires covered employers to grant eligible employees up to five days of leave following a reproductive loss event.
     

    Reproductive Loss Events Defined

    Reproductive Loss Events are defined as a failed adoption, failed surrogacy, miscarriage, stillbirth, or an unsuccessful assisted reproduction procedure.
     

    Leave Provisions

    5 Days per Event: The law allows for up to five days per reproductive loss event.

    Annual Maximum: The law limits the amount of reproductive loss leave to a maximum of 20 days within a 12-month period. That means if an employee experiences multiple reproductive loss events within a 12-month period, up to five days per event must be provided, but there is a cap of 20 days within a 12-month period.

    Time Window: While there are some narrow exceptions, generally, employees must take the leave within three months of the reproductive loss event.

    Intermittent Leave: Employees need not take leave for a reproductive loss event on consecutive days.

    Unpaid: Reproductive loss event leave is structured as unpaid leave. However, employees may choose to use any accrued and available sick leave, or other paid time off, for a reproductive loss leave. In addition, employers are free to provide all or a portion of the leave on a paid basis.

    Documentation: The law does not contain any provision that permits employers to request documentation of a reproductive loss leave. In the absence of any such expressed permission, employers wishing to take a safe route should presume self-attestation to be sufficient.

    Anti-Retaliation: SB 848 prohibits employers from retaliating against an employee for requesting or taking leave for a reproductive loss event.

    Confidentiality: Employers are required to maintain the confidentiality of any employee requesting reproductive loss leave.
     

    Covered Employers

    California employers with five or more employees are covered under the law. 
     

    Covered Employees

    Employees who have worked for an employer for at least 30 days are eligible for reproductive loss leave.
     

    Are Spouses/Partners Covered?

    The law is clear that a spouse/partner of a person who directly experienced a reproductive loss event is also entitled to this leave. For each type of reproductive loss event, the law includes language that clarifies that a person who would be a parent but for the reproductive loss event is entitled to the leave.
     

    Effective Date

    This law becomes effective on January 1, 2024.
     

    Employer Action Items

    As with any new employee entitlement, employers should consider the following actions:

    1. Update the employee handbook to include Reproductive Loss Events as eligible.
    2. Consider whether reproductive loss leave will be included under any existing employer leave programs that may be paid (and update policies to that effect).
    3. Train supervisors, managers, and HR teams in the new law, including the confidentiality provisions of the law.
     

    References

    S.B. 848




     

  • Free COVID Tests with Home Delivery

    Effective September 25, 2023, every U.S. household can again place an order for additional free COVID-19 rapid tests. Four COVID-19 tests are available for each household and will be delivered directly to your home.

    To access the tests, log in to covid.gov/tests. The process is simple and takes only a few minutes. Tests arrive in approximately one week.
     

    Rapid Test Details

    The tests that are sent:

    • Are rapid antigen at-home tests, not PCR
    • Can be taken at home or other locations and give results within 30 minutes (no lab drop-off required)
    • Can be used for testing whether you have COVID-19 symptoms or not
    • Can be used for testing whether you are up-to-date on your COVID-19 vaccines or not
    • Are also referred to as self-⁠tests or over-the-counter (OTC) tests
     

    Test Expiration Date Extensions

    The covid.gov website also has posted a list of expiration date extensions for COVID-19 tests. All at-home COVID-19 tests are labeled with an expiration date printed on the packaging. Generally, tests should not be used beyond this expiration date. However, these expiration dates can be extended beyond the date printed on the package as additional stability data is collected. Information on these extensions can be found on the covid.gov website.
     

    Two Employer Considerations

    Employers may want to proactively notify employees of the availability of additional test kits. This will help ensure that employees have tests on hand for at-home testing if they or a family member becomes ill.

    Employers would also be wise to familiarize themselves with the Centers for Disease Control and Prevention recommendations for isolation and precautions for people with COVID-19.



     

  • California Paid Sick Leave Expansion Signed Into Law

    On October 2, 2023, Governor Gavin Newsom signed S.B. 616, which significantly expands the state’s existing Paid Sick Leave (PSL) mandate. The two key changes are:

    • Required number of paid sick leave days increased from 3 days to 5 days (or from 24 hours to 40 hours)
    • Maximum accrual cap raised from 6 days to 10 days (or from 48 hours to 80 hours).
     

    Effective Date

    The law will become effective on January 1, 2024.
     

    PSL Accrual Methodology

    The new law leaves in place existing options for paid sick leave accrual. Specifically, employers may adopt one of three methods for accruing PSL for their employees:

    • Accrual Method: Under this method, employees must earn at least one hour of paid sick leave for every 30 hours worked, up to a rolling cap of 48 hours. This approach allows employers to avoid employees taking sick leave after only minimal time working by requiring employees to “earn” leave time prior to taking it.
    • Frontload Method: Under this method, employers provide an upfront allocation of at least the minimum required paid sick leave. This approach allows employers to avoid accrual tracking and year-end carryover obligations.
    • Alternate Accrual Rate for New Hires: Under this method, employers may adopt a different accrual method if employees receive at least 24 hours of accrued paid sick leave by their 120th calendar day of employment and in each calendar year, AND at least 40 hours of paid sick leave by their 200th calendar day of employment. (The first part of this alternate method is the same as the current law. The “40 hours by the 200th day” is a new extension that was added by S.B. 616.)

    Under the new law, regardless of the accrual method adopted, employers may limit the number of days an employee can USE per year to 5 days (or 40 hours) for 2024 and beyond.
     

    Employer Action Item

    The January 1, 2024, effective date is just around the corner, and many employers will want to start the implementation process immediately. Employers should look ahead and plan for:

    • Programming new requirements into PSL/PTO tracking systems
    • Updating PSL/PTO policy documents
    • Communicating changes to employees.



     
  • Kaiser Permanente Workers Strike

    [UPDATE 10/13/2023]

    Kaiser Reaches Tentative Deal with Union

    Kaiser Permanente’s healthcare workers union reached a tentative labor agreement with Kaiser on Friday, October 13th. The three-day strike earlier this month was the largest ever in the U.S. healthcare industry. This tentative agreement is expected to avert further potential work stoppages that the union indicated were planned for the first week of November. This is welcome news for both the Kaiser members and the Kaiser healthcare system.

    -----------------------------------------------------------------

    A major strike has taken effect across portions of the Kaiser Permanente health system. An estimated 75,000 healthcare professionals are striking, impacting hundreds of hospitals and medical facilities. There are two unions formally striking:

    • UFCW 555 (Pharmacy Technicians / Pharmacy Warehouse) announced a strike that began October 1st and could last through October 21st.
    • SEIU announced a strike that began October 4th and could last through October 6th.
     

    Why are workers striking?

    Kaiser Permanente healthcare workers are striking to improve working conditions and pay prior to agreeing to a new contract. Union leaders are concerned with Kaiser’s commitment to appropriate staffing levels and have presented data that 11% of union positions were vacant as of April 2023. Kaiser union workers believe this staffing shortage is impacting their ability to give the best patient care possible. 
     

    What does this mean for Kaiser members?

    Employees and individuals with Kaiser coverage may experience delays, or otherwise impacted patient experience, during this strike. However, there is good reason to believe that both parties will be incentivized to resolve the impasse as soon as possible.

    Kaiser members will continue to receive communication from the health system regarding patient expectations. Members have already received communication on how to access pharmacy benefits based on their regional location, and Kaiser will employ temporary staffing to meet the immediate care needs of members.
     

    Employer Actions:

    We believe it is important for employers to be aware of the current situation and to direct Kaiser members to follow best practices outlined in Kaiser communications.


     

  • Gag Clause Prohibition: The Attestation Process

    The Consolidated Appropriations Act of 2021 (CAA) added a provision to prohibit group health plans from entering contracts with Gag Clauses, effective December 27, 2020. The new rule also requires that group health plans submit an attestation of compliance with this provision.
     

    Gag Clause Defined

    A Gag Clause is any term that directly or indirectly restricts the plan from:

    • Accessing provider-specific cost or quality of care information or data
    • Electronically accessing de-identified claims and encounter information or data, or from sharing these types of information or data.

    This generally means that insurers and third party claims administrators (TPAs) can no longer restrict a plan’s access to certain data by claiming that such data is “proprietary” in nature or by controlling the plan’s access to the data at the TPA’s or insurer’s sole discretion.

    For additional details on the Gag Clause provision, please refer to our detailed article.
     

    What is a GCPCA?

    GCPCA is a new acronym that stands for Gag Clause Prohibition Compliance Attestation. It is the attestation of compliance with the Gag Clause provisions for group health plans.
     

    Upcoming Deadline

    The first annual attestation is due by December 31, 2023. This attestation covers the period from inception through 2023. Subsequent attestations will be required by December 31st each year thereafter.
     

    Employer Action Items – Fully Insured Plans

    Fully insured carriers are generally making mass submissions of attestation on behalf of all of their fully insured clients. That said, the legal responsibility for attestation still remains with the group health plan (regardless of the underlying agreement). Thus, there are still important steps that employers must take to ensure compliance with the attestation process.

    Step #1 Confirm Compliance: Employers must first confirm (in writing) that their insurer complies with the Gag Clause (specifically, that their contracts do not contain any prohibited provisions). Insurers are typically providing a statement of compliance to employers. Note that employers will need to secure Certifications of Compliance from each carrier if coverage is offered through multiple carriers.

    Step #2 Confirm Insurer to Complete Attestation: Employers must then confirm that their insurer will be completing the GCPCA on their behalf.

    Step #3 Secure Written Confirmation: Employers must secure written confirmation that their insurer has or will submit the attestation on their behalf. Ideally, the acceptance of this responsibility would be included in the contractual agreement between the carrier and the employer. Until those agreements are updated, employers should request separate communication/confirmation of the carrier’s acceptance of responsibility.
     

    Employer Action Items – Self-Funded Plans

    Many employers plan on transferring responsibility for the GCPCA to either a TPA, broker, or another consulting party. That said, the legal responsibility for completing the GCPCA remains with the group health plan. Therefore, it is important to take steps to understand the process and recommended actions to affirm responsibility and document the completion of the attestation process.

    Step #1 Confirm Compliance: Employers must first confirm (in writing) that their TPA complies with the Gag Clause (specifically, that their contracts do not contain any prohibited provisions). TPAs and PBMs typically providing a short Certificate of Compliance to employers.

    Step #2 Confirm Who is Completing the Attestation: Employers must then confirm who will be completing the GCPCA for the group health plan. This can be completed by their TPA, by the employer directly, or by another third party “Submitter” (such as a broker) on their behalf.

    Step #3 Secure Authorization for Submitter: If the GCPCA is completed by any entity other than the employer, an authorization is required. Specifically, the employer must authorize the “Submitter” to also be the “Attester” of compliance.

    Step #4 Maintain Documentation of Attestation: The following elements of documentation should be maintained:

    1. Documentation of acceptance/transfer of responsibility for completion of the GCPCA.
    2. Certificate of compliance with Gag Clause provisions from TPA/PBM.
    3. Authorization for Submitter to be Attester (if applicable).
    4. Confirmation of GCPCA attestation from the website submission process.
     

    Unique Situations for Self-Funded Plans

    There are a few other notable items for self-funded employers.

    • Level-Funded Plans: Employers with level-funded plans should plan to follow the process as defined for self-funded employers.
    • Blue Shield: Blue Shield appears to be an outlier in that they will accept responsibility for attesting on behalf of plans. Refer to Blue Shield’s communications for an outline of details.
    • Still Figuring It Out: As a rule, ASO providers have made the determination to not accept the attestation responsibility on behalf of employer plans. However, a few are still “figuring out” their procedures. Employers should take note to confirm the final process with their TPA.
     

    What if we have Fully Insured and Self-Funded Plans?

    To the extent plans are offered both on a fully insured and self-funded basis (for example, Kaiser is offered alongside a self-funded plan), employers should plan to follow both the fully insured and the self-funded processes in parallel.
     

    What if we changed carriers or changed funding?

    Since the initial attestation covers the period of December 27, 2020, through December 31, 2023, employers will need to consider any changes in carrier or funding that have occurred during that period. For example, if a change was made from Carrier A to Carrier B in 2022, compliance documentation would need to be obtained from the prior carrier for that period of coverage. Similarly, if the plan funding mechanism has changed, employers will need to follow the applicable fully insured or self-funded processes (outlined above) for the respective periods.
     

    Vita Clients – Attestation Completed for You

    Fully Insured Plans: Vita will secure copies of the Certification of Compliance from all major carriers. The Vita account management team will work with employer groups to secure confirmation that the carrier will be completing the attestation on their behalf. However, employers should confirm that some written form of the acceptance of attestation responsibility is received.

    Self-Funded Plans: Vita will complete the attestation process for clients with self-funded health plans. Vita will secure a copy of the Certification of Compliance from the TPA/PBM, complete the online attestation, and maintain documentation of the submission. Clients will be required to sign an authorization form (via DocuSign) to authorize Vita to complete the attestation on their behalf.
     

    Resources

    Website for Online GCPCA Attestation

    Gag Clause FAQs

    Instructions for submitting the GCPCA

    User Manual for submitting the GCPCA [Word Doc Download]