Earlier this year, the Biden-Harris Administration took a firm stance against ‘junk insurance’ by introducing regulations aimed at impacting short-term limited duration insurance policies, independent non-coordinated coverage, and level funded plan arrangements. In this episode, our guests Diane Dygert and Benjamin Conley provide insights on these proposed regulations, addressing employee comprehension gaps, coverage notifications, and potential tax implications. Diane and Ben also draw from practical examples, stressing the importance for employers to reassess FICA avoidance strategies. Grab your cup of coffee and tune in to hear Richard and Sarah discuss the current regulatory landscape and what employers should consider when offering or renewing such benefit plans.

Click here to listen to the full episode.

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Seyfarth Synopsis: The IRS has announced an increase to the applicable dollar amount for determining the Patient-Centered Outcomes Research Institute (“PCORI”) Fee for 2024 as well as other health and welfare limits.

The Affordable Care Act (ACA) established the PCORI to support research on clinical effectiveness. The PCORI is funded (through the Patient-Centered Outcomes Research Trust Fund) in part by fees paid by certain health insurers and sponsors of self-insured health plans (“PCORI fees”). The PCORI fee is determined by multiplying the average number of covered lives for the plan year times the applicable dollar amount, and is reported and paid annually (by July 31) to the IRS using Form 720 (Instructions to Form 720 are available here). The applicable dollar amount as set by the IRS for plan years ending on or after October 1, 2022 and before October 1, 2023 was $3.00 per covered life.

The IRS has issued Notice 2023-70 announcing the applicable dollar amount that must be used to calculate the fee for plan years that end on or after October 1, 2023 and before October 1, 2024. This 2023-24 PCORI fee is $3.22 per covered life, an increase of $0.22 per covered life from 2023. The PCORI fee for a 2023 calendar year plan, calculated as $3.22 per covered life, is due by July 31, 2024.

For more information on paying the PCORI fee, see our prior posts here,  here and here, and the IRS website here. Also refer to this IRS page for a helpful chart describing the applicability of the PCORI fee to various health arrangements.

Additionally, the IRS has announced other 2024 cost-of-living adjustments for employer-sponsored health and welfare and related plans and programs (collectively, “plans”). The 2024 cost-of-living adjustments (and the changes from 2023) for these plans, from Rev. Proc. 2023-23 and Rev. Proc. 2023-34 are summarized in the table below:

* The amount excludable from an employee’s gross income for amounts paid by an employer for qualified adoption expenses through an AAP begins to phase out in 2024 for taxpayers with modified adjusted gross income (“MAGI”) in excess of $252,150 and is completely phased out in 2024 for taxpayers with MAGI of $292,150 or more.

** The HSA catch-up contribution limit is set by statute and does not adjust for inflation.

*** Dependent Care FSA limits are set by statute and do not adjust for inflation.

**** The HDHP out-of-pocket limit for family coverage also is subject to an “embedded” individual out-of-pocket limit of $9,450 (up from $9,100) on essential health benefits in a non-grandfathered HDHP, as required by the Affordable Care Act. The 2024 adjustment was announced by the U.S. Department of Health & Human Services here.

Please contact the employee benefits attorney at Seyfarth Shaw LLP with whom you usually work if you have any questions regarding the PCORI fee or the other limits on health and welfare and related plans.

True to form, the IRS released long-awaited proposed regulations during a long holiday weekend. This time they are narrowly focused on the eligibility rules for Long-Term Part-Time employees first introduced under the SECURE Act, and then expanded by SECURE 2.0. But, they did not disappoint, and are chock full of useful and detailed information on the topic. The IRS is now seeking comments and interested parties have until January 26, 2024.

We have digested the new proposal and hit the highlights in our Legal Update found here. As always, if you have any questions on how this impacts your retirement plan, please do not hesitate to reach out to your Seyfarth Employee Benefits attorney.

On October 31, 2023, the Department of Labor (“DOL”) issued its latest attempt at revising the rules regarding when investment professionals who provide “investment advice” to employee benefit plans or plan participants are a fiduciary under the Employee Retirement Income Security Act of 1974 (“ERISA”). This proposed rule represents the most recent bid by the DOL to expand on the fiduciary rule first established in 1975 to make more investment advisors ERISA fiduciaries, and as a result, subject to the high fiduciary standards imposed by ERISA. This time, however, the DOL has labeled its new rule as the “Retirement Security Rule”, rather than the more traditional “fiduciary” rule.

With this proposed rule, the DOL is attempting to replace the 1975 five-part test for whether a person is an ERISA fiduciary because they are providing investment advice with a three-part test designed to expand who is an ERISA fiduciary. An earlier DOL attempt under the Obama Administration to change the definition of who is a fiduciary was struck down by the Fifth Circuit Court of Appeals as over-reaching the DOL’s authority. Drafted to avoid this problem, the new proposed rule emphasizes relationships of trust and confidence. From the preamble to the proposed rule, it is clear that the DOL is concerned about investment professionals who work with plan participants who are deciding whether to rollover their ERISA plan account. The decision to execute a rollover of retirement plan benefits is generally a one-time decision that the DOL explains can have a significant impact on an individual’s retirement savings. Yet, under the 1975 rule, many advisors who assist participants with this decision are not ERISA fiduciaries when providing rollover advise on a one-time basis.

In order to avoid this result, the DOL proposes to re-write current rule that generally requires that the investment advice be provided on a “regular basis”. Under the proposed rule, the new requirement would be that the advice be provided on a regular basis as part of the advisor’s regular business, and the recommendation is made under circumstances indicating that the recommendation is based on particular needs or individual circumstance. In this way, providing rollover advice to a retirement investor on a one-time basis could fall within the definition of an ERISA fiduciary.

The DOL’s new release also proposes to update some existing prohibited transaction exemptions (“PTEs”) so that all the different investment professionals who would be ERISA fiduciaries under the revised rule would be subject to the same standards of conduct to qualify for a prohibited transaction exemption – i.e., that they must act in the “best interest” of the retirement investor when making a recommendation and take action to mitigate the investment advisor’s conflicts of interest.

Although the DOL’s proposal addresses the concern expressed by the Fifth Circuit Court of Appeals, it will no doubt be subject to challenge in the courts. We are already seeing requests from those in the investment industries for the DOL to extend the period for comments on the proposed rule (from 60 days to 120 days).

Stay tuned for a Seyfarth Legal Update that will drill down deeper into this new DOL guidance. If you have any questions, please do not hesitate to reach out to your Seyfarth Employee Benefits attorney.

Seyfarth Synopsis: The IRS just announced the 2024 annual limits that will apply to tax-qualified retirement plans. For a third year in a row, the IRS increased the annual limits, allowing participants to save even more in 2024. Employers maintaining tax-qualified retirement plans will need to make sure their plans’ administrative procedures are adjusted accordingly.

In Notice 2023-75, the IRS announced the various limits that apply to tax-qualified retirement plans in 2024. The “regular” contribution limit for employees who participate in 401(k), 403(b) and most 457 plans will increase from $22,500 to $23,000 in 2024. The “catch-up” contribution limit for individuals who are or will be age 50 by the end of 2024 is not changing, and remains $7,500 for 2024. Thus, if you are or will be age 50 by the end of 2024, you may be eligible to contribute up to $30,500 to your 401(k) plan in 2024. These same limitations apply if you work for a governmental or tax-exempt employer and participate in a 403(b) plan.

Continue Reading Want to Put More Away in Your 401(k)? Qualified Plan Limits Generally Increase in 2024

Seyfarth Synopsis: In August, the Ninth Circuit Court of Appeals revived a challenge by Airlines for America (“A4A”), to San Francisco’s Healthy Airport Ordinance (the “Ordinance”), which requires airlines that use the San Francisco International Airport, which the City runs, to provide enhanced health plan benefits to the airlines’ employees and their dependents.  A4A, an airline trade association, had challenged benefits mandates of the ordinance on ERISA preemption grounds.

The Ordinance requires that private employers, including the airlines, offer a platinum health plan (that is, a plan with at least a 90% actuarial value) at no cost to employees, that covers the employees as well as their spouses and dependents. The plan must also cover all the services provided for under California’s essential health benchmark plan.  Instead of offering coverage, the Ordinance allows an airline to pay a set dollar amount (currently $10.30 per hour, up to $412 per week) into a City fund that employees can use to pay for medical expenses. 

Back in April 2022, the federal District Court held that the requirements of the Ordinance are “functionally equivalent” to business contract terms and do not operate as a regulation. As a result, the airlines could decide whether or not to do business with the City at SFO, knowing that to do so they would be subject to those requirements. Because the Ordinance imposed business terms and the City was acting as a private market participant, the court held that the Ordinance was not preempted. 

A4A then appealed that decision to the Ninth Circuit.  In reversing, the Ninth Circuit held that the City acted as a regulator in enacting the Ordinance. Therefore, the case was sent back to the District Court for consideration of the merits of A4A’s claims. The Ninth Circuit’s decision was based in large part on the ability of the Airport Director to assess hefty civil penalties that the Circuit Court held carried the force of law and therefore made the City a regulator. These penalties include daily fines (with potential increases at the Airport Director’s discretion), and the ability to collect liquidated damages of up to $100 for each one-week pay period for each employee for whom the airline has either not offered compliant health plan benefits or made payments into the fund. The Circuit Court also noted that the City can enforce these provisions in a municipal administrative proceeding. If the City were acting as a market-participant merely managing the airport as a private party, its actions could not be preempted.  However, because the City is acting as a regulator, the District Court’s presumption that the Ordinance cannot be preempted was incorrect and A4A’s challenge can proceed.

This holding is, and the final outcome of this case will be, significant. From time to time, employers and their associations have been stopped by Ninth Circuit courts when they attempted to argue state and local benefits laws are preempted by ERISA and other federal laws due to the market-participant exception to preemption. The Ninth Circuit has now rejected the market-participant exception, at least based on the penalty and enforcement provisions of the Ordinance. As a result, the case may provide a roadmap for employers who want to challenge state and local benefits laws in the future. We will have to wait and see if the ordinance is deemed preempted.

We will continue to monitor this case and provide updates as developments arise.

Tuesday, October 24, 2023
2:00 p.m. to 3:00 p.m. Eastern
1:00 p.m. to 2:00 p.m. Central
12:00 p.m. to 1:00 p.m. Mountain
11:00 a.m. to 12:00 p.m. Pacific

This year, we’ve seen a number of key developments that are shifting the landscape of ERISA Litigation.

Join us for this update, where our presenters couple their own experiences with expert analysis to recap significant developments from the year so far and hot topics. 

Topics include:

  • Emerging topics in 401(k) fee litigation, 
  • Risks for Health and Welfare litigation and plans,
  • Prohibited transactions, and
  • The trend toward previously unheard-of jury trials. 


Ada Dolph, Partner, Seyfarth Shaw LLP
Jules Levenson, Senior Counsel, Seyfarth Shaw LLP
Ryan Tikker, Associate, Seyfarth Shaw LLP

For more information and to register, click here.

Seyfarth Synopsis: The IRS has announced adjustments decreasing the affordability threshold for plan years beginning in 2024, which may cause employers to have to pay more for ACA compliant coverage in 2024.

The IRS recently released adjustments decreasing the affordability threshold for plan years beginning in 2024 in Revenue Procedure 2023-29.

Under the Affordable Care Act (ACA), applicable large employers (ALEs) that do not offer affordable minimum essential coverage to at least 95% of their full-time employees (and their dependents) under an eligible employer-sponsored health plan may be subject to an employer shared responsibility penalty. Generally speaking, coverage is affordable if the employee-required contribution for self-only coverage is no more than 9.5% (as adjusted each year) of the employee’s household income. The adjusted percentage for 2023 is 9.12%. For more information regarding the 2023 affordability threshold, see our prior Blog Post here.

Adjusted Percentage for 2024

Under Revenue Procedure 2023-29, the adjusted percentage for 2024 will be 8.39%. This is a decrease of 0.73% from the 2023 affordability threshold of 9.12%, and is the lowest affordability threshold to date.

Federal Poverty Line (FPL) Safe Harbor 

Making calculations based on each employee’s household income would be administratively burdensome. Accordingly, there are three safe harbors for determining affordability based on a criterion other than an employee’s household income; namely an employee’s Form W-2 wages, an employee’s rate of pay, or the FPL.  If one or more of the safe harbor methods can be satisfied, an offer of coverage is deemed affordable. 

The FPL safe harbor is the easiest to apply, since an employer has to do just one calculation and can ignore employees’ actual wages, and is intended to provide employers with a predetermined maximum required employee contribution that will in all cases result in coverage being deemed affordable. Under the FPL safe harbor, employer-provided coverage offered to an employee is affordable if the employee’s monthly cost for self-only coverage does not exceed the adjusted percentage (8.39% for 2024) of the federal poverty line for a single individual, divided by 12.  The federal poverty guidelines in effect 6 months before the beginning of the plan year may be used for an employer to establish contribution amounts before the plan’s open enrollment period.

For plan years beginning in 2024, a plan will meet the ACA affordability requirement under the FPL safe harbor if an employee’s required contribution for self-only coverage does not exceed $101.94 per month.

Given the large decrease in the adjusted percentage, employer-sponsored health coverage that was considered to be affordable prior to 2024 may no longer be considered affordable in 2024. Therefore, employers may have to pay more for ACA compliant employer-sponsored health coverage in 2024.  If you have any concerns about the affordability of your health care coverage offerings, please reach out to one of our Employee Benefits attorneys directly.

This post was originally published to Seyfarth’s Global Privacy Watch Blog.

As organizations begin renewing and entering into new contractual relationships for 2024, an oft-forgotten aspect of the contracting process is determining whether a Business Associate Agreement (a “BAA”) is required. Under HIPAA, health care providers, health plans and health care clearinghouses (“Covered Entities”) are required to enter into BAAs with any vendor (“Business Associate”) that may have access to Protected Health Information (“PHI”). Many organizations operate under a misconception that they are not subject to HIPAA if they are not in the health care industry but, in fact, HIPAA’s reach is much broader than that. For example, organizations that sponsor health plans, including employers that sponsor self-funded plans, are responsible for their health plans’ compliance with HIPAA, including the requirement to enter into BAAs with plan vendors. As another example, information technology organizations providing services to employers that offer health plans may be asked to sign a BAA as a Business Associate if they have access to data on the employer’s systems that may constitute PHI.

Putting aside the fact that BAAs are legally required under HIPAA, we have outlined the top 5 reasons why you shouldn’t forget to enter into a BAA with applicable organizations as you begin your contract review process for 2024:

  1. Ensure proper and timely notification of breaches and security incidents. Data security breaches have seemingly become a daily headline in our morning papers. Under HIPAA, there are very strict, specific notification requirements in the event of a breach or security incident. Entering into a BAA allows the parties to negotiate the timeline for notification not only from Business Associate to Covered Entity or downstream subcontractor to Business Associate, but also to individuals, the Department of Health and Human Services (“HHS”), state agencies, the media, and more. The parties can also negotiate terms to broaden the definition of what constitutes a reportable event. Understanding, outlining, and assigning these obligations is crucial given the breadth of the stringent requirements under the law (and interplay of potentially applicable state laws).
  2. Shift liability for breach-related costs. Substantial costs may be involved when a breach or security incident occurs, including, for example, notification costs, credit monitoring expenses, governmental fines and penalties, legal fees, hiring third party cybersecurity experts for investigation efforts, and more. Entering into a BAA provides parties the opportunity to negotiate liability and indemnification rights for these expenses.
  3. Pass requirements through to subcontractors. Whether your organization is a Covered Entity or a Business Associate, utilizing BAAs to ensure that subcontractors are also required to comply with applicable HIPAA requirements is key. Understanding who those subcontractors are, where they store data, what entities may receive PHI from them, and what safeguards they have in place is an important aspect of ensuring HIPAA compliance and shifting liabilities.
  4. Be prepared for an audit. In the event HHS audits an organization for HIPAA compliance, the agency will ask for a list of all Business Associates and the applicable BAAs with those vendors. If your organization does not have a comprehensive list of Business Associates or up-to-date BAAs, HHS could assess penalties and decide to delve even deeper than usual during the audit process. Producing these documents upon request demonstrates a good faith effort to comply with HIPAA and could help an organization avoid or reduce the risk of certain penalties that may be assessed during the audit process.
  5. Assign responsibilities to the parties. There are a number of obligations under HIPAA that the parties may want to specifically assign to a contractual party or delegate to yet another entity. For example, some Covered Entities may want control over individual rights under HIPAA, such as an individual’s right to request access to PHI, amend PHI, request confidential communications of PHI, restrict PHI disclosures, or obtain an accounting of disclosures. In other instances, some Covered Entities may decide to shift the obligation to respond to these requests to the Business Associate due to the nature of the parties’ relationship and the Covered Entity’s capabilities. Entering into a BAA allows the parties to determine who is best suited to satisfy certain HIPAA requirements and assign such roles accordingly.

If you need help negotiating a BAA, drafting a template BAA for your organization, or understanding whether your organization needs a BAA in place, contact the author or other legal counsel to evaluate your business operations, activities, and HIPAA obligations.

This afternoon, the IRS issued Notice 2023-62, providing welcome guidance relating to the mandatory Roth catch-up provision under Section 603 of the SECURE Act 2.0 (“S2”), which is effective for plan years beginning after December 31, 2023. First, the Notice clarifies that catch-up contributions are still allowed after 2023, despite a technical glitch in S2. Second, the Notice provides a two year administrative transition period for implementing mandatory Roth catch-up contributions for employees earning more than $145,000 (YAY!!!!).

Treasury and IRS took note of the many open questions surrounding the mandatory Roth catch-up provision under S2, and recognize the need for additional time to implement the changes to administration and payroll systems. Under the two year administrative transition period, all catch-up eligible employees (even those earning more than $145,000) may continue to make pre-tax catch-up contributions until tax years beginning after December 31, 2025. We can’t think of a better way to celebrate the penultimate Friday of the summer!

Stay tuned for a more comprehensive blog post on Notice 2023-62, which will be posted shortly!