PLANSPONSOR - July - August 2023 - 7

ERISA: the duty of loyalty, the duty of
prudence and the duty to comply with the
provisions of the plan. She did, however,
also deny Advance Publications' request to
dismiss Anderson's amended complaint
with prejudice, giving him until June 27
to re-amend the complaint.
Anderson's
complaint
is
centered
on the BlackRock LifePlan Index that
Advance Publications' 401(k) plan has
offered since its April 2011 adoption.
Anderson argued that the company
elected to retain the BlackRock TDFs
instead of choosing from a wide range of
alternative TDF families that competing
providers offered. Advance Publications
did not respond to a request for comment.
House Republicans Call for
More Transparency in ESG
The ESG [environmental, social and
governance] Working Group established
by Republican members of the House
Committee on Financial Services in
February recently published an interim
report highlighting the various policy
goals it intends to pursue. These include:
reforming the proxy voting system,
improving ESG rating agency accountability
and transparency, mitigating application
of European Union regulations to
U.S. issuers; and demanding transparency,
responsibility and adherence to statutory
limits from financial and consumer
regulatory agencies.
" The initial focus of the Working
Group centers on the environmental
aspect, specifically the current promotion
of environmental policies in the financial
services industry and by regulatory
bodies, " the report states.
Health Care Regs Going
The Way of 401(k)s
In December 2020, Congress passed
the Consolidated Appropriations Act,
including $900 billion in COVID-19 stimulus
relief. Within the heavily COVIDrelated
act, a roughly 100-page section
may, according to industry experts, push
the private health care industry the way of
retirement benefits. That is: heightened
fiduciary
standards,
enhanced
transparency
and increased litigation that,
according to LinkedIn advertisements
from law firm Schlichter Bogard LLP, may
already be ramping up.
The " Private Health Insurance and
Public Health Provisions " section of CAA
2021 immediately enacted multiple provisions
targeting health care benefit providers
and brokers. Those regulations included
fiduciary responsibility to price shop for
" The industry's
slow response to
the provisions ...
appears to have
been noticed by
regulators. "
the best deal for employees; requirements
to report drug pricing and pharmaceutical
information to government regulators; and
the necessity to monitor the direct and
indirect compensation received by health
industry broker/dealers.
The industry's slow response to the
provisions, some of which have been staggered
or held back due to lack of regulatory
clarity, appears to have been noticed
by regulators. The departments of Labor,
Health and Human Services, and the
Treasury issued FAQ on the regulations
in February to clarify some rules and put
a timeline in place for regulatory action.
The FAQ also provided crucial clarity
on the section prohibiting health service
providers from including " gag clauses "
in contracts with plan sponsors;
these
prevent an employer from accessing data
as to cost or quality of care, for example
to inform its plan participants or their
beneficiaries, to benchmark the plan, or
to use in a request for proposals. At the
end of this year, health plans must attest
to regulators that they have not entered
into any such gag clause contracts.
The DOL did not respond to a request
for elaboration on the timeline for, or
expectations of, regulatory action.
Reimbursed Wellness
Benefits Are Taxable
The IRS announced, June 9, that wellness
indemnity payments under a fixedindemnity
insurance policy count toward
gross taxable income and may not be
treated on a tax-favored basis.
A wellness indemnity program as
described by the IRS is one in which
salary is deducted on a pre-tax basis and
then used to reimburse the employee
for various wellness benefits such as a
weight-loss program, nutritional guidance
or diabetes management. Since this
effectively sends the employees' money
back to them for nonmedical expenses, it
should count toward taxable gross income,
the IRS memo says.
The IRS provides an example
of what such a plan might look like:
Employees at a hypothetical business
pay $1,200 in pre-tax monthly premiums
into a wellness program through a cafeteria
plan by way of salary deduction
and then receive $1,000 in compensation
for wellness expenses, having saved
more than $200 in taxes. The example
shows someone effectively buying something
with pre-tax dollars and then being
compensated with untaxed dollars for a
nonmedical expense.
This observation would apply only
to the extent that the employee actually
has no unreimbursed medical expenses,
according to the Groom Law Group.
The IRS memo is chief counsel
advice, according to Groom, and is therefore
not formal guidance but " an indication
of the IRS's views on an issue. " -PS
For in-depth coverage of these topics and more, go to PLANSPONSOR.com/compliance.
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