DOL Announces Plans to Issue Proposed Overtime and Independent Contractor Rules
In its recent spring regulatory agenda, the U.S. Department of Labor (DOL) announced its plans to issue a proposed overtime rule in October 2022. According to the agency’s regulatory agenda, this proposed rule is expected to address how to implement the exemption of executive, administrative and professional employees from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime requirements.
The DOL provided a similar notice last fall but has yet to specify what changes it may be considering. In recent years, some experts note that the agency has contemplated modifying the duties test and salary thresholds for exempt employees.
Additionally, in a recent blog post, the DOL announced it will issue a proposed rule on determining employee or independent contractor status under the FLSA. On Jan. 7, 2021, during the Trump administration, the DOL published a rule—the Independent Contractor Status Under the Fair Labor Standards Act—that expanded the definition of workers who could be classified as independent contractors. On March 4, 2021, under the Biden administration, the DOL delayed the rule before withdrawing it on May 6, 2021, for being inconsistent with the FLSA’s text and purpose. On March 14, 2022, a U.S. district court vacated the DOL’s delay and withdrawal of the rule for failing to meet rulemaking requirements for federal agencies. As a result, the district court determined the rule took effect as of March 8, 2021—the original effective date—and remains in effect.What Will the Proposed Overtime Rule Address?This proposed overtime rule could provide clarity for classifying exempt employees and increasing their salary levels under the FLSA. Some experts believe the DOL could even create automatic annual or periodic increases to exempt employees’ salary levels by linking them to the consumer price index, allowing exempt employees’ salary thresholds to adjust without formal rulemaking. The current annual salary threshold for exempt employees is $35,568. The DOL has held several calls with industry stakeholders and recently conducted multiple regional listening sessions to gather information. Still, there’s no firm date for when the agency will release the proposed overtime rule. Changes to minimum wage and overtime requirements under the FLSA could impact compliance costs and litigation risks for employers.What Will the Proposed Independent Contractor Rule Address?The DOL’s proposed rule could provide clarity for employers in establishing and maintaining proper classification of workers under the FLSA, impacting compliance costs and litigation risk. The existing rule is generally viewed as employer-friendly, making it easier for employers to classify workers as independent contractors under the FLSA. The DOL’s proposed rule may change how employers classify their workers. If the DOL adopts a more employee-friendly rule, workers previously classified as independent contractors may be entitled to employee protections and essential benefits such as the right to minimum wage, overtime pay, unemployment insurance and workers’ compensation. Providing these protections to more workers could be expensive for employers.Employer TakeawayOnce the DOL publishes proposed rules in the Federal Register, there will be time designated for the public comment. Subsequently, the agency will review comments and determine whether to move forward with a final rule. Even after the DOL publishes the proposed rules, it will likely be some time before this rule becomes final, if ever. Employers are not obligated to change how they classify or pay employees until the DOL’s proposed rules become final. However, potentially impacted employers will want to follow the DOL’s rule-making process closely. We will keep you apprised of any notable updates. For more resources on FLSA regulations, contact Higginbotham today.
Price Comparison Tool Required for 2023 Plan Years
Now that we are past the Machine Readable Files (MRF) posting debacle, it is time for employers to turn their heads toward posting links to price comparison tools by next year. Effective for plan years beginning on or after Jan. 1, 2023, group health plans and health insurance issuers must make an internet-based price comparison tool available to participants, beneficiaries and enrollees. This requirement comes from final rules regarding transparency in coverage (TiC Final Rules) that were issued by the Departments of Labor, Health and Human Services and the Treasury (Departments) in November 2020.
According to the Departments, this tool will provide consumers with real-time estimates of their cost-sharing liability from different providers for covered items and services, including prescription drugs, so they can shop and compare prices before receiving care.
The TiC Final Rules require health plans and issuers to provide this information in paper form upon request. In addition, plans and issuers should be prepared to provide this comparison information over the telephone to comply with a transparency requirement added by the Consolidated Appropriations Act, 2021 (CAA).Price Comparison Tool (TiC Final Rules)The TiC Final Rules require group health plans and health insurance issuers in the individual and group markets to make an internet-based self-service tool available to participants, beneficiaries and enrollees to disclose personalized price and cost-sharing liability for all covered health care items and services, including prescription drugs. This tool must be available without a subscription or other fee. Also, upon request, group health plans and issuers must make this information available in paper form.DeadlinesThe self-service price comparison tool must be available by the following phased-in deadlines:
- 2023 Plan Years: For plan years beginning on or after Jan. 1, 2023, plans and issuers must make price comparison information available for 500 shoppable items, services and drugs identified by the Departments in the TiC Final Rules.
- 2024 Plan Years: For plan years beginning on or after Jan. 1, 2024, plans and issuers must make price comparison information available for all covered items, services and drugs.
Accordingly, group health plans with a calendar year plan (Jan. 1 – Dec. 31) must make a price comparison tool available beginning Jan. 1, 2023, for the 500 shoppable items and services identified in the TiC Final Rules.Affected PlansGroup health plans, including self-insured plans and level-funded plans, and health insurance issuers of individual and group coverage are subject to the price comparison tool requirement. However, grandfathered health plans, excepted benefits (for example, limited-scope dental and vision benefits) and short-term, limited-duration insurance (STLDI) are NOT required to provide the price comparison tool. In addition, account-based group health plans, such as HRAs and health FSAs, and HSAs are not subject to the price comparison tool requirement. The TiC Final Rules include the following special provisions for group health plans to avoid unnecessary duplication:
- Employers with fully insured health plans: According to the preamble to the TiC Final Rules, the Departments assume fully-insured group health plans will rely on issuers to develop and maintain the price comparison tool and provide any requested disclosures in paper form. Accordingly, the Final Rules provide that an employer with a fully-insured health plan is not required to provide the price comparison tool if the health insurance issuer agrees in writing to provide the tool. If this written agreement is in place and the issuer fails to provide a compliant price comparison tool, the issuer (and not the plan) will violate the TiC Final Rules’ transparency requirements.
- Employers with self-insured health plans: The Departments assume that most self-insured group health plans will rely on other parties, such as TPAs and pharmacy benefit managers (PBMs), to develop and maintain price comparison tools. Accordingly, the Final Rules allow employers with self-insured plans (including level-funded plans) to contract with another party, such as a TPA or PBM, to provide the required tool. However, these employers must monitor their service providers to ensure they provide the required cost-sharing disclosures and remain liable for compliance with the Final Rules.
How the Tool WorksAccording to the Departments, the price comparison tool will enable individuals to obtain real-time, accurate estimates of their potential cost-sharing liability for covered items and services they might receive from different providers. Having access to this information will allow them to understand and compare health care costs before receiving care. The price comparison tool must allow users to search for cost-sharing information for a covered item or service by entering certain information: a billing code or descriptive term (for example, “rapid flu test”); the in-network provider’s name if a user wants cost-sharing information for a specific in-network provider; and certain other relevant factors, such as the location of service, facility name or dosage. The price comparison tool must provide real-time responses based on cost-sharing information that is accurate at the time of the request. Responses must include the following information:
- An estimate of the individual’s cost-sharing liability for the covered item or service;
- The individual’s accumulated amounts (that is, the amount of financial responsibility the individual has incurred at the time of the request, with respect to a deductible or an out-of-pocket limit);
- The in-network rate;
- The out-of-network allowed amount if the request for cost-sharing information is for a covered item or service furnished by an out-of-network provider;
- For items or services subject to a bundled payment arrangement, a list of the items and services included in the bundled payment arrangement for which cost-sharing information is being provided;
- A notification, whenever applicable, that coverage of a specific item or service is subject to a prerequisite (for example, prior authorization, concurrent review or step therapy);
- A disclosure notice that communicates certain information in plain language, such as a statement about the possibility of balance billing from out-of-network providers and a statement that the cost-sharing estimate is not a guarantee that benefits will be provided for that item or service. Note that the Departments have developed a draft model disclosure that plans and issuers can use (but are not required to use) for these disclosure requirements..
Enforcement DelayThe CAA’s price comparison requirement is effective for plan years beginning on or after Jan. 1, 2022. However, in the FAQ guidance, the Departments recognize that the price comparison methods required by the CAA are largely duplicative of the price comparison tool required by the TiC Final Rules. The Departments also realize plans and issuers have been expecting to implement the first phase (500 items and services) for plan years beginning on or after Jan. 1, 2023. Accordingly, the Departments will not enforce the requirement that a plan or issuer makes available a price comparison tool (by internet website, in paper form or by telephone) for plan years beginning before Jan. 1, 2023.Employer TakeawayMost employers will rely on their health insurance issuers or TPAs to develop and maintain the price comparison tool and provide related disclosures in paper or over the phone upon request.
Employers with fully-insured health plans should confirm that their health insurance issuer will comply with the price comparison tool requirements, beginning with 2023 plan years, and ensure this compliance responsibility is reflected in a written agreement. Similarly, employers with self-insured plans should reach out to their TPAs (or other service providers) to confirm they will be in compliance by the deadline and update agreements, as necessary, to reflect this responsibility.
IRS Announces Retirement Plan Compliance “Pilot” Program
The IRS has begun piloting a pre-examination retirement plan compliance program. The agency’s stated goal is to mitigate taxpayer burden and reduce time spent on retirement audits (see the June 3 announcement here).
IRS letters are going out to plan sponsors whose retirement plans have been randomly selected for this program. Plan sponsors will have a 90-day period to review all plan documents and operations to determine if any compliance issues exist and if there are errors that qualify for the Self Correction Program under the Employee Plans Compliance Resolution System. For items that don’t qualify, the plan sponsor can request remediation through a closing agreement with the IRS.
Once the review is complete, the IRS will review documentation and determine if it agrees with your conclusions and that you appropriately self-corrected any mistakes. If so, they will then issue a closing letter or conduct either a limited or full scope examination.
Employer Takeaway
Discovering and correcting non-compliance issues now will help avoid a full IRS audit. If it has been some time since you conducted a compliance review of your company’s retirement plan, this may be a good time to do so. Please contact Higginbotham’s Retirement Plan Services division if you require assistance setting up a compliance program.
