A Summary of the Consolidated Appropriations Act’s Employee Benefits Provisions

The Consolidated Appropriations Act, 2021 (the “CAA”) was signed into law on December 27, 2020. The CAA was a large and complicated bill, consisting of approximately $2.3 trillion dollars of spending laid out in its 5,593 pages. The CAA is best known for providing many Americans with a $600 stimulus check due to the ongoing pandemic and averting a government shutdown. However, the CAA also included major changes to group health plans (“health plans”), health and dependent care flexible spending arrangements (collectively, “FSAs”), educational assistance programs, and retirement plans.

This article summarizes the major provisions of the CAA that affect employee benefit plans and provides action steps for employers to implement these changes. For more detailed information about the CAA and its provisions, please contact the Kutak Rock Employee Benefits and Executive Compensation practice group.

Health Plan Provisions

Unless otherwise specified, the effective date for the health plan changes is January 1, 2022:

• Surprise Billing Limitations and Related Requirements. The CAA establishes cost‑sharing requirements and the amounts and time periods by which a plan must pay providers.
• Independent Dispute Resolution Process for Determining Out‑of‑Network Rates. Federal agencies must issue regulations to implement a new independent dispute resolution process by December 28, 2021 which health plans will use to determine the amount payable to certain out‑of‑network providers (including air ambulances) for services when the plan and provider cannot reach an agreement.
• In‑Network and Out‑of‑Network Cost Transparency on ID Cards. Health plans must include deductibles and out‑of‑pocket maximum limitations on participant insurance ID cards, as well as a telephone number and website where participants may seek consumer assistance information.
• Advanced Explanation of Benefits. Health plans must provide participants with information about their scheduled services, such as the in‑network status of the provider, the contracted costs, and estimates of plan and participant financial responsibility.
• Ensuring Continuity of Care for Serious and Complex Conditions. Health plans must satisfy new continuity of care requirements for patients who are receiving specified types of care if an in‑network provider terminates its relationship with a plan or the plan’s benefits with respect to a provider are terminated.
• Price Comparison Tools. Health plans must offer price comparison guidance by telephone and an Internet price comparison tool that allows a price and cost‑sharing comparison of in‑network provider services.
• Provider Directories. Health plans must maintain a public website that contains a list of in‑network providers/facilities with directory information and establish a process to verify and update provider directory information.
• Reliance on Provider Information. Participants may be charged only in‑network cost sharing and deductible amounts for the furnished item or service if they are erroneously informed that a provider or facility is in‑network.
• Balance Billing Disclosures. Health plans must post and include on their EOBs a plain‑language statement regarding the prohibition on balance billing in certain circumstances.
• Mental Health and Substance User Disorder Benefits. Health plans must perform and document a comparative analysis of the design and application of the plan’s mental health, substance use disorder, and medical/surgery nonquantitative treatment limitations and, by February 10, 2021, make this analysis available to federal regulators, upon request.
• Reporting on Health Care and Pharmacy Benefits and Drug Costs. By December 28, 2021, and not later than June 1 each year thereafter, a health plan must report to federal regulators detailed information relating to its benefits and prescription drug claims and costs.
• Eliminating Contractual “Gag Clauses.”Effective December 28, 2021, a health plan cannot enter into an agreement which offers access to a network of providers if that contract directly or indirectly restricts the plan from providing certain information to participants, plan sponsors, or business associates.
• New Disclosures of Direct and Indirect Broker and Consultant Compensation. Effective December 28, 2021, consultants and brokers must disclose in writing specific detailed information relating to their services and direct and indirect compensation.

Dependent Care and Health FSAs

These changes are optional, so an employer is not required to adopt them. If utilized, amendments will be required.

• Post‑Termination Health FSA Reimbursements (Health FSAs only). A health FSA may allow an employee who ceases participating in the FSA during 2020 or 2021 to receive reimbursements from unused contributions through the end of the plan year in which such participation ceased (including any grace period).
• Special Carryforward Rules (for Dependent Care FSAs only). The CAA temporarily permits dependent care FSAs to (a) permit participants to carry over unused amounts from one plan year to the next, and (b) allow participants to receive dependent care reimbursements for qualifying children who turned age 13 during the COVID‑19 pandemic and use those amounts in the following plan year until the child turns age 14.
• Carryovers. The CAA temporarily permits dependent care and health FSAs to allow any unused 2020 dollars to be used in 2021 and any unused 2021 dollars to be used in 2022.
• Extended Grace Periods. A dependent care or health FSA may have a 12‑month grace period for the 2020 and 2021 plan years. The extended grace period provides participants a longer period of time to incur claims that may be reimbursed from an FSA for the applicable plan year.
• Changing FSA Election Amounts. For plan years ending in 2021, a dependent care or health FSA may allow an employee to prospectively change, for any reason, the amount the employee elected to contribute to the FSA.

Employer Payments of Student Loans

The CAA extends the time period to January 1, 2026 (from January 1, 2021) for employers to use an educational assistance program to make certain tax‑free payments of employees’ qualifying education loans.

Retirement Plan Provisions

The CAA provides several forms of pandemic and disaster relief for retirement plans, as well as a few technical corrections, including:

• Deductibility of Retirement Plan Contributions. The CAA affirms that retirement plan contributions are deductible even if they are financed by Paycheck Protection Program (“PPP”) loan proceeds.
• Partial Plan Termination Relief. The CAA permits a company to avoid the 100% vesting requirement associated with a partial plan termination if the plan covers at least 80% as many participants on March 31, 2021 as were covered by the plan on March 13, 2020.
• Section 420 Transfers. Employers that had elected to make a “qualified future transfer” under Section 420(f) of the Internal Revenue Code may elect, by December 31, 2021, to terminate the transfer and revert the unused funds to the defined benefit plan, with certain conditional responsibilities spelled out in the CAA.
• Disaster Relief. The CAA provides optional relief for non‑coronavirus‑related disasters (such as storms or fires) that occurred between January 1, 2020 and February 25, 2021. The relief allows affected participants in declared disaster areas to take qualified distributions of up to $100,000 in aggregate from 401(k), 403(b), 457(b), or money purchase plans without tax penalties and with the option to repay the distributed amounts. Larger loan limits and loan payment delays also are permissible.