On July 25, 2023, the DOL, HHS, and IRS (the departments) announced proposed rules under MHPAEA aimed at ensuring that people seeking coverage for mental health and substance use disorders can access treatment as easily as people seeking coverage for medical treatments.

MHPAEA Compliance and NQTLs
Enacted in 2008, MHPAEA applies to group health plans and insurers that cover mental health/substance use disorder (MH/SUD) benefits. Self-insured plans sponsored by small employers (50 or fewer employees) and stand-alone retiree-only medical plans that do not cover current employees are exempt. Broadly, MHPAEA requires plans and insurers that cover MH/SUD benefits to provide such coverage on par with medical/surgical (MED/SURG) benefits. This means plans and insurers cannot impose financial requirements (e.g., deductibles, copays, coinsurance, or out-of-pocket maximums), quantitative treatment limitations (“QTLs”, e.g., number of covered days, visits, or treatments), or non-quantitative treatment limitations (“NQTLs”, e.g., coverage exclusions, prior authorization requirements, medical necessity guidelines, network restrictions, or reimbursement rates) on MH/SUD benefits that are more restrictive than those applied to MED/SURG benefits.

Since the law was passed in 2008, MHPAEA enforcement has been a challenge for insurers, employers, regulators, and courts. The departments have reported a significant amount of noncompliance regarding the design and application of NQTLs that apply to MH/SUD benefits. To address this, the Consolidated Appropriations Act, 2021 (CAA, 2021) included an amendment to MHPAEA requiring that applicable group health plans and insurers document compliance with the law by providing an NQTL comparative analysis beginning February 10, 2021. Plans must make their comparative analysis available to the departments, applicable state agencies, or participants upon request.

In announcing the proposed rules, the departments chronicle America’s mental health crisis and describe pervasive barriers to access MH/SUD treatment, despite MHPAEA protections. While the departments have prioritized MHPAEA enforcement over the last two years, they continue to encounter widespread noncompliance, especially with respect to the design and application of NQTLs that apply to MH/SUD benefits. The departments’ comparative analyses reviews revealed that many plans and issuers had not carefully designed and implemented their NQTLs to be compliant with MHPAEA. (See our articles on the 2023 Report to Congress and FY 2022 Enforcement Fact Sheet for more information.)

Newly Proposed Rules
The newly proposed rules focus on NQTLs and are intended to ensure that individuals with mental health conditions and substance use disorders can benefit from the full protections afforded to them under MHPAEA, along with offering compliance guidance to plans and insurers. If finalized, the proposed rules would be effective beginning with 2025 plan years. Notable highlights of the departments’ actions in the proposed rules include:

• Delineating a three-part test for imposing an NQTL on MH/SUD benefits:
  
1. First, a plan or insurer must show the NQTL is applied to MH/SUD no more restrictively than a comparable NQTL applied to MED/SURG benefits. The elements of this “no more restrictive” standard mirror the current tests for parity financial requirements and QTLs and would require comparisons to MED/SURG plan payments.
   
2. Second, a plan or insurer must show that no factor or evidentiary standard relied on in designing or applying the NQTL “discriminates” against MH/SUD benefits as compared to MED/SURG benefits.
   
3. Third, the plan or insurer must collect, evaluate, and consider the impact of relevant outcomes data (e.g., claim denial rates) on access to MH/SUD benefits relative to access to MED/SURG benefits. “Reasonable action” must then be taken to address any material differences in access, and such action must be documented in the relevant NQTL’s comparative analysis.
   
   The departments note specific concerns related to network composition, and to that end, the proposed rules require plans and insurers to collect and evaluate specific data points related to network composition, such as in-network and out-of-network utilization rates, network adequacy metrics (including time and distance data, and data on providers accepting new patients), and provider reimbursement rates (including as compared to billed charges). The DOL issued a Technical Release with the proposed rules to set out principles and seek public comment on data submissions for NQTLs related to network composition and a potential enforcement safe harbor. (See our article on the Technical Release 2023-01 for more information.)

Importantly, there are certain exceptions under this three-part test for NQTLs based on impartially applied independent professional medical or clinical standards, or standards related to fraud, waste, and abuse.

• Adding a “meaningful benefits” obligation. The proposed rules require plans and insurers to provide “meaningful benefits” for the treatment of a particular MH/SUD condition. This means that when plans and insurers cover a range of treatments for MED/SURG conditions in a classification (e.g., outpatient, out-of-network), they cannot provide only limited benefits for a MH/SUD condition in that same classification. For example, a plan that generally covers the full range of outpatient treatments and settings for MED/SURG conditions on an out-of-network basis cannot only cover outpatient out-of-network developmental evaluations for autism spectrum disorder (ASD) while excluding applied behavioral analysis (ABA) therapy, which is one of the primary treatments for ASD in children.
  
  
• Specifying six elements required for a sufficient NQTL comparative analysis:
  1. A description of the NQTL
  2. The identification and definition of the factors used to design or apply the NQTL
  3. A description of how factors are used in the design and application of the NQTL
  4. A demonstration of comparability and stringency as written
  5. A demonstration of comparability and stringency in operation
  6. Findings and conclusions
     
     
• Requiring certification of the comparative analysis by a named ERISA plan fiduciary. For employer-sponsored plans subject to ERISA, the proposed rules require one or more named plan fiduciaries to review a written list of all NQTLs, a general description of documentation relied on in preparing the comparative analysis, and the findings and conclusions of each NQTL analysis and certify whether they found the comparative analysis to comply with the content requirements.
  
  
• Illustrating how the proposed rules apply to NQTLs. The proposed rules provide thirteen particularly helpful examples of NQTLs – some in compliance and some not. Specifically, the examples illustrate more restrictive prior authorization and peer-to-peer review requirements in operation; more stringent methods for determining reimbursement rates; compliant provider network admission standards; more restrictive exclusions for experimental or investigative treatment applied to ABA therapy; a separate EAP exhaustion treatment limitation applicable only to MH/SUD benefits; a residential treatment exclusion applicable only to MH/SUD benefits; and exceptions for generally recognized independent professional medical or clinical standards.

Departments’ Regulatory Impact Analysis
The departments believe that the proposed rules will increase compliance with MHPAEA’s requirements for imposing NQTLs, which will expand access to MH/SUD benefits and ultimately lead to better mental health outcomes and lower out-of-pocket costs related to MH/SUD benefits. While the departments acknowledge that plans and insurers will incur costs to comply with the proposed rules, and that those costs may be passed on via higher premiums and cost-sharing, they have determined that the benefits of the proposed rules (e.g., increased compliance with MHPAEA, better mental health outcomes) justify the costs.

As to fully insured plans, the departments observed that insurers, as the designers of the products and claims administrators, make decisions about which NQTLs to use and how to implement them. Insurers are also typically the owners of claims and other data related to plan administration. As to self-insured plans, the departments observed that since TPAs and insurance companies providing administrative services only (ASO) overwhelmingly design the plans, administer the networks, manage claims, provide plan services, maintain and hold the data relevant to the comparative analyses, and drive MHPAEA compliance, they are in the best position to conduct comparative analyses, and to provide the analyses in an efficient and cost-effective manner. Accordingly, the departments expect that TPAs and insurers will perform most of the work associated with the analyses because they can do so at the lowest cost and greatest scale. However, self-insured plans may require additional work to address unique plan issues. The departments seek comments on these observations, specifically how to best ensure that all the entities involved in plan design and administration provide the information necessary to document MHPAEA NQTL compliance.

Takeaways
With these proposed rules in mind, employers should confirm their current plan designs and claims applications comply with MHPAEA requirements. The thirteen new examples of NQTLs are particularly helpful in identifying potential areas of noncompliance. The examples should be reviewed in addition to the MHPAEA Self-Compliance Tool. If an employer identifies a problematic NQTL in their plan, they should work with their legal counsel to review and resolve the issue with their carrier or TPA. While the proposed rules are extensive, they largely provide clarity on the NQTL comparative analysis, with some new requirements related to network adequacy and ERISA plan fiduciary certification of the comparative analysis.

The departments have requested a wide range of comments on the proposed rules, which can be submitted 60 days following publication in the Federal Register. Even though the rules have not been finalized and may change following the comment period, the requirement to perform and document NQTL comparative analysis has been effective under the CAA, 2021 since February 10, 2021, and the proposed rules provide valuable insight into the departments’ interpretation of MHPAEA compliance. Contact your consultant for additional information on MHPAEA’s NQTL requirements.

Requirements Related to MHPAEA: Proposed Rules »

On July 25, 2023, the DOL issued a technical release accompanying the MHPAEA proposed rules (Please see our article entitled Departments Announce Proposed Rules to Strengthen MHPAEA, also featured in this edition of Compliance Corner.)

The technical release explains the NQTL-related data group health plans and health insurance insurers must collect and evaluate to demonstrate compliance in regard to network composition. The release also requests public comments on the application of such data.

In providing future guidance, the DOL, HHS, and IRS (the departments) seek to (1) address the type, form, and manner of data that plans and insurers would be required to collect and evaluate as part of their NQTL analysis of network composition; and (2) define standards for the data elements and create an enforcement safe harbor for plans and insurers that provide data indicating that they meet or exceed standards related to network composition.

The safe harbor would be designed to allow plans and insurers to prove that plan participants, beneficiaries, and enrollees have comparable access to in-network mental health/substance use disorder (MH/SUD) and medical/surgical (MED/SURG) providers.

There are four specific types of data that the departments will potentially require plans and insurers to collect regarding NQTLs related to network composition:

1. Out-of-network utilization
2. Percentage of in-network providers actively submitting claims
3. Time and distance standards
4. Reimbursement rates

For each type of data, the departments explain the relevant data and provide a number of questions that they would like addressed by public comments. Importantly, the departments are considering requiring the relevant data to be collected and evaluated by TPAs or other service providers in the aggregate for all plans and policies that use the same network of providers or reimbursement rates. If the proposed rules are finalized, the departments will use the four types of data above to determine if a plan’s or insurer’s NQTLs related to network adequacy comply with MHPAEA.

The departments plan to provide a potential enforcement safe harbor for plans and insurers that meet or exceed specific standards established by future guidance. The NQTLs addressed by the safe harbor would be limited to those related to network composition and would include standards for provider and facility admission to and continuation in a network, methods for determining reimbursement rates, credentialing standards, and procedures for ensuring the network includes adequate numbers of service providers and facilities. The departments are also seeking comment on the potential enforcement safe harbor.

This technical release provides plans and insurers with more concrete information surrounding the data that’s necessary to prove compliance with MHPAEA in regard to network composition. As the departments receive comments, we expect that they will update and amend this information as they finalize the proposed rule and create the enforcement safe harbor. Comments must be emailed to mhpaea.rfc.ebsa@dol.gov and must be received no later than October 2, 2023.

Technical Release 2023-01P »

On July 25, 2023, the DOL, Department of the Treasury, and HHS (the departments) released the 2023 MHPAEA Comparative Analysis Report to Congress (“the 2023 Report”). The 2023 Report highlights the departments’ enforcement efforts regarding MHPAEA’s non-quantitative treatment limitations (NQTLs) (e.g., prior authorization and benefits exclusions) during the second year of the Consolidated Appropriations Act, 2021 (CAA, 2021) implementation. The departments simultaneously published related guidance; please see our articles entitled Departments Announce Proposed Rules to Strengthen MHPAEA, Technical Release on Network Composition Accompanies Proposed MHPAEA Rule, and DOL and CMS Release 2022 MHPAEA Enforcement Fact Sheet, which are also featured in this edition of Compliance Corner.

The CAA 2021, which amended MHPAEA, requires plans and insurers to perform and document comparative analyses of the design and application of their NQTLs to demonstrate that NQTLs applied to their plan’s mental health or substance use disorder (MH/SUD) benefits are not more restrictive than those applied to medical/surgical benefits (MED/SURG). The CAA, 2021 also requires the departments to report annually to Congress on the results of the DOL and CMS’s reviews of these NQTL comparative analyses. The first year of the report to Congress was issued in January 2022, and its summary was featured in the February 1, 2022, edition of Compliance Corner.

Enforcement Activity
The DOL’s Employee Benefits Security Administration (EBSA) enforces MHPAEA with respect to approximately 2.5 million private employment-based group health plans. The report notes that EBSA is currently devoting nearly 25% of its enforcement program to work focusing on MHPAEA NQTLs and continues to expand staffing dedicated to MHPAEA enforcement. HHS’s Centers for Medicare and Medicaid Services (CMS) enforces MHPAEA with respect to approximately 90,000 nonfederal governmental group health plans and 41 issuers in three states that do not enforce MHPAEA.

Between February 2021 and July 2022, the EBSA requested comparative analyses from 182 plans and insurers, for which 138 insufficiency letters covering over 290 NQTLs were issued. During that same period, EBSA issued 53 initial determination letters finding MHPAEA violations and three final determination letters finding MHPAEA violations. Between February 2021 and September 2022, CMS issued 26 letters requesting comparative analyses from 24 plans and issuers, for which 35 insufficiency letters for 44 NQTLs were issued. During that same period, CMS issued 15 initial determination letters finding MHPAEA violations. Between January 2022 and September 1, 2022, CMS issued five final determination letters finding MHPAEA violations. (For detailed findings of CMS NQTL enforcement, please refer to the 2023 Report.)

According to the 2023 Report, common deficiencies found in the January 2022 Report continued. These include:

• Failure to prepare comparative analyses.
• Failure to identify the benefits, classifications or plan terms to which the NQTL applies.
• Failure to describe in sufficient detail how the NQTL was designed or how it is applied in practice to MH/SUD benefits and MED/SURG benefits.
• Failure to identify or define in sufficient detail the factors, sources and evidentiary standards used in designing and applying the NQTL to MH/SUD and MED/SURGE benefits.
• Failure to analyze in sufficient detail the stringency with which factors, sources and evidentiary standards are applied.
• Failure to demonstrate parity compliance of NQTLs as written and in operation.

However, the EBSA reported that, in many cases, the departments’ outreach and enforcement initiatives prompted insurers and plans to correct their noncompliance before the EBSA reached a final determination of MHPAEA violations. The 2023 Report notes that appropriate corrective action depends on the NQTL and may include one or more of the following:

• Complete removal of an NQTL.
• Changes to plan document language and disclosures, along with notification to participants and beneficiaries of the change in plan terms.
• Amendments to plan practices or claims processing procedures.
• Addition of coverage for previously excluded benefits.
• Reduction in the scope of an NQTL’s application to MH/SUD benefits.
• Submission of a complete and sufficient comparative analysis, cured of identified deficiencies.
• Re-adjudication of claims affected by an impermissible NQTL, with payment of claims wrongfully denied because of the NQTL.
• Notice to participants and beneficiaries of an opportunity to submit previously unsubmitted claims that will now be accepted for processing.

Further, the 2023 Report provides specific examples of NQTL corrections by plans and insurers in response to EBSA’s enforcement actions, including the following:

• A plan excluded MH/SUD benefits at residential treatment facilities but covered benefits at MED/SURG residential treatment facilities (e.g., skilled nursing facilities and stroke rehabilitation programs). In response to EBSA's initial determination letter regarding the plan’s imposition of an impermissible NQTL, the plan removed the exclusion and reprocessed previously denied MH/SUD residential treatment claims. Furthermore, the plan agreed to cover MH/SUD residential treatment going forward.
• A plan excluded benefits for ABA therapy to treat autism spectrum disorder (ASD) though the plan covers general benefits for ASD. In response to the EBSA’s inquiry, the plan removed the ABA therapy exclusion.

As required by CAA, 2021, the 2023 Report identifies the noncompliant plans that did not take sufficient corrective action prior to EBSA’s final determination.

Enforcement Priorities and Legislative Recommendations
In the 2023 reporting, the departments added two additional priority enforcement areas, including network adequacy. The six priority areas are:

• Prior authorization requirements for in- and out-of-network inpatient services.
• Concurrent care review for in- and out-of-network inpatient and outpatient services.
• Standards for provider admission to participate in a network, including reimbursement rates.
• Out-of-network reimbursement rates (methods for determining usual, customary, and reasonable charges).
• New — impermissible exclusions of key treatments for mental health conditions and substance use disorders (e.g., ABA therapy to treat autism spectrum disorder and nutritional counseling for eating disorders).
• New — adequacy standards for MH/SUD provider networks (e.g., adequacy of provider networks and provider reimbursement rates).

Additionally, the 2023 Report, consistent with the 2022 Report, recommends that the legislature provide authority to enforce group health plan requirements directly against a plan’s administrative service providers for efficiency purposes. The 2023 Report also indicates that the departments will work to update the MHPAEA Self-Compliance Tool to reflect the CAA, 2021 requirements and related guidance.

Takeaways
Employers should review their current plan designs with respect to MH/SUD benefits, particularly NQTLs and their comparative analyses, to evaluate whether changes are needed based on this 2023 Report and the recent departments’ enforcement efforts.

Importantly, if an employer currently does not have its plan’s NQTLs comparative analyses, they should work with their insurer, TPA, and legal counsel to prepare the required detailed comparative analyses as soon as possible. This process should involve the identification of any potential risks regarding their plan design, considering with particular attention the common deficiencies, corrective actions, and enforcement priorities identified in the 2023 Report. Note that a plan’s NQTL comparative analyses must be updated when there is a change in benefits and plan policy. Additionally, employers should review their vendor contracts to ensure that insurers or TPAs will provide necessary MHPAEA compliance assistance.

We will continue to monitor for any new legislation or guidance.

MHPAEA Comparative Analysis Report to Congress — July 2023 »

On July 25, 2023, the DOL and CMS released the 2022 MHPAEA Enforcement Fact Sheet. The fact sheet, which is provided annually, summarizes enforcement data and results from MHPAEA investigations closed by the DOL and CMS in the prior fiscal year. The departments simultaneously published related guidance; please see our articles entitled MHPAEA 2023 Report to Congress Focuses on NQTLs and CAA, 2021 Compliance, Departments Announce Proposed Rules to Strengthen MHPAEA, and Technical Release on Network Composition Accompanies Proposed MHPAEA Rule, which are also featured in this edition of Compliance Corner.

The DOL enforces compliance with ERISA, including the MHPAEA provisions, with respect to 2.5 million private group health plans through approximately 326 investigators and 113 benefits advisors. CMS enforces the MHPAEA with respect to nonfederal governmental group health plans, such as state and local governmental plans. CMS also oversees MHPAEA compliance of insurers in states where CMS is responsible for enforcement and provides compliance assistance in states with a collaborative enforcement agreement.

During the 2022 fiscal year, the DOL and CMS significantly increased their nonquantitative treatment limitation (NQTL) enforcement activity in response to CAA, 2021 requirements imposed on plans and insurers. The categories of MHPAEA violations investigated by the DOL and CMS also included, but were not limited to, annual and lifetime dollar limits, financial requirements (e.g., deductibles, copayments) and quantitative treatment limitations (QTLs), such as treatment limitations based on the number of visits or days of coverage. Additionally, the regulators reviewed situations involving MHPAEA claims processing and disclosure violations.

The 2022 reported statistics show that the DOL closed 145 health plan investigations, 86 of which involved plans subject to the MHPAEA and thus were reviewed for related compliance. Twenty of these MHPAEA investigations involved fully insured plans, 50 involved self-insured plans, and 16 involved plans of both types (the plan offered both fully insured and self-insured options). The DOL cited 18 MHPAEA violations in 11 investigations, 10 of which involved self-funded group health plans. Notably, the cited violations included 10 NQTL violations and one final determination of noncompliance with the NQTL comparative analysis requirements. DOL benefits advisors also answered 160 MHPAEA-related public inquiries, including 142 complaints.

During the same period, CMS closed four self-insured nonfederal governmental group health plan MHPAEA investigations and nine MHPAEA NQTL comparative analysis reviews of nonfederal governmental group health plans and health insurers in states where CMS is responsible for MHPAEA enforcement. CMS cited seven MHPAEA violations because of the NQTL comparative analysis reviews.

The fact sheet explains that investigators who find violations generally require the plan or coverage to remove any non-compliant provisions and pay any improperly denied benefits. For example, the 2022 reporting cites the following results of DOL and CMS enforcement actions to address MHPAEA violations:

• The elimination of impermissible preauthorization requirements and payment of improperly denied claims.
• The reimbursement of excessive cost-sharing (i.e., copayments) based on impermissible financial requirements.
• Obtaining access to applied behavior analysis (ABA) therapy for participants whose claims were denied due to a plan exclusion.
• The correction of improper reimbursements for out-of-network ABA therapy claims.
• The elimination of an exclusion for residential treatment for mental health and substance use disorders when there was no comparable exclusion for medical/surgical care in the relevant classifications.
• Updating provider network participation standards to correct distance and time criteria used to determine the availability of inpatient facilities, which were not comparable for medical/surgical and mental health and substance use disorders.

The fact sheet also notes that investigators work with the plan service providers (such as TPAs) to obtain broad correction, not just for the plan(s) investigated, but for other plans that work with that service provider.

Employers should be aware of the release of the enforcement fact sheet, which provides insights regarding the types of MHPAEA violations upon which the regulators are focusing. Employers should review their own plans for compliance in these areas.

FY 2022 MHPAEA Enforcement Fact Sheet »

On July 25, 2023, the Third Circuit Court of Appeals (the Third Circuit) affirmed an award of damages for retaliation by the United States District Court for the Western District of Pennsylvania. One of the plaintiff’s claims was based on ERISA Section 510, which makes it unlawful to discharge a participant or beneficiary for exercising a right under an employee benefit plan or for the purpose of interfering with the attainment of any right under the plan.

The plaintiff in this case was an employee hired as VP of Sales by the owner and CEO of the employer/plan sponsor. Soon after starting work, the employee was diagnosed with a condition that required a hip replacement. The employee notified his supervisor, the CFO of a sister company also owned by the CEO, that he would take a week of paid time off to have the surgery. The employee also told his supervisor that he would need to have the other hip replaced in the future.

The ERISA group health plan in this case covered a total of 20 employees of three related companies, and the employee was one of three in the company he worked for. The health plan was self-funded and the employer/plan sponsor received weekly invoices that listed claim costs. Although employees were not identified by name on the invoices, there were so few employees that it was possible to determine to whom the claim expenses applied. The expenses for the employee’s claims spiked following his surgery. At trial, the CEO testified that he may have looked at the claims cost invoices as part of his job reviewing the company’s financials. Four months after the surgery, the CEO fired the employee, claiming that his position was being eliminated even though the employee had earned an $11,458.00 bonus a week before he was fired. Less than two months later, the company hired another employee whose job duties included sales maintenance (maintaining customer relationships), which was part of the employee’s job prior to being terminated.

The employee sued his former employer for several violations, including discrimination and retaliation under the Americans with Disabilities Act (ADA), discrimination under the Age Discrimination in Employment Act (ADEA), retaliation under ERISA, breach of contract and violations of two Pennsylvania statutes. The jury found for the employer on the ADA, ADEA, and one of the Pennsylvania state law counts but found for the employee on the other Pennsylvania state count and awarded $5,384.62. The District Court found for the employee on the ERISA retaliation claim and awarded an additional $67,500. The District Court also awarded $111,981.79 in attorneys’ fees. The employer appealed to the Third Circuit on the ERISA and attorneys’ fees awards.

The Third Circuit determined that the decision turned on the findings of fact based on the evidence and testimony at trial. After reviewing all the evidence and the District Court judge’s factual findings, the Third Circuit found that the findings on the ERISA count were not clearly erroneous and affirmed the District Court’s judgment.

This case demonstrates that the remedies provided for participants and beneficiaries under ERISA are alive and well. ERISA requires plan sponsors to always act in the best interests of participants and prohibits employment decisions based on the utilization of plan benefits. Plan sponsors and administrators should avoid, if possible, access to the claims and claims costs of employees and their families by company employees and decision makers to eliminate the possibility of decisions being influenced based on that information.

Kairys v. Southern Pines Trucking, Inc. »

The IRS recently issued Notice 2023-54, which provides transition relief to address changes made by the SECURE Act and the SECURE 2.0 Act in required minimum distribution (RMD) requirements for qualified plans such as 401(k) plans, IRAs, Roth IRAs, 403(b) plans, and 457(d) eligible deferred compensation plans.

RMD rules ensure that qualified retirement accounts are used for their intended purpose by making accountholders draw down their retirement savings upon reaching a certain age. The adjustments made by the SECURE Act and the SECURE 2.0 Act were intended to preserve that aim while also accounting for continually increasing life expectancy rates among Americans who are living and working longer than ever before.

Accordingly, the SECURE Act increased the age for determining an individual’s required beginning distribution date from 70 1/5 to age 72, which the SECURE 2.0 Act then increased to age 73 beginning January 1, 2023.

Payers and plan administrators have expressed concerns to IRS that they did not have adequate time to update their systems to reflect the changes to RMD rules made by SECURE 2.0, which were signed into law only three days before taking effect. As a result, certain 2023 distributions were characterized as RMDs – and therefore ineligible to be rollover distributions – but should not have been characterized as such under the new rules.

The transition relief clarifies that a payer or plan administrator who did not treat certain distributions made between January 1, 2023, and July 31, 2023, to participants born in 1951 (or their surviving spouses) as eligible rollover distributions (in other words, the distributions were characterized as RMDs) will not be considered to have failed to meet SECURE 2.0 Act requirements.

The relief also extends the 60-day rollover period for these distributions to September 30, 2023, and grants a similar extension to IRA owners (or their surviving spouses) regarding distributions made between January 1, 2023, and July 31, 2023, to IRA owners born in 1951 (or their surviving spouses) that would have been RMDs under the previous rules.

The transition relief also updates previous relief relating to otherwise required RMDs to beneficiaries after the deaths of participants (otherwise known as “specified RMDs”) in 2020 and 2021 to include the same for otherwise required RMDs related to participant deaths in 2022. Accordingly, defined contribution plans will not be treated as failing to satisfy the RMD rules for failure to make a specified RMD in 2023, and no taxpayer will not be subject to an excise tax for having failed to take a specified RMD.

Employers should be aware of this welcomed transition relief and consult with their advisors for further information.

Transition Relief Guidance, Notice 2023-54 »

Note the focus of this FAQ is on Medicare coverage for individuals age 65 or older, not those who may be Medicare-eligible due to disability. This addresses the effective dates of Part A (inpatient hospital and skilled nursing facilities) and Part B (physician’s visits, outpatient hospital services, durable medical equipment, etc.); however, it does not cover the effective date of Part D (prescription drug coverage) or Part C (also known as Medicare Advantage).

Generally, Medicare coverage begins on the first day of a given month. The actual effective date of coverage will depend on when the individual signs up relative to their 65 birthday. Part A coverage is retroactive six months from when an individual signs up but no sooner than the month in which they turn 65.

Effective January 1, 2023, the effective date of Part B coverage for individuals enrolling in coverage during either the Initial Enrollment Period (IEP) or the General Enrollment Period (GEP) changed, making coverage effective sooner than in years past. Additional information on this welcome change can be found on the SSA’s Medicare website.

There are three timeframes during which an individual might enroll in Medicare and different effective dates of coverage for each type of enrollment situation.

1. Initial Enrollment Period (IEP): An individual’s initial Medicare effective date is the first day of the month of their 65 birthday. For coverage to begin on this date, an individual must enroll in the three-month period prior to turning 65. If an individual enrolls during the 65 birthday month or any of the three months after, coverage begins on the first day of the month following enrollment. As mentioned above, this was a recent change for 2023; in prior years, if an individual enrolled during the three months following their 65 birthday, Part B coverage may have been delayed two or three months.
2. Special Enrollment Period (SEP): If an individual does not enroll in Medicare during the IEP – most commonly because they are continuing to work and are covered under an employer’s group health plan – they will enroll in Medicare via a SEP. The SEP spans eight months once active group health coverage is lost, although individuals likely want to enroll prior to the end of the SEP. If enrolling during the SEP, coverage will begin on the first day of the month following enrollment; however, in some situations, an individual can choose to have coverage start on the first day of any of the three following months.
3. General Enrollment Period (GEP): If an individual does not enroll during the IEP or SEP, the last opportunity to enroll in Medicare is the GEP. The GEP runs each January 1 through March 31 with coverage beginning the first day of the month following enrollment. Like the IEP, prior to 2023, if an individual enrolled during the GEP, coverage was not effective until July 1 of that year, so this is a welcome change for individuals enrolling during the GEP.

Individuals should always work with a licensed Medicare agent when determining the effective date of coverage for their specific situation to avoid late enrollment penalties. Additional information about Medicare effective dates can be found on Medicare.gov.