DOL Issues Fee Disclosure Regulation

The Department of Labor (DOL) has issued an interim final regulation requiring pension plan service providers to disclose to plan fiduciaries detailed information about the fees they charge. The new rule is scheduled to become effective on July 16, 2011 and applies to plan service providers that expect to receive $1,000 or more in compensation and that:

• Provide certain fiduciary or registered investment advisory services,
• Offer plan investment options in connection with brokerage or recordkeeping services, or
• Otherwise receive indirect compensation for providing certain services to the plan.

The new rule is intended to help fiduciaries assess the reasonableness of fees charged by their service providers and to identify any potential conflicts of interest that may impact a service provider's performance. Public comments are due on the new rule by August 30.

Phyllis Borzi, the head of the DOL's Employee Benefits Security Administration (EBSA) said the DOL expects to release additional regulations later this year requiring plan fiduciaries to make certain fee disclosures to plan participants.

New Regulations Provide Clarity for "Grandfathered" Health Plans

A recently issued interim final regulation provides much anticipated guidance to health plans that qualify for "grandfathered" status under federal health care reform legislation. While the Affordable Care Act requires all health plans to comply with certain provisions of the law, plans that existed as of March 23, 2010 are exempt from some of the new requirements.

The new regulation allows plans to make routine cost adjustments to keep pace with inflation, make modest adjustments to existing benefits, voluntarily adopt new consumer protections under the new law, and make change to comply with other state or federal laws. However, plans will lose their grandfathered status if they chose to make significant changes that reduce benefits or increase costs to participants. Specifically, compared to coverage in effect on March 23, 2010, grandfathered plans cannot:

• Significantly cut or reduce benefits for specific conditions, for example diabetes, cystic fibrosis or HIV/AIDS
• Raise co-insurance percentages paid by the participant (e.g. increase employee co-insurance from 20% to 30%)
• Significantly raise copayments paid by the participant (limit is the greater of $5, adjusted annually for medical inflation or a percentage equal to medical inflation plus 15 percentage points
• Significantly raise deductibles (limit is percentage equal to medical inflation plus 15 percentage points)
• Significantly lower employer contributions (employer paid premiums cannot be decreased by more than 5 percentage points)
• Add or decrease annual limits; plans without an annual benefit limit as of March 23, 2010 cannot add one (unless it replaces and matches the plan's lifetime maximum) and plans that currently have an annual limit cannot decrease it.
• Change in insurance companies. Insured plans will lose their grandfathered status if they change insurance companies (except in the case of collectively bargained plans). Self insured plans may change administrators without losing their status.

If a plan loses its grandfathered status, participants in the plan must be offered certain new benefits including coverage of specific preventive services with no cost sharing and certain patient protections, such as guaranteed access to OB-GYNs and pediatricians.

More details can be found in the full text of the interim regulation. If you have questions or need assistance ensuring your plan does not lose its grandfathered status, please contact Cindy LaQuatra at BRG. You can reach Cindy by phone at 216-393-1848 or by email at claquatra@benefitsrg.com.