Employee Benefits Legal Blog : Employee Benefits Lawyer & Attorney : Fox Rothschild Law Firm : Health Care, Retirement, ERISA : Philadelphia, New York, Northeast

After many years of debate, the mental health parity requirements for group health plans became permanent on October 3, 2008.  These new required provisions will apply to plan years beginning after October 3, 2009.  For calendar year plans, the effective date is January 1, 2010.  Collectively bargained group health plans with agreements ratified prior to October 3, 2008, are subject to the requirements in either January 1, 2009, or the date on which the last collective bargaining agreement relating to the plan terminates, whichever is later.  It applies to plans with coverage for 50 or more employees.

The Act generally requires equity in treatment of mental health and substance abuse treatments under a plan.  The key components of the Act are as follows:

1. Plans cannot generally cannot impose more restrictive lifetime or annual limits on mental health or substance use disorder benefits that those imposed on medical or surgical benefits.
2. Plans cannot generally impose more restrictive financial requirements, such as co-pays, deductibles, coinsurance or out-of-pocket expenses, on treatment for mental health or substance use disorder benefits than apply to medical or surgical benefits.
3. Plans cannot generally impose more restrictive limitations on the frequency or total use of mental health or substance use disorder benefits that medical or surgical benefits.
4. The Plan must provide similar in-network and out-of-network benefits for all coverages.
5. The Plan must clarify and make available to participants the criteria used for determining medical necessity of mental health and substance use benefits.

Mental health and substance use disorder benefit are broadly defined to mean benefits with respect to services for mental health conditions and substance use disorders.  If a plan offers two or more benefits packages, the requirements apply separately to each package.

There is a limited exception.  A plan can be exempted from the Act if it experiences an increase in actual total costs of 1% (2% in the first plan year that the Act applies).  However, any request for exemption to the Department of Labor or Department of Health & Human Services will require actuarial certification of the cost increase associated exclusively with the implementation of the Act and it is not anticipated that most plans will qualify for an exemption.

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Each year the U.S. Government adjusts the limits for certain plans.  These limits deal with compensation, contributions and other components of benefit plan administration.  Here are the limits for 2009:

For Retirement Plans:

1. Basic Annual Compensation Limit; $145,000
2. Defined Benefit Basic Limit: $195,000
3. Defined Contribution Basic Limit: $49,000
4. 401(k) and 403(b) Elective Deferrals: $16,500
5. 457(b) Elective Deferrals: $16,500
6. 415 Compensation Limit Adjustment Factor: 1.0530
7. Catchup Contribution Limit: $5,500
8. Definition of Highly Compensated: $110,000
9. Officer for Key Employee Definition: $160,000
10. SIMPLE Plans, Elective Deferral Limit: $11,500
11. SIMPLE Plans, Catch-up Limit: $2,500

For certain Welfare Plans:

1. Dependent Care Limit: $5,000
2. Parking Fringe Limit: $230
3. Transit Pass Limit: $120
4. HSA Contribution, Single: $3,000
5. HSA Contribution, Family: $5,950
6. HSA Minimum Deductible, Single: $1,150
7. HSA Minimum Deductible, Family: $2,300
8. HSA Maximum Out-of-pocket, Single: $5,800
9. HSA Maximum Out-of-pocket, Family: $11,600

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At a time when the financial markets are obviously seething, plan participants can tend to be desperate for guidance about whether or not to move their money or change their retirement portfolio.  They may turn to the plan sponsor for guidance about how to better position their retirement plan allocations.  Plan sponsors should try to avoid giving such guidance to remain protected against fiduciary liability claims.

ERISA Section 404(c) provides an exception to fiduciary liability for plan sponsors involved in participant-directed account plans.  It specifically provides that when a participant exercises control over the assets in his or her account, no person who otherwise is a fiduciary shall be liable for any loss, or by reason of any breach, that results from such participant's exercise of control.  In short, a plan fiduciary would not be liable for actions taken by the participant in a participant directed account if the participant took them on their own.

Rendering investment advice can give rise to a claim of fiduciary status if it is determined that it influences the decision of the participant to make a specific investment or elect a particular investment option.  29 CFR 2509.96-1 sets forth the distinctions between "rendering investment advice" and "investment education."  It is important to recognize that "education" is simply explaining the options and impact of each choice.  "Advice" is suggesting which option is preferred for the individual participant and can give rise to claim of fiduciary duty as t the person who renders the advice, including the plan sponsor.

In this market, it would probably not be a bad idea to increase "education" to participants and invite the plan professionals in to discuss the plan investment options with participants.  But I would caution plan sponsors to not engage in direct discussions about how participants could better manage their portfolios as this would likely be "investment advice" that takes them out of the 404(c) protections.

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