MACHINE READABLE FILE POSTING UPDATE | IRS PLAN EXAMINATION PILOT PROGRAM - WILL IT TAKE FLIGHT? | SUMMER IS FOR FUN, SUN, AND PCORI FEES | COMPLIANCE ALERT - CYCLE 3 RESTATEMENT DEADLINE *JULY 31*
The June Monthly Minute provides updates on machine readable file posting rules, the IRS’ new plan examination pilot program, and the upcoming PCORI fee and filing requirements.
Machine Readable File Posting Update
This month, CMS issued Technical Clarifications to facilitate compliance with the machine readable file posting requirements. The guidance clarified, among other things, that a group health plan that does not have its own website can still satisfy the posting requirements if the plan’s service provider posts the files on its behalf. Specifically, the FAQ states: “If a group health plan does not have a public website, the plan may satisfy the requirements for posting the Allowed Amount file and the In-Network file by entering into a written agreement under which a service provider (such as a TPA) posts the Allowed Amount file and the In-network Rate file on its public website on behalf of the plan. However, if a plan enters into an agreement under which a service provider agrees to post the Allowed Amount file and the In-network Rate file on its public website on behalf of the plan, and the service provider fails to do so, the plan violates these disclosure requirements. The Departments intend to follow up with the issuance of formal guidance soon.” This clarification comes not a moment too soon considering the upcoming July 1, 2022 compliance deadline.
KMK Comment: This clarification is particularly helpful to self-insured plan sponsors that do not have a designated plan website. But, it is important to note the requirement to have this delegation of duty memorialized in a written agreement and to keep in mind that if the TPA does not satisfy the posting requirement, it will still be the plan that will be considered in violation of the transparency rule.
IRS Plan Examination Pilot Program – Will It Take Flight?
On June 3, 2022, the IRS Employee Plan News announced a new pilot program aimed to streamline and increase compliance with qualification rules and decrease the time and expense of examinations. Under the pilot program the IRS will notify a plan of its selection for examination and provide a 90-day window for plan document and compliance review. Certain errors may be self-corrected under EPCRS and other errors will require a closing agreement with attendant sanctions under the VCP fee structure. If no response is provided to the IRS within the 90-day timeframe, a full IRS plan examination will be scheduled.
KMK Comment: Although 90 days is not a long time to conduct an internal compliance review, the pilot program offers a lower fee assessment under the VCP (compared to sanctions under Audit CAP) which acts as a valuable incentive. Note that the pilot program does not include an end-date, and even those plans selected under the pilot program may still be subject to a limited or full-scope examination. If your plan is selected for this pilot program, you will want to work with your legal counsel and other plan advisors before responding.
Summer is for Fun, Sun, and PCORI Fees
PCORI fees, established under the ACA, support research into clinical effectiveness. Although the fees were initially set to expire several years ago, legislation enacted at the end of 2019 extended these requirements through 2029. This year, there are slight adjustments to both the due date and amount of the PCORI fees. In IRS Notice 2022-4, the IRS announced the annual increase to $2.79 per covered life (under the actual count, snapshot or Form 5500 method) for plan/policy years ending on/after October 1, 2021 and before October 1, 2022. As a reminder, PCORI fees are reported and paid annually using Form 720. Note: while the deadline is usually July 31, this year, the actual deadline is August 1, 2022 due to July 31 falling on a Sunday.
KMK Comment: Compliance with PCORI fee and filing requirements may be old-hat by now, but keep in mind the annual increase and work with your service providers to determine the best calculation method.
COMPLIANCE ALERT — Cycle 3 Restatement Deadline *July 31*
The Cycle 3 restatement window for pre-approved defined contribution plans began August 1, 2020 and ends July 31, 2022. Adopting employers should be working with plan providers and legal counsel now to ensure timely restatement.