The February Monthly Minute highlights a new online ACA reporting alternative, the DOL’s temporary policy regarding escheatment of small retirement benefits owed to missing participants, and new guidance clarifying the gag clause prohibition and related attestation requirements.
Paperwork Reduction in Action: New Online ACA Reporting
In IRS Notice 2025-15, the IRS issued guidance addressing an alternative manner of furnishing Forms 1095 effective for calendar years after 2023. Under this new guidance, employers and insurers may avoid automatically furnishing statements to individuals. Instead, ACA reporting requirements may be satisfied by posting a conspicuous online notice by the original furnishing deadline (including the automatic 30 day extension) that notifies individuals of the Form 1095 availability (this means, for Forms 1095 related to the 2024 calendar year, the notice must be posted by March 3, 2025), and the notice must remain posted online through October 15 of the following year. Certain posting requirements apply as well as specific timeframes in which to provide a paper notice on request.
KMK Comment: This guidance is welcomed news to large employers who annually gear up to mail Forms 1095 to full-time employees and other covered individuals. Keep in mind, however, that the online-posting alternative does not impact the requirements to file Form 1094 and Forms 1095 with the IRS.
Missing Participant Benefits (Might) Find a Home in State Unclaimed Property Fund
The DOL recently announced a temporary enforcement policy that applies to small retirement benefit payments owed to missing participants or beneficiaries. As further described in FAB 2025-01, the DOL will not pursue violations under ERISA 404(a) in connection with the voluntary decision to transfer retirement benefit payments (including uncashed checks) owed to a missing participant or beneficiary from an ongoing retirement plan to a state unclaimed property fund, if the present value of the nonforfeitable accrued benefit is $1,000 or less and the plan fiduciary complies with certain specific conditions –
- The plan fiduciary determines that the transfer to a state unclaimed property fund is a prudent destination for the retirement benefit payments;
- The plan fiduciary has implemented a prudent program to find missing participants consistent with the Department's Best Practices for Pension Plans, and nevertheless has been unable to locate the participant or beneficiary;
- The plan fiduciary selects the state unclaimed property fund offered by the state of the last known address of the participant or beneficiary;
- The plan's summary plan description explains that retirement benefit payments of missing participants or beneficiaries may be transferred to an eligible state fund and identifies the name, address, and phone number of a plan contact for further information concerning the eligible state funds to which the retirement benefit payments are transferred; and
- The state unclaimed property fund qualifies as an “eligible state fund” (as defined under FAB 2025-01)
KMK Comment: This new guidance sets a fairly high bar for plan fiduciaries interested in escheating small benefits to state funds. Furthermore, it expressly states that the DOL is not precluded from pursuing other ERISA violations in connection with escheatment, nor does it protect against actions by plaintiffs. Accordingly, plan fiduciaries should proceed with caution and work closely with legal counsel before escheating missing participant or beneficiary benefits to state unclaimed property funds. Many plan documents include a procedure for addressing missing participants which should also be considered.
Clarifying Guidance on the Gag Clause Prohibition
Late last month, the DOL released additional guidance in the form of FAQs regarding the gag clause prohibition and related attestation requirement. Those FAQs were released in response to ongoing questions about the gag clause prohibition compliance attestation (GCPCA), and offered the following clarifications:
- Downstream Agreements May Violate Gag Clause Prohibition: Where a plan enters an agreement with a TPA (or other service provider) to provide network access, and the plan is restricted from providing, electronically accessing, or sharing the relevant information or data available to the TPA (or service provider) with participants, beneficiaries, and enrollees, plan sponsors, referring providers, or a business associate due to the TPA (or service provider) having entered into a downstream agreement that restricts the use of such relevant information or data, the plan's agreement with the TPA (or other service provider) indirectly restricts the plan in violation of the Gag Clause Prohibition.
- Agreements Limiting Disclosure of De-identified Claims Data to Business Associate Violate Gag Clause Prohibition: To the extent an agreement between a plan and a health care provider, network or association of providers, TPA, or other service provider offering access to a network prevents or limits a plan from sharing, or directing such information be shared, with a business associate (consistent with applicable privacy regulations), the agreement would violate the Gag Clause Prohibition.
- Restrictions on Audits Can Constitute Impermissible Gag Clauses: the following (nonexhaustive) examples of restrictions on an audit or claims review would be considered impermissible gag clauses:
- Limiting access to a statistically significant or the "minimum necessary" number of de-identified claims;
- Limiting the scope of access to the data to specific, narrow purposes (such as limiting access to the context of an audit);
- Unreasonably limiting the frequency of claims reviews (e.g., no more than once per year);
- Limiting the number and types of de-identified claims that a plan or issuer may access;
- Restricting the data elements of a de-identified claim that a plan or issuer may access; and
- Providing access to de-identified claims data only on the TPA's or service provider's physical premises.
- Attestations Are Required for Non-Compliant Agreements: Plans are required to complete and submit the required annual attestation even if they are aware that they have entered into an agreement that would violate the Gag Clause Prohibition. In this case, plans must identify the non-compliant provision as part of their attestation. The provision in question may still be considered a prohibited gag clause and may be subject to enforcement action by the Departments. However, a plan that submits an attestation of compliance that includes such additional information will still satisfy the requirement to submit a GCPCA, and the Departments will take into account good-faith efforts to self-report a prohibited gag clause in an enforcement action.
KMK Comment: The new gag clause guidance, which became effective as of January 14, 2025, makes clear that is it imperative for plans to understand the extent to which gag clauses exist in their TPA agreements, as well as any downstream contracts. It is also crucial to carefully review contractual claims and audit provisions, as well as any language restricting the provision of de-identified data to business associates, for compliance with the gag clause prohibition. Plan sponsors should work closely with service providers and legal counsel to ensure accuracy when complying with the attestation requirement.
