The Washington Report
February 24, 2021
Note to subscribers: Due to the current environment, information is changing at a rapid rate. While we do our best to provide timely updates, it is possible that the information shared in the newsletter may change or be revised after our publication deadline. Stay healthy and safe! ~The Washington Report team
Court Delays Drug Rebate Rule to January 2023
On February 19, 2021, the Office of Inspector General and the Department of Health and Human Services (HHS) announced in the Federal Register the delay of the effective date of certain amendments to the safe harbors to the federal anti-kickback statute that were issued in a final rule (“Fraud and Abuse; Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection for Certain Point-of-Sale Reductions in Price on Prescription Pharmaceuticals and Certain Pharmacy Benefit Manager Service Fees”) published in November 2020. The new effective date for these certain amendments is January 1, 2023.
HHS issued a final rule on November 30, 2020, establishing four changes to the regulatory safe harbors to the federal anti-kickback statute (Social Security Act Section 1128B(b)). Specifically, the final rule: 1) amended 42 CFR 1001.952(h)(5) to remove safe harbor protection for reductions in price for prescription pharmaceutical products provided to plan sponsors under Part D; 2) created a new safe harbor at Section 1001.952(cc) for certain point-of-sale reductions in price offered by manufacturers on prescription pharmaceutical products that are payable under Medicare Part D or by Medicaid managed care organizations that meet certain criteria; 3) created a new safe harbor at Section 1001.952(dd) for fixed fees that manufacturers pay to pharmacy benefit managers for services rendered to the manufacturers that meet specified criteria; and 4) added new paragraphs (6)-(9) to 42 CFR 1001.952(h), defining certain terms. The final rule was published with an effective date of January 29, 2021, except for the amendments to 42 CFR 1001.952(h)(5), which were to be effective on January 1, 2022.
On January 12, 2021, a lawsuit challenging the final rule was filed in the U.S. District Court for the District of Columbia. On January 30, 2021, the court issued an order postponing until January 1, 2023, the effective date of all provisions of the final rule that were scheduled to take effect on January 1, 2022. Consistent with that order, HHS notified the public in the Federal Register that the effective date of the amendments to paragraph 42 CFR 1001.952 (h)(5) in the final rule is now January 1, 2023. Pursuant to the court order, any obligation to comply with a deadline tied to the effective date of these amendments is similarly postponed, and those obligations and deadlines are now tied to the postponed effective date.
The Federal Register notification about the delay is available here.
The November 30, 2020, final rule is available here.
IRS Releases Guidance Providing Additional Flexibility for Health FSAs and Dependent Care Assistance Programs
On February 18, 2021, the Internal Revenue Service (IRS) released Notice 2021-15, providing guidance on the application of recently enacted Section 214 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which provides temporary special rules for health flexible spending arrangements (FSAs) and dependent care assistance programs under Section 125 cafeteria plans. Generally, under these plans, an employer allows its employees to set aside a certain amount of pre-tax wages to pay for medical care and dependent care expenses. Amounts spent by the employee are then reimbursed from their designated health FSAs or dependent care assistance programs.
Notice 2021-15 provides flexibility for employers in the following areas related to health FSAs and dependent care assistance programs:
- Provides flexibility for the carryover of unused amounts from the 2020 and 2021 plan years;
- Provides flexibility to extend the permissible period for incurring claims for plan years ending in 2020 and 2021;
- Provides flexibility to adopt a special rule regarding post-termination reimbursements from health FSAs;
- Provides flexibility for a special claims period and carryover rule for dependent care assistance programs when a dependent "ages out" during the COVID-19 public health emergency; and
- Allows certain mid-year election changes for health FSAs and dependent care assistance programs for plan years ending in 2021.
Prior guidance provided flexibility to employers with cafeteria plans through the end of calendar year 2020, during which employers could permit employees to apply unused health FSA amounts and dependent care assistance program amounts to pay for or reimburse medical care or dependent care expenses. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, signed into law on December 27, 2020, provides similar flexibility for these arrangements in 2021 and 2022.
For more information, please see the Aon bulletin titled The Cafeteria Re-Opens! IRS Menu Offers More Flexibility (Again) in the Publications section of this newsletter.
The IRS news release is available here.
IRS Notice 2021-15 is available here.
The Cafeteria Re-Opens! IRS Menu Offers More Flexibility (Again)
The Internal Revenue Service (IRS) last week issued more COVID-19-related relief that greatly expands employer flexibility in the design and operation of their cafeteria plans. The relief, issued in IRS Notice 2021-15, permits employers to give employees greater ability to change their cafeteria plan elections for health care flexible spending accounts (FSAs), dependent care FSAs, and group health plan coverage.
The Aon bulletin, which provides an overview of the latest IRS guidance, is available here.
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