July 2022 Issue:

• Senate Democrats Revive Slimmed-Down Build Back Better Reconciliation Bill
  
• Senate Finance Committee Approves Its Piece of SECURE 2.0
• Details of EARN Act LTCi Provision Raise Concerns
• Prospects for Enactment of SECURE 2.0 Are Equally Good and Questionable
• NAIFA Comments on DOL Rulemaking on Independent Contractor Issue
• Cryptocurrency Sparks Regulatory Attention
• PBGC Releases Final Multiemployer Plan Rescue Regulation
• IRS Proposes Estate Tax Deduction Regulation
• Inflation Increases Penalties for Failure to Provide Affordable Health Coverage
• NAIFA Works to Lessen the Impact of CMS Final Rule
• SECURE Notarization Amendment Offered for NDAA

Senate Democrats Revive Slimmed-Down Build Back Better Reconciliation Bill

Hill staff report negotiations between Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin (D-WV on a slimmed-down Democrat-only reconciliation bill are focused now on health provisions only.  Senator Manchin has reportedly informed Leader Schumer that he can only accept a two-year extension of the expiring ACA health insurance subsidies and a proposal that would require the federal government to negotiate the price of some prescription drugs as part of the politically high-priority Build Back Better (BBB) initiative. 

Currently, details of negotiations between Senate Majority Leader Sen. Chuck Schumer (D-NY) and Sen. Joe Manchin (D-WV), the Democrat whose opposition to the House-passed bill scuttled the BBB effort late last year, have been closely held. Sen. Schumer is reportedly keeping the rest of his caucus apprised of the direction the talks are taking, and insiders say the caucus likely will support the decisions that have been made so far.   

Although it appears that any tax increases have temporarily fallen out of the current agreement due to Manchin’s concern over inflation, Sens. Manchin and Schumer had previously tentatively agreed to an expansion of the 3.8 percent net investment income tax (NIIT). The NIIT under current law applies, among other items, to nonqualified annuity income. The expansion would have included pass-through business income (whether or not the taxpayer is actively involved in the business) in the base to which the NIIT would apply. It would also have raised the threshold at which the NIIT applies from current law’s $250,000 (married; $200,000/single) to $400,000 (married) and $500,000 (trusts and estates). The provision, insiders predict, would raise more than $200 billion over ten years. The House-passed reconciliation bill also includes an expansion of the NIIT. It is possible this provision comes into play later in the year as it is viewed as “low-hanging fruit” by many staff and Members. 

On the spending side, it looks like Sens. Schumer and Manchin have agreed to a proposal that would require the federal government to negotiate the price of some prescription drugs. The provision would also cap the out-of-pocket costs for prescription medicines that Medicare beneficiaries would have to pay. This provision is expected to raise some $250 billion over 10 years. A tentative agreement on extending the ACA’s health insurance subsidies for two years is also reportedly part of the spending deal. 

Both the NIIT provision and the prescription drug negotiating authority proposal have been submitted to the Senate Parliamentarian to be sure they comply with the complicated (and limiting) rules of the reconciliation process. This is the process that allows Senate Democrats to avoid a filibuster by Senate Republicans. 

Prospects: Chances for an agreement among the 50 Senate Democratic votes (no Republican seems willing to support any reconciliation package) are still only 50-50, because of Democrats’ disappointment in how small the package appears to have become.  And even if the Senate passes a slimmed-down BBB bill, there are significant doubts about whether enough House Democrats would vote for it. But it seems clear that the effort will have to reach a conclusion, one way or the other, later this month. 

NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.

Senate Finance Committee Approves Its Piece of SECURE 2.0

On June 22, the Finance Committee unanimously approved the EARN Act, its piece of the emerging retirement savings bill usually referred to as SECURE 2.0.

NAIFA’s required minimum distribution (RMD) aggregation proposal did not make it into the package—committee staff said they couldn’t get the revenue score on the proposal below $11 billion, and they just couldn’t accommodate that big a revenue loser in the package. 

The NAIFA proposal would have allowed taxpayers with multiple retirement savings accounts who are subject to RMD obligations to pay their RMDs out of the retirement savings account(s) of their choice. Currently, RMDs must be paid separately from each 401(k) account. RMDs from multiple IRAs can be aggregated, as can RMDs from multiple 403(b) accounts. But RMDs from IRAs and 403(b)s cannot be aggregated.

The EARN Act contains 69 provisions (out of some 112 submitted to the committee and/or in Portman/Cardin or in the House-passed Securing a Strong Retirement Act (SSRA)). The package raises a relatively small amount of revenue, $144 million (per Joint Committee on Taxation (JCT) scoring) and it contains three principal revenue raisers, all involving “Rothification.” The three revenue raisers are: (1) a requirement that catch-up contributions be Roth contributions, (2) authority for contributions to SEPs and SIMPLE IRA plans to be under Roth rules, and (3) a choice for employees to treat the contributions their employers make on their behalf under Roth rules (i.e., taxable contributions and after-tax distributions). Additional revenue needs were met by delaying many effective dates—most to 2024, but at least one to 2032 (the increase in the age, from 72 to 75, at which RMDs are required).

Among the EARN Act provisions are: 

• A new safe harbor plan design—as of 2024, a plan could meet nondiscrimination requirements (and qualify for the tax credit available to employers) by offering a plan with a six percent of compensation employee deferral in the first year, rising by one percent per year to a ten percent cap, with an employer match of 100 percent of the first two percent deferred, 50 percent of the next four percent, and 20 percent of the last four percent of compensation deferred.
  
  
• Up to $2,500 in retirement plan money could be used to purchase “high quality” long-term care insurance (LTCi), including coverage provided through riders to life insurance policies—the money used to purchase LTCi would be subject to income tax, but the early withdrawal penalty tax would be waived. This provision would take effect three years after the date of enactment of the EARN Act. 
  
  
• As of 2032, the age at which an individual will have to take required minimum distributions (RMDs) rises from 72 to 75.
  
  
• As of the date of enactment, the penalty for failure to take an RMD (or taking an RMD less than the amount required) would be reduced from 50 percent to 25 percent (or to ten percent if the RMD is taken within the permitted correction period).
  
  
• As of 2027, the SAVERs credit would change to a government contribution to an eligible taxpayer’s retirement savings plan.
  
  
• Long-term part-time employees would become eligible for participation in an employer-sponsored plan after two years (down from current law three years) of service.
  
  
• As of 2024, employee-paid student loan payments would be eligible for employer matching contributions as if they were elective contributions.
  
  
• As of 2024, plan participants would be allowed to withdraw up to $1,000/year from their retirement plans without triggering an early withdrawal penalty tax, if the withdrawal is for emergency or immediate family financial needs. The withdrawals could be repaid within three years. No further withdrawals would be permitted during the three-year repayment period unless the withdrawal was repaid.
  
  
• Catch-up contribution limits would be indexed (starting in 2024), plus the allowable catch-up contribution would rise for those age 60 to 63 to $10,000 ($5,000 for SIMPLE plans)—note, under a separate provision in the package, these (and all) catch-up contributions would have to be Roth (i.e., after-tax contributions/tax-free distributions).
  
  
• Creation of a “starter” 401(k) plan design—As of 2024, an employer that does not offer a retirement plan could offer a “starter” 401(k) or 403(b) plan that automatically enrolls all employees at a three to 15 percent deferral rate. The limit on annual deferrals would be the same as for IRAs (currently, $6,000/year, with an additional $1,000 catch-up contribution).
  
  
• The tax credit to an employer for starting a retirement savings plan would be extended to employers that join a multiple employer plan, effective as of the date of enactment.
  
  
• As of 2024, additional, uniform nonelective contributions to SIMPLE plans would be allowed (in addition to the current law required two percent of compensation or three percent of employee elective deferral) up to the lesser of ten percent of compensation or $5,000 (indexed).
  
  
• As of 2024, contribution limits to SIMPLE IRA plans would go up to $16,500 (indexed), and the size of allowed catch-up contributions (subject to Roth rules under a separate provision in the package) would go up to $4,750 (indexed) for employers with fewer than 25 employees, or for employers with between 25 and 100 employees who also provide either a four percent matching contribution or a three percent employer contribution.  Similar rules changes are provided for SIMPLE 401(k) plans.
  
  
• An auto-rollover rule to make it possible for an employer who has a terminating employee to roll over that employee’s account balance into the employee’s new employer’s retirement plan.
  
  
• Authority to include ETFs (exchange-traded funds) in variable annuity aggregated accounts—the effective date of this provision is seven years after the date of enactment.
  
  
• Employers could rely on employee self-certification of hardship for purposes of hardship withdrawals.
  
  
• Modification of longevity annuity rules—the modifications include elimination of the 25 percent threshold and an increase in the dollar limit to $200,000.
  
  
• As of 2024, the limit ($100,000) on the amount of a direct contribution to a charity from an IRA would be indexed. In addition, the provision would allow for a one-time $50,000 distribution to charities through charitable gift annuities, charitable remainder unitrusts, and charitable remainder trusts. This provision would take effect after the EARN Act’s date of enactment.
  
  
• A commercial annuity issued by a tax-preferred retirement plan could include a guaranteed increase in annual annuity payments of up to five percent per year and provide lump-sum payments that reduce the annuity payment period. The provision would take effect as of the date of enactment of the EARN Act.
  
  
• An extension of the current law rule that allows an employer to use assets in an overfunded pension plan to pay retiree health and life insurance benefits. This authority currently expires at the end of 2025. The EARN Act would extend it to the end of 2032. The provision limits these transfers to no more than 1.75 percent of plan assets and is available only if the plan is at least 110 percent funded.

There are other provisions, too, dealing with correcting mistakes, specialized plans (e.g., ESOPs, special needs plans, tax court judge plans), notice and disclosure requirements, plan amendment rules, authority to offer de minimus incentives to encourage participation in an employer-sponsored plan, etc.

Prospects: There is wide bipartisan support for the SECURE 2.0 initiative, and many of the provisions in play are in both the House and Senate versions of the bill. However, there are also differences and points of controversy. For example, there is concern about the EARN Act’s extended effective dates. Plus, the Senate bills (Senate HELP Committee’s RISE and SHINE Act and the EARN Act) must still be melded into one proposal. Further, at this point, it appears unlikely that the SECURE 2.0 package will move on its own—it is more likely that House and Senate retirement savings lawmakers will finalize a bicameral package that they will then add to some other piece of legislation—most probably, the year-end government funding bill. 

NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.

Details of EARN Act LTCi Provision Raise Concerns

A modified (and modest) long-term care insurance (LTCi) proposal is in the Senate Finance Committee-approved EARN Act, the tax-focused piece of the SECURE 2.0 retirement savings package. Under the proposal, a person could take up to $2,500 from their retirement plan to pay for qualified LTCi. The withdrawal would be subject to income tax, but the ten percent penalty tax (applicable if the withdrawal occurred pre-retirement) would be waived. And the provision would make “high quality” LTCi in the form of riders to a permanent life insurance policy eligible for the early withdrawal penalty tax waiver. 

There had been a problem with “qualification” regarding restrictions on use of dividends in the usual definition of qualified LTCi that would prevent those riders on life policies (where dividend payment options are not restricted) from being qualified. The EARN Act resolved this problem. The resolution includes, among other rules, a requirement that LTCi riders on permanent life policies be subject to LTCi consumer protection rules.

There are also reporting requirements included in the LTCi proposal. These reporting rules, along with the scaled-back tax benefits of the EARN Act LTCi provisions, have raised some concerns among the proposal’s supporters. Further, there are ongoing efforts to define the minimum LTCi benefit that would qualify for the penalty waiver.

The reporting requirements are: 

1. The plan participant taking up to $2,500 in retirement plan funds must file a statement (statement to be provided by the LTCi issuer, whether a separate contract or a rider on a life insurance contract) including the name and TIN (taxpayer identification number) of the LTCi issuer, identification of the LTCi purchaser, the amount of LTCi premium owed, and "other information” as required by statute or in guidance.
   
   
2. The LTCi issuer (insurer) is required to provide the above-described statement to the LTCi purchaser, and also file its own statement, including the issuer's name and TIN, the name of the LTCi purchaser, the amount of premium paid during the calendar year, and "other information” as required by statute or in guidance.
   
   
3. The LTCi insurer also has to file with Treasury a disclosure application with respect to its LTCi product. The information in the disclosure application must include that information required by statute or in guidance. The disclosure application must be filed before the insurer can provide the required statement to plan participants seeking to take a withdrawal from their retirement savings accounts.

The provision also requires Treasury to establish and maintain a website listing all LTCi for which disclosure statements have been filed. The website must also include information regarding LTCi consumer protections and information about each product that would help a consumer choose a product.

Prospects: The LTCi provision is not in the House-passed Securing a Strong Retirement Act (SSRA). However, the Senate proposal raises some revenue (per a Joint Committee on Taxation (JCT) score), and so its chances for acceptance by House lawmakers are good.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org.

Prospects for Enactment of SECURE 2.0 Are Equally Good and Questionable

Weeks of negotiations to craft a final bicameral retirement savings bill (SECURE 2.0) among House and Senate, Democrat and Republican retirement savings lawmakers are likely to succeed. All the in-play bills got overwhelming bipartisan support. However, difficult issues remain, and then there’s the question of whether there will be a vehicle on which a final bill can ride to enactment.

Among the issues to be resolved are whether the House will accept new provisions added by the Senate, or the Senate will accept restoration of the House bill provisions dropped by the Senate committees. One important House provision not included in the Senate Finance bill is the auto-enrollment in section 401(k) and 403(b) plan requirement championed by Ways and Means Chair Neal. The bill’s effective dates will also be an issue. 

The EARN Act’s three revenue-raising (offset) provisions—all involving a requirement for Roth treatment (i.e., after-tax contributions and tax-free distributions)—were not enough to cover the cost of the EARN Act. As a result, there are a lot of very-delayed effective dates (for example, the LTCi provision won’t take effect until three years after the date of enactment; the change in the age at which RMDs are required (to 75, from 72), is delayed until 2032; there are also a lot of 2024 effective dates). There is some concern about this, but to accelerate the effective dates means either dropping some revenue-losing provisions or finding alternative offsetting revenue. 

There will also be ongoing efforts to add provisions that neither the House nor the Senate bills contain. Among those is the NAIFA proposal to allow aggregation of required minimum distribution (RMD) obligations for taxpayers who reach RMD age holding multiple retirement savings accounts. That provision was scored as an $11 billion revenue loser, and so getting it into a final, bicameral bill will be a heavy lift, if it’s possible at all. The final bill has to be revenue-neutral, and there are already revenue-related issues (e.g., the extended effective dates in the EARN Act, and the House “need” to restore provisions in its bill that were not included in the Senate legislation).  But there is an effort underway to see if it could be possible.

Prospects: SECURE 2.0 is both bipartisan and widely supported in both the House and Senate. But Hill insiders think it is highly unlikely that the bill will move on its own—indeed, it’s unlikely that the full Senate will vote on it at all. Rather, it is looking like a final bicameral package will be added to other must-pass legislation. Right now, that looks like it will not be before December when Congress will likely consider the year-end FY 2023 government funding bill.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.

NAIFA Comments on DOL Rulemaking on Independent Contractor Issue

Last month, NAIFA member Josh O’Gara told the Department of Labor (DOL) at its virtual public forum on the worker classification issue that DOL’s new rule on what constitutes an employee, or an independent contractor should make clear that insurance and financial professionals may continue to be independent contractors. 

Clarification of the right to a status as an independent contractor for insurance and financial professionals could come as an exemption to a more general rule, if that is what is needed to acknowledge the special working conditions applicable to insurance and financial professionals. 

O’Gara, president of NAIFA-MA and vice chair of NAIFA’s National Grassroots Committee, told DOL that he works with more than 20 insurance companies and that allows him to offer his clients a variety of products and services. Rules or laws that would hinder this independence would hurt his ability to serve his clients’ best interests, he said. He noted that many insurance and financial professionals are entrepreneurs and owners of their own businesses. It would make no sense, he pointed out, to classify these professionals as employees of an insurer or other financial firm with which they work.

DOL is close to releasing a new worker classification rule (RIN 1235-AA43). The agency’s proposed new rule, based on the authority in the Fair Labor Standards Act (FLSA), is currently under review at the White House’s Office of Information and Regulatory Affairs (OIRA). This is the last step before formally releasing a proposed new rule.

Most of the impetus behind the effort to redo worker classification rules arises from the growth of the gig economy—i.e., workers and firms such as drivers for rideshare companies. The rules that work in those contexts do not work for financial professionals whose efforts do include considerable financial services company control under securities and retirement savings laws.

Prospects: There has been both regulatory and legislative attention paid to worker classification issues. NAIFA has been working hard to make sure both regulators and lawmakers know that there are important distinctions with respect to classification as an employee or as an independent contractor applicable to insurance and financial professionals. To date, these efforts have been successful in California, where insurance and financial professionals are exempt from the state’s “ABC” test for determining employee status. NAIFA has also been successful with Congress where pending legislation has been modified to exempt insurance and financial professionals from ABC test-like proposals.

NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.

Cryptocurrency Sparks Regulatory Attention

Both the Treasury Department and the Department of Labor (DOL) are looking at issuing new guidance on cryptocurrency, whether as an investment outside of retirement plans or as an option for investment inside a retirement plan. Both agencies have expressed concern about the riskiness and volatility of cryptocurrency.

Last month Treasury Secretary Janet Yellen called cryptocurrency assets a “very risky choice” to include in average savers’ retirement plans. She also said that while she is not recommending that Congress legislate on the inclusion (or exclusion) of cryptocurrency investments in a 401(k) plan, she thinks it would be “reasonable” for Congress to do so.

Another Treasury official, on June 14, told an International Tax Institute seminar that Treasury is “considering guidance to implement an executive order on the governance of cryptocurrencies.” Erika Nijenhuis, senior counsel in Treasury’s Office of Tax Policy, said, “In the context of anti-money laundering or financial stability or the like, that means there are going to be restrictions.” She said new guidance—the timeline for which she did not discuss—would emphasize “promoting innovation in a responsible manner.” 

The Biden Executive Order was issued March 9, 2022.

Over at DOL, also on June 14, Labor Secretary Marty Walsh told the House Education and Labor Committee that his agency is also looking at a rulemaking focused on “the appropriateness of cryptocurrency in 401(k) plans.” This would be on top of the agency’s March 10 Compliance Assistance Release No. 2022-01 (which characterized cryptocurrency as “speculative” and “volatile”). That guidance has already sparked a lawsuit filed by a company that wants to include cryptocurrency funds in retirement plan investment choice menus. 

Walsh noted that DOL did not tell interested parties that they could not include cryptocurrency investments in 401(k) plans, but rather that DOL has “major concerns” about doing so. Yet the DOL release does state that it “expects to conduct an investigative program aimed at plans that offer participant investments in cryptocurrencies and related products, and to take appropriate action to protect the interests of plan participants and beneficiaries with respect to these investments.”

Prospects: It appears highly likely that Treasury, DOL, or both will be initiating rulemaking on cryptocurrency issues in the near future. That is not likely to change even if the November elections result in a change in which party controls the House and/or Senate, as the White House and the regulatory agencies will remain in Democratic hands at least until after the 2024 presidential elections.

NAIFA Staff Contacts: Michael Hedge – Director – Government Relations, at mhedge@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.

PBGC Releases Final Multiemployer Plan Rescue Regulation

On July 7, the Pension Benefit Guaranty Corporation (PBGC) released its final rule implementing the multiemployer plan (where two or more employers agree with a union to sponsor a plan for their unionized workforces) pension relief enacted into law in 2021. In response to more than 100 comments on its interim final rule (issued last July), the final rule incorporates several changes. The changes include modifications to the methodology plans used to calculate the amount of Special Financial Assistance (SFA), restrictions on investments of SFA funds, conditions imposed on plans that receive SFA, and several aspects to the application process. 

The 2021 multiemployer pension plan relief was enacted in response to the need to protect retirement benefits earned by participants in bankrupt and near-bankrupt multiemployer plans. The law includes the creation of a $94 billion fund to help shore up the plans’ benefits payable to both already-retired and currently active plan participants. Retired participants have seen their benefits more than halved in some cases due to the dire financial position in which some of the plans find themselves. Among the provisions of the new law is the creation of the Special Financial Assistance program.

According to the fact sheet released by the PBGC, among the final rule changes are the following:

• A provision allowing plans to invest up to 33 percent of their SFA funds in return-seeking investments (e.g., publicly traded common stock and equity funds that invest primarily in public shares); with the remaining 67 percent restricted to high-quality fixed income investments. 
  
  
• A modification to the SFA calculation method to use separate interest rates for plans’ SFA and non-SFA assets—the modification also aligns the interest rates used to calculate SFA with reasonable expectations of investment returns on plans’ SFA assets.
  
  
• A different methodology for the calculation of SFA for plans that implemented benefit suspensions under the Multiemployer Pension Reform Act of 2014 (MPRA).  

The final rule applies to new applications. Plans that have already submitted SFA applications under the interim final rule may submit a revised or supplemental application under the final rule, PBGC said.

The final rule was published in the Federal Register on July 8, and will take effect 30 days later; i.e., on August 8, 2022. A fact sheet on the final regulation is posted on the agency’s website.

Prospects: PBGC included in its final regulation a request for additional comments “solely on the change to the withdrawal liability condition requiring a phased-in recognition of SFA assets for purposes of computing employer withdrawal liability.” Comments on this issue can be submitted to reg.comments@pbgc.gov or on http://www.regulations.gov.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.

IRS Proposes Estate Tax Deduction Regulation

On June 24, the Internal Revenue Service (IRS) proposed new regulations on deductions against estate taxes. The IRS will hold a public hearing, via teleconference, on the proposed regulation on October 12.

The proposed regulation (RIN 1545-BI11) covers deductible expenses governed by Internal Revenue Code section 2053. They include deductions for funeral expenses, administration expenses, certain investment expenses, and other claims against the estate. The proposed regulation also clarifies the requirements for substantiating the value of a deductible claim against the estate and the deductibility of amounts paid under a decedent’s personal guarantee. 

Prospects: Comments submitted for the hearing or for the record may result in changes to the proposed regulation.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.

Inflation Increases Penalties for Failure to Provide Affordable Health Coverage

The Affordable Care Act (ACA) imposes a monetary penalty on employers that fail to offer affordable health care coverage to their workers. Those penalties are indexed for inflation. Due to indexing, the penalties will increase (by around $50) in 2022.

Generally, affordable minimum essential coverage is health insurance for which employees pay no more than 9.83 percent of the employee’s household income. Employers that require their employees to pay more than that for their health insurance premiums, or that do not offer health insurance at all (and where at least one employee receives a premium tax credit), are subject to the employer shared responsibility payment.

The payment for employers that do not offer minimum essential coverage at all (and who have at least one worker getting a premium tax credit) paid a $2,700/year ($225/month) penalty in 2021. It goes up to $2,750 ($229.17/month) in 2022. For employers that offer minimum essential coverage, but the coverage is not affordable, the payment was $4.060 ($338.33/month) in 2021 and increased to $4,120 ($343.33/month) in 2022. The penalties are per employee, payable monthly. 

NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.

NAIFA Works to Lessen the Impact of CMS Final Rule

In May, the Centers for Medicare and Medicaid Services (CMS) issued a Final Rule which revises the Medicare Advantage (Part C) program and the Medicare Prescription Drug Benefit (Part D) program regulations to implement changes related to marketing and communications, past performance, Star Ratings, network adequacy, medical loss ratio reporting, special requirements during disasters or public emergencies, and pharmacy price concessions. 

While this final rule creates several new requirements for Medicare Advantage and Part D, the most displeasing of these are the new marketing and communications requirements. CMS has stated that it received a significant increase (over 15,000 complaints in 2020, which more than doubled in 2021 to 39,000) in beneficiary complaints regarding the marketing activities of Third-Party Marketing Organizations (TPMOs) who sell Medicare Advantage and Part D products.

The new rule affirms that Medicare Advantage plans and Part D sponsors are responsible for TPMO activities associated with the selling of those plans, and requires that:

• Contracts between TMPO and Plan, or TPMP and Plan’s FDR must ensure that the TPMO:
• Disclose to the MA organization any subcontracted relationships used for marketing, lead generation, and enrollment.
• Record all calls with beneficiaries in their entirety, including the enrollment process.
• Report to plans monthly any staff disciplinary actions or violations of any requirements that apply to MA plan associated with beneficiary interaction to the plan.
• When conducting lead-generation activities (directly or indirectly) for an MA organization, TMPOs must disclose to a beneficiary that their information will be provided to the licensed agent for future contact and that the agent can enroll them into the new plan. This disclosure must be provided as follows:
• (A) Verbally when communicating with beneficiary through telephone.
• (B) in writing when communicating with a beneficiary through mail or other paper.
• (C) Electronically when communicating with a beneficiary through email, online chat, or other electronic messaging platform.

The rule also adds a requirement that Medicare Advantage and Part D plans create a multi-language insert that will inform the reader of available interpreter services, in the top fifteen languages used in the United States and includes new parameters and requirements governing dually-eligible special needs plans, medical loss ratio transparency, and pharmacy price concessions. 

Additionally, this rule codifies previous technical guidance included in the Managed Care Marketing Guidelines:

• Technical standards for issuing ID cards, disclaimers regarding pharmacy access, and preferred cost-sharing policy.
• Requirements for specific website content.

NAIFA has received a great deal of input on this rule, specifically, we have fielded several complaints regarding the requirement that all phone calls with beneficiaries be recorded. This requirement applies to all agents who enroll beneficiaries into new plans, whether they are new or existing clients. CMS is interpreting this rule as applying to agents who are walking their clients through online applications as well. 

On balance, beneficiary dissatisfaction is not with their agent of record, but the call centers that solicit beneficiaries to switch plans that may not meet their needs. NAIFA believes that calls with existing clients should be exempt from this requirement. 

Prospects: NAIFA is currently collaborating with CMS and CMS Administrator, Chiquita Brooks-LaSure, requesting an exemption for agents working with existing clients. NAIFA, along with our industry partners, will continue to press this issue with CMS and will provide updates as necessary.

NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.

SECURE Notarization Amendment Offered for NDAA

On July 8, The SECURE Notarization Act was filed with Rules as an amendment (AMDT #543) to the National Defense Authorization Act (NDAA) by Rep. Dean (D-PA), Rep. Armstrong (R-ND), Rep. Perlmutter (D-CO), Rep. Reschenthaler (R-PA), and Rep. Escobar (D-TX).

NAIFA joined with industry partners in a letter to express strong support for NDAA amendment #543. The text of the amendment is taken from H.R. 3962, the SECURE Notarization Act, which has the strong, bipartisan support of 113 cosponsors. 

The amendment provides all Americans additional flexibilities and options for executing critical life documents, including for real estate transactions, wills, and health care directives using remote online notarization (RON). 

The last few years have demonstrated how technology can be leveraged to modernize services across a variety of markets. Notarizations are widely used for real estate, financial services, and other legal documents. Remote Online Notarization (RON) allows the consumer, notary, and other parties to a transaction to be in different locations using two-way audio-visual communication to securely notarize documents. This process provides assured consumer access to notarization, allows for flexible scheduling, and affords consumers time to review documents and proceed when they are ready to sign.

Prospects: The amendment has good prospects to be adopted in the House version of NDAA but could again face difficulty from members of the California delegation in either the House or Senate due to concern of implementation in California by the California state government. Last year, although included as an amendment in NDAA, SECURE Notarization was stripped out of the bill before passage.  

NAIFA Staff Contact: Michael Hedge – Director – Government Relations, at mhedge@naifa.org.