The Tax Court’s May 3, 2023, decision in ES NPA Holding, LLC v. Commissioner (T.C. Memo 2023‑55), upholding a taxpayer’s position to characterize a partnership interest as a profits interest under the “safe harbor” of IRS Revenue Procedure 93-27 (as clarified by IRS Revenue Procedure 2001-43), provides helpful guidance to issuers of profits interests, including private equity funds and other investment partnerships and their portfolio companies.

In addition to the excitement of the upcoming outdoor concert season, Proskauer’s lawyers are anxiously awaiting VERY different forms of entertainment:

  • the next installment of the never-ending saga of U.S. Department of Labor (“DOL”) guidance on who is considered an investment advice fiduciary, including whether the fiduciary standard applies to advice on whether to take a rollover;
  • finalization of the DOL’s QPAM Exemption amendment proposal; and
  • resolution of court challenges to the DOL’s final “ESG” rules.

We discussed these developments at ERISAFest 2023.  If you missed it, feel free to reach out to your Proskauer contact for a recording, and be sure to sign up next year!

On Monday, the U.S. Court of Appeals for the Fifth Circuit issued an administrative stay of enforcement of the district court decision in Braidwood Management Inc. v. Becerra.  Readers of our earlier blog (found here) will remember that in Braidwood, the district court enjoined enforcement of the preventive services mandate for “A” or “B” items and services recommended by the United States Preventive Services Task Force (“USPSTF”) on or after March 23, 2010.  If the district court decision stands, this means that non-grandfathered plans would not have to cover these services without cost-sharing.  However, as a result of the Fifth Circuit stay issued on May 15, non-grandfathered health plans will continue to be subject to the mandate for these services for the time being.  All other preventive care requirements for health plans remain in place.

“Didn’t we just do this?” might be the first question asked by many health plan sponsors and administrators when gearing up to complete 2022 prescription drug reporting by June 1, 2023.  The answer to that question is both “yes” and “no.”  Yes, because group health plans were required to complete prescription drug reporting for the 2020 and 2021 reference years by January 31, 2023. No, because the agencies released revised instructions for reporting 2022 year data—meaning the reporting exercise for 2022 may be a little different than the last go-around.

A third district court has dismissed with prejudice a complaint alleging that defendants breached their fiduciary duties under ERISA by offering 401(k) plan participants the option to invest in BlackRock LifePath Index Target Date Funds (the “Funds”).  Beldock v. Microsoft, Case No. 22-cv-1082 (W.D. Wash. Apr. 24, 2023).  Although the outcome of the court’s ruling here is consistent with earlier decisions, the rationale underlying the Beldock decision arguably goes further than in prior rulings, thus providing additional food for thought.

The Departments of Labor, Treasury, and Health and Human Services (the “Departments”) recently released guidance for group health plans on required preventive services coverage.  The guidance was issued in response to a federal district court decision in a case called Braidwood Management, Inc. v. Becerra that enjoined enforcement of the preventive services mandate for items and services with an “A” or “B” rating from the United States Preventive Services Task Force (“USPSTF”) on or after March 23, 2010. The Departments issued this guidance to clarify the current scope of the preventive services mandate in light of the court’s decision.

Last Friday, the United States Supreme Court stayed a federal district court order that suspended  the U.S. Food and Drug Administration’s approval of the drug mifepristone, which is used as part of a two-drug regimen to induce abortion.  This decision means that mifepristone will remain available subject to current FDA dispensation guidelines while the appeal of the district court’s decision proceeds through the U.S. Court of Appeals for the Fifth Circuit (and potentially the Supreme Court).  Although the Supreme Court’s decision returns mifepristone access to the status quo for the time being, it creates a number of questions for employers and other benefit plan sponsors with respect to abortion coverage in group health plans, which we discuss below.

Important Update: Based on informal comments from the U.S. Department of Labor, it appears that the tolling of benefit plan deadlines will end on July 10, 2023, as described in our earlier blog on this subject, notwithstanding the legislation that was signed on Monday ending the COVID-19 National Emergency on April 10th…

On remand from the U.S. Supreme Court, the Seventh Circuit issued its opinion in Hughes v. Northwestern University, concluding that participants in two Northwestern 403(b) plans plausibly pled fiduciary-breach claims based on allegations of excessive recordkeeping and investment management fees, but dismissed their claim that too many investment options caused them “decision paralysis.”  In…