Speaker 1: 0:00

The Supreme Court recently overturned a 40-year precedent known as the Chevron Deferment. The decision could have a major effect on advisors and the work that they do for their clients. So what's the reality on the ground and what do you need to know today and going forward? We'll find out on this episode of Shift Shapers.

Speaker 2: 0:20

Change either energizes or paralyzes. The choice is yours. This is the Shift Shapers podcast, bringing the employee benefits industry interviews with individuals and companies who are shaping the industry shifts. And now here's your host, david Saltzman.

Speaker 1: 0:42

And to help us answer that question, we've invited Jennifer Berman, JD MBA, CEO of our podcast sponsor, MZQ Consulting. Welcome, Jennifer.

Speaker 3: 0:52

Hi, david, thanks for having me.

Speaker 1: 0:55

Our pleasure. So let's level set. Where were we before this whole kerfuffle started?

Speaker 3: 1:00

So basically the way the laws worked for the past 40 years. So basically the way the laws work for the past 40 years. If a federal regulation is in place interpreting an ambiguous federal statute, the courts defer in and they say this is what we think the statute means, the court will defer to that federal agency's interpretation.

Speaker 1: 1:33

Isn't that a good thing? Because the agencies have experts, the courts don't.

Speaker 3: 1:39

Well, I think that many thought it was, but others said you know, that's not the role of the executive branch. The executive branch are not the legislators and it's up to the federal legislature to decide what the law should be and then the executive branch to enforce and create, you know, the enforcement mechanism for those laws. And so last week's decision, or the decision that came down at the end of June, goes and says where there's ambiguity, it's the role of the judiciary to determine what what the law should mean. And that's what it means that the Chevron decision has been overturned. Now courts are going to interpret that ambiguity, not the executive branch represent ambiguity, not the executive branch.

Speaker 1: 2:27

Does this mean that when Congress builds out a law, when they write a law, that they need to be more specific?

Speaker 3: 2:33

Well, I mean, ultimately, if they want to make sure that courts aren't going to come in and overturn or change the interpretations of those laws. It would speak to the idea of more specificity. But remember, a lot of those laws are already on the books. So the laws that are on the books and the regulations that are on the books are not going to be automatically overturned. That's not what this means. So existing law is going to stay what it is today. What it does mean is we're likely to see many of the existing regulations challenged on the grounds that the underlying statutes are unclear.

Speaker 1: 3:11

So the question that I know everybody who's listening is asking is, before we delve into any more of those specifics, the question I know everybody's asking is what do I tell my employers today? They may already be getting calls from people who are nervous about what they need to do to keep their plans in compliance. What do they need to know today?

Speaker 3: 3:31

Today, nothing has changed, so today's law is no different than yesterday's law. Now, over time, we are likely to see many, many more federal regulations challenged in the courts, and what this ultimately means is probably a longer and more contentious process around the regulatory system. But today, very little, actually, really nothing is different, very little actually really nothing is different.

Speaker 1: 4:06

So can you give us an example of what might change in the healthcare realm?

Speaker 3: 4:27

Sure. So one example might be how we go about interpreting, say, compensation disclosures. So there is a statute the Consolidated Appropriations Act and the Consolidated Appropriations Act says that brokers and consultants have to actually it doesn't say that brokers and consultants have to disclose their compensation to plan sponsors. It says that plan sponsors have to know the compensation that they're paying to brokers and consultants, and to date there is no regulation on what that means. There's a lot of question as to what it means to be a broker or consultant for that and a lot of debate as to say whether or not a general agent counts as a broker or consultant for that purpose.

Speaker 3: 5:05

That's a very ambiguous statute on that point. If and when a regulation is passed on that, that regulation is likely to be challenged in court because that's ambiguous statutory language and so we're likely to see a lawsuit. And there's been a lot of questions so far as to whether or not we'll ever see a regulation on that, because there's no requirement under the statute that the Department of Labor opine on that. And now, because the courts are unlikely to defer to the Department of Labor's interpretation of that, it seems even less likely that we'll ever get a regulation on that point. So will we ever know for sure if and GAs are subject to that?

Speaker 1: 6:07

Probably not, and somebody did want to seek a further clarification. Would they have to be someone going to court who has standing and who has damages to mitigate, and what does that mean for the process?

Speaker 3: 6:21

They absolutely would, because you can't sue in federal court unless you have standing and damages.

Speaker 3: 6:27

And so this adds, you know, and you have to have certain levels of damages and certain levels of amounts and controversy at issue in order to sue in federal courts.

Speaker 3: 6:37

So it means a lot more time, energy, effort to get many of these things worked through and in many ways it just adds an entire additional level of difficulty to the process, and that's many. Much of the reason why we had the Chevron case was this idea that it was going to aid in federal governance, and I mean that really was the principle that it stood for. So the entire basis of Chevron was this thing called the Administrative Procedures Act and it set out a whole bunch of rules and regulations around how we make rules and regulations, quite frankly. And so it wasn't that the federal agencies could just sort of willy-nilly create additional rules. It said the federal agencies have to go through a process and if they've gone through that process, that's how you get difference. So now this is sort of undoing that regime and while it does sort of enhance balance of powers, it makes governance in some ways more difficult as well.

Speaker 1: 7:36

Well, yeah, I mean, let's go outside of healthcare and use the IRS as an example. A lot of us are used to especially those of us who used to practice on pensions and that kind of stuff are used to the IRS having letters and determinations of different kinds, some of which went by nature further than others, but they came from the IRS helping to define terms and conditions and whatnot. What happens now and I guess maybe more to the point, does the process get even slower than it's usually been?

Speaker 3: 8:08

Well, it may. It may because it makes it easier to challenge the acts of the regulatory agencies. And you know, we already have a lot of regulation being challenged in courts, even without the elimination of the Chevron case or really overturning the Chevron case. So it was already the case that much of what was coming out through the regulatory process was leading to judicial challenge. So, you know, will we continue to see that trend? Absolutely? Will this, you know, accelerate that trend Absolutely?

Speaker 3: 8:41

Does this mean that the federal regulatory agencies have lost all of their power? No, Right, this only is the case where a federal law is ambiguous. Does this mean that suddenly the federal agencies don't have enforcement authority? No, an example that came up that we've been talking about at MCQ recently the requirement of mental health parity comparative analysis. That's something we do a lot of work around here on. That is a statutory requirement. In fact, we're still waiting for final regulations sort of laying out all of the rules there.

Speaker 3: 9:20

There's explicit statutory language requiring that Now the Department of Labor is required under the statute to enforce those rules and in fact Congress has been really grumpy with the DOL about how slow they have been to enforce those rules and in fact Congress has been really grumpy with the DOL about how slow they have been to enforce those rules. So it's important to remember in all of this that this doesn't mean that suddenly the agencies have no power. It just means that their regulatory authority is slowed down a bit. But the agencies are still very much here, very powerful. They still have enforcement authority. So it would be a mistake to think, oh, this case overturns certain pieces of this, and now the agencies, we can ignore them. That is not the case.

Speaker 1: 10:03

Are the agencies precluded in any way from providing guidance?

Speaker 3: 10:08

Absolutely not. In fact, that is. A huge part of their job is providing guidance and insight in this and as is enforcing the rules.

Speaker 1: 10:17

You mentioned that mental health parity was statutory and therefore maybe not as volatile in this kind of a circumstance that we're talking about today. What are some of the other things that agents and their clients deal with on a regular basis on the regulatory front and compliance front that are statutory?

Speaker 3: 10:35

Really most of what we do in the benefits world is statutory. In the benefits world is statutory. So you know, ERISA is a statute, so is the Consolidated Appropriations Act. Aca reporting is statutory. 125 of the tax rules are statutory. Fiduciary duties are set out in the statute. That comes from ERISA as well HIPAA statutory, COBRA statutory. So the regulations sort of add color to these rules. But most of what we do in our world comes from statutes. So that's really important. We say things are regulatory, but the regulations, you know, they give the detail, they sort of color, they color things in and they help us to know exactly how to do things, but they don't tell us what we have to do. It's the statutes that tell us what we have to do.

Speaker 1: 11:32

So a lot of people are. Even in the few short days between the time of the Supreme Court ruling last Friday and today, on Monday, when we're recording this, just a few days a lot of people in our business are freaking out Ill-advised or, you know, are there areas where freakouts are advised?

Speaker 3: 11:52

I tell people, including my teenagers, that freaking out is, but I think in this case it really is ill-advised. The rules are here to stay. Yes, there's going to be more court challenges, but court challenges are not new. We've been dealing with court challenges for a while. The wellness plan regulations were challenged in court. We are already seeing a lot of mental health parity be challenged in court. Obviously, the fiduciary world is blowing apart right now because of court challenges. All this means is more court cases, and that's nothing new here. So this is not. I think. So much of what we're used to is sensationalized now because of the media, and this is just another opportunity for the media to sensationalize something that, yes, affects us, but this is not going to be a major sea change. This is just going to make things take a little bit longer, be a little bit harder, but you know, we've seen things, we've done hard things before and this just means we have to face things one day at a time.

Speaker 1: 13:05

Well, I mean, I think a lot of the freak out, don't you, is coming from the different political factions that were aligned completely differently on this issue.

Speaker 3: 13:14

Much of everything is coming from political factions these days.

Speaker 1: 13:18

Well, that's true, that's true. I can't deny that. So let's go back to what advisors should do on a going forward basis. Obviously, you've been really clear with them that they shouldn't freak out, that they should tell their clients to just keep doing what they've been doing. What should they watch for on a going forward basis?

Speaker 3: 13:45

watch for making sure that your, your clients, are doing the right thing, putting putting their clients first right? Um and their clients are the participants and beneficiaries in this plans. Um, I always say um, go back to the exclusive benefit rules. Um, are you putting participants and beneficiaries first and doing the right thing by them? And that is all about making sure that you're following the rules, that you're acting exclusively in the best interest of participants and beneficiaries. And as long as you're doing that working through making sure that you are, you know, fulfilling those fiduciary duties, thinking about those participants you're going to end up doing the right thing and everything is going to be all right.

Speaker 1: 14:27

And now a word from our sponsor. This episode is sponsored by MZQ Consulting, a concierge compliance firm that excels at making the complex simple. Have you seen the news lately? Johnson Johnson is being sued because J&J's health plans failed to negotiate lower prices for prescription drugs. In the case of one drug, the plan paid $10,000 for a drug that regularly is available for under $80. Not only were the members of the benefits committee named personally, but their benefits advisor was also named in the suit.

Speaker 1: 15:04

And that, dear listeners, is why you need a top-flight compliance firm. Yes, MZQ handles all the usual compliance stuff, from ACA reporting and tracking to RAP documents, 5500s, mental health, NQTL and QTL analysis and a whole lot more, but the heat is being turned up on fiduciaries who don't act like it. In this environment, using an ERISA attorney-led compliance consulting firm is your best strategy, your clients too, and MZQ Consulting is where you should go For more information. Go to wwwmzqconsultingcom or email them today at engage at mzqconsultingcom. Now back to our conversation. Maybe you know, given the time between the ruling and today, this is not a totally fair question but, in your experience, if there are a couple of things that might be more likely than others to hit the courts based on this ruling. What do you think they might be? Or what do you think they might be, or what do you think they might be in?

Speaker 3: 16:09

We have a final rule of mental health parity expected probably this summer. That was going to get challenged in the courts. No matter what, it will still get challenged in the courts. In the courts, really, anything sort of new on the regulatory front, right? So things that cost money, where we see high dollar values as far as the penalties are concerned, we'll see that. So anything that's looked at as sort of overreach in the penalty front will be. There's some very, very high value ACA penalties and things Believe it or not, things like plan document distribution, sbcs, stuff like that. There are really really high penalties there, high penalties under HIPAA, stuff like that. So areas where you see statutory authority for high, high penalties and the regulators using that penalty authority and the regulations, I think we'll see some challenges there.

Speaker 1: 17:12

Will attorneys have to decide for their clients whether there's enough ambiguity to move forward with a lawsuit?

Speaker 3: 17:20

Yes, but they will always find ambiguity. That's what we are trained to do.

Speaker 1: 17:24

Bless you all. You know an interesting conversation about this decision and I know other firms and whatnot. There'll be enough until we get more flavor around where this is going.

Speaker 3: 17:54

So best efforts is a tricky thing, yes, but best efforts is not. I tried and I said that I tried. Best efforts is truly making your best efforts. It is forming a fiduciary committee, is meeting with that fiduciary committee and it is documenting that you met with that fiduciary committee. It is not saying I thought about it and that was my best effort.

Speaker 1: 18:27

Well, that's a part of and we'll have a separate podcast on that but that's a whole part of fiduciary responsibility that I don't think enough has been said about it. Maybe with all of these lawsuits like Johnson, johnson and some of the others, it's time to start talking about that and Johnson and some of the others it's time to start talking about that. But there's a whole administrative side that kind of gives you the best defense, being a good offense or vice versa, whatever that old saying is. But setting up a charter, having a committee meeting regularly documenting, et cetera, that's really important. Where do most employers stand on that? Is that something that has just been kind of deferred or not really thought about and should have been?

Speaker 3: 19:07

Very much so. So I've seen very, very little activity in a space where there's a very good opportunity to do a lot, and that concerns me. So I think that there is a real opportunity to really show that you are acting in the best interest of your participants and that you are doing the right thing as a plan fiduciary, and I've seen not really a disappointingly few of my clients actually take the steps. I feel like there's a lot of talk and not a lot of action in this space, and that worries me a lot.

Speaker 1: 19:38

That's what I lose sleep about at night In large measure because advisors are helping their employer groups focus on the the other side of that coin, which is the plan design and how to, how to save money and how to get best benefits to employees, and they're just doing that, but they don't have the structure set up to support the conversations and the structure around policies and procedures and stuff to do that, and so maybe that's a that's an area for advisors to start expanding their advice to clients, would you say.

Speaker 3: 20:10

Absolutely. You know, and I often tell people that you know, if you didn't document it, it didn't happen, and that really is true. If you can't prove it, it didn't happen.

Speaker 1: 20:24

Well, we'll, I'm sure, revisit this as time goes on and as we see how this all rolls out and what the actual effects are, but I'd like you to reiterate, as we close, what it is that advisors should be telling their clients to do today, because I think that's the most important takeaway today.

Speaker 3: 20:40

Yep, stay the course. Act in the best interest of your participants. Don't panic and enjoy the summer.

Speaker 1: 20:50

Jen Berman, CEO of AMZQ Consulting. Jennifer, thank you so much for sharing your expertise with the audience.

Speaker 3: 20:56

My pleasure, thank you.

Speaker 2: 20:59

Shout out to the crew at Grand River Agency for their awesome post-production. To the crew at Grand River Agency for their awesome post-production. This Shift Shapers podcast is copyrighted content and may not be reproduced in whole or in part without the express written permission of Shift Shapers Solutions LLC. Copyright 2024.