February 2024 Compliance Recap - Bim Group

February 2024 Compliance Recap


February saw a potential industry-changing lawsuit against Johnson & Johnson and its plan fiduciaries asserting a breach of fiduciary duties and mismanagement of Johnson & Johnson’s prescription drug benefits program, costing its ERISA plans and employees millions of dollars in the form of higher payments for prescription drugs, as well as higher premiums, deductibles, coinsurance, and copays, resulting in lower wages or limited wage growth. Instructions for this June’s RxDC reporting have been updated, moving certain data from vendor aggregating into plan sponsor responsibility. The 2025 Employer Shared Responsibility indexed penalties have been released.


In early February, a federal class action lawsuit was filed against Johnson & Johnson (JNJ) and its plan fiduciaries, alleging overpayment for prescription drugs within its prescription drug plan. The complaint alleges that under the Employee Retirement Income Security Act of 1974 (ERISA), JNJ’s plan fiduciaries are obligated to diligently compare service providers, seek cost-effective options, and monitor expenses. It is claimed that the plan fiduciaries failed to act prudently by agreeing to terms with a pharmacy benefit manager (PBM) that resulted in excessive costs for numerous drugs compared to other market options.

The lawsuit highlights the importance of transparency in facilitating comparisons between prescription drug prices across different plans or pharmacies and underscored significant risks faced by health and welfare plan fiduciaries. Publicly available information on drug prices enables individuals – including class action plaintiff attorneys – to scrutinize plan expenses, further emphasizing the need for prudent fiduciary actions.


Given the evolving landscape and heightened litigation risks, health plan fiduciaries should take proactive steps to mitigate litigation exposure and safeguard the interests of plan participants:

  • Establish a fiduciary committee dedicated to health and welfare benefits and delegate responsibilities accordingly.
  • Engage qualified consultants to assess PBMs and prescription drug arrangements, ensuring impartiality.
  • Review and negotiate terms of PBM agreements, fee structures, and formularies to ensure reasonability.
  • Collect and analyze benchmark information from various sources to evaluate vendor agreements.
  • Scrutinize compensation arrangements for reasonability and conflicts of interest.
  • Periodically solicit proposals from PBMs and vendors to reassess market competitiveness.
  • Document all policies, procedures, and decisions regarding vendor selection and performance monitoring to demonstrate procedural prudence.

The No Surprises Act, as part of the Consolidated Appropriations Act, 2021 (CAA), requires employer-sponsored health plans to comply with annual prescription drug data collection (RxDC) reporting to provide transparency in prescription drug and health care spending. Data is reported to the U.S. Department of Labor (DOL), the Department of the Treasury (Treasury), and the Department of Health and Human Services (HHS) to monitor spending trends and facilitate regulatory control measures.

The reporting deadline for the 2023 reference year data is June 1, 2024. The Centers for Medicare & Medicaid Services (CMS) has issued revised instructions and templates for RxDC reporting. The instructions are mostly consistent with prior years; however, one significant change is the new enforcement of the “aggregation restriction” beginning with the 2023 reference year. The restrictions will limit the ability of plan sponsors to have their vendors report certain data on their behalf.

Additional changes in the instructions for the 2023 reference year reporting include prescription exclusions and simplified calculations.

Failure to comply with RxDC reporting requirements may result in penalties under Internal Revenue Code Section 4980D of $100 per day.

  • Ensure timely completion of the RxDC reporting for calendar year 2023 by June 1, 2024.
  • Confirm filing status with insurance carriers for fully insured plans or follow up with third party administrators (TPAs), pharmacy benefit managers (PBMs), or administrative services only providers (ASOs) for self-insured plans.
  • Provide necessary information requested by relevant parties for reporting.
  • Determine whether data should be reported on a plan level or aggregated basis.
  • Consider requesting pharmacy data reporting on a plan level basis to access detailed pharmacy benefit spend information.

** Please refer to our recent email regarding the carriers’ approach to this topic and how Bim Group is supporting our clients.


The IRS has released the 2025 employer shared responsibility payments under the Affordable Care Act (ACA). Applicable large employers (ALEs) may face penalties for failing to provide minimum essential coverage to 95% of full-time employees, or for offering coverage that is not affordable or does not meet minimum value. The adjusted penalty amounts for 2025 will be $2,900 per full-time employee for Penalty “A” (a $70 decrease from 2024) and $4,350 per full-time employee for Penalty “B” (a $110 decrease from 2024).


To avoid penalties, ALEs should consistently ensure full-time employees receive minimum essential coverage that meets affordability and minimum value standards. The IRS uses Letter 226-J to notify ALEs of potential penalties, with a response form included for ALEs to address proposed penalties. Employers and advisors should remain vigilant for this letter to promptly review and respond accordingly.


This information is general in nature and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.

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