Benefits Blog

CMS Extends Transition Relief for Non-Compliant Plans Through 2021

On January 31, 2020 the Centers for Medicare & Medicaid Services (CMS) announced a one-year extension to the transition policy (originally announced November 14, 2013 and extended six times since) for individual and small group health plans that allows issuers to continue policies that do not meet ACA standards.  The transition policy has been extended to policy years beginning on or before October 1, 2021, provided that all policies end by January 1, 2022.  This means individuals and small businesses may be able to keep their non-ACA compliant coverage through the end of 2021, depending on the policy year.  Carriers may have the option to implement policy years that are shorter than 12 months or allow early renewals with a January 1, 2021 start date in order to take full advantage of the extension.

Background

The Affordable Care Act (ACA) includes key reforms that create new coverage standards for health insurance policies. For example, the ACA imposes modified community rating standards and requires individual and small group policies to cover a comprehensive set of benefits.

Millions of Americans received notices in late 2013 informing them that their health insurance plans were being canceled because they did not comply with the ACA’s reforms. Responding to pressure from consumers and Congress, on Nov. 14, 2013, President Obama announced a transition relief policy for 2014 for non-grandfathered coverage in the small group and individual health insurance markets. If permitted by their states, the transition policy gives health insurance issuers the option of renewing current policies for current enrollees without adopting all of the ACA’s market reforms.

Transition Relief Policy

Under the original transitional policy, health insurance coverage in the individual or small group market that was renewed for a policy year starting […]

By |February 11th, 2020|Employee Benefits, Employee Benefits Adviser, Health Care Reform, Medical, Voluntary Benefits|Comments Off on CMS Extends Transition Relief for Non-Compliant Plans Through 2021

Legal Alert- Congress Repeals Unrelated Business Income Tax for Tax-Exempt Entities Offering Qualified Transportation Fringe Benefits

Congress Repeals Unrelated Business Income Tax for Tax-Exempt Entities Offering Qualified Transportation Fringe Benefits

As part of the Further Consolidated Appropriations Act, 2020 (the “Act”), Congress repealed Section 512(a)(7) of the Internal Revenue Code of 1986 (the “Code”). This Code section was added as part of the Tax Cuts and Jobs Act of 2017 (the “TCJA”) and resulted in an unrelated business income tax (UBIT) liability when a tax-exempt entity provides qualified transportation benefits to employees.  The repeal is effective retroactively to December 22, 2017, the date the TCJA was enacted. Tax-exempt entities who paid an UBIT on transportation benefits in the last two years should be able to obtain a refund.

About UBIT and Qualified Transportation Fringe Benefits 

The UBIT on qualified transportation fringe benefits only affected tax-exempt entities. UBIT generally applies to income that is not related to an entity’s exempt purpose, so it was unclear why Congress targeted expenses related to providing parking or transportation for employees.  Under the TCJA, tax-exempt entities offering qualified transportation fringe benefits to their employees were exposed to a 21% UBIT tax.  The tax applied regardless of whether the employer was providing the benefits or whether employees were paying pre-tax.

Qualified transportation benefits include transit passes, parking, and commuter highway vehicle rides. Notably, the amount of the UBIT was based on the qualified transportation benefit expenditures instead of the entity’s income. As a result, tax-exempt entities were experiencing larger UBIT bills, even though employees may have been paying for the benefits themselves via salary reduction.

What the Repeal Does

 Under the Act, the UBIT for tax-exempt entities who offered qualified transportation fringe benefits is retroactively repealed. This means that tax-exempt entities are no longer subject to UBIT on qualified transportation benefits and […]

By |January 20th, 2020|Compliance, Employee Benefits, Employee Benefits Adviser, Employee Communications, Health Care Reform, Human Resources, Medical, Voluntary Benefits|Comments Off on Legal Alert- Congress Repeals Unrelated Business Income Tax for Tax-Exempt Entities Offering Qualified Transportation Fringe Benefits

Congress Passes Spending Bill that Repeals Three Major ACA Taxes, Extends PCORI

Updated December 21 to reflect that the bill has been signed into law.

 On December 20, 2019, the House and Senate, with the final signature from President Trump, passed a bipartisan legislative package of spending bills to avoid a government shutdown.  This package of bills is collectively referred to as the Further Consolidated Appropriations Act, 2020 (the “Act”). The Act includes a permanent repeal of three Affordable Care Act (ACA) taxes: the tax on high-cost health plans (the so-called “Cadillac Tax”), the Health Insurance Tax (HIT tax), and the medical device tax. Overall, the repeal of these ACA taxes may result in at least $300 billion in lost revenue to the government; however, the bill brings relief to employers and consumers, who may have experienced tax payments, increased health premiums and other costs. The repeal of the HIT tax is effective as of January 1, 2021, and the medical device tax is repealed as of January 1, 2020. The Cadillac Tax was already delayed until 2022, and thus will never take effect. The Patient-Centered Outcomes Research Institute (PCORI) fee has also been extended to 2029 (i.e., it will apply to plan years ending on or before September 30, 2029). 

PCORI Fee Extension

The PCORI fee is now extended to plan years ending on or before September 30, 2029. PCORI fee extensions have been discussed frequently and have been included in previously introduced bills, such as the Protecting Access to Information for Effective and Necessary Treatment and Services Act (PATIENTS Act) that was approved by the House Ways and Means Committee in June 2019. The amount due per life covered under a policy will be adjusted annually, as it has been previously. Insurers of fully insured health […]

By |December 23rd, 2019|Employee Benefits, Employee Benefits Adviser, Employee Communications, Health Care Reform, Human Resources, Legislation, Medical, Wellness|Comments Off on Congress Passes Spending Bill that Repeals Three Major ACA Taxes, Extends PCORI

IRS Extends Deadline for Furnishing Form 1095-C, Extends Good-Faith Transition Relief

The Internal Revenue Service (IRS) has released Notice 2019-63, which extends the deadline for furnishing 2019 Forms 1095-B and 1095-C to individuals from January 31, 2020 to March 2, 2020.  The Notice also provides penalty relief for good-faith reporting errors and suspends the requirement to issue Form 1095-B to individuals, under certain conditions.

The due date for filing the forms with the IRS was not extended and remains February 28, 2020 (March 31, 2020 if filed electronically).

The draft instructions to Forms 1094-C and 1095-C allow employers to request a 30-day extension to furnish statements to individuals by sending a letter to the IRS with certain information, including the reason for delay. However, because the Notice’s extension of time to furnish the forms is as generous as the 30-day extension contained in the instructions, the IRS will not formally respond to requests for an extension of time to furnish 2019 Forms 1095-B or 1095-C to individuals.

Employers may still obtain an automatic 30-day extension for filing with the IRS by filing Form 8809 on or before the forms’ due date. An additional 30-day extension is available under certain hardship conditions. The Notice encourages employers who cannot meet the extended due dates to furnish and file as soon as possible and advises that the IRS will take such furnishing and filing into consideration when determining whether to abate penalties for reasonable cause.

Relief from Furnishing Form 1095-B to Individuals

Due to the individual mandate penalty being reduced to zero starting in 2019, an individual does not need the information on Form 1095-B in order to complete his or her federal tax return. Therefore, the IRS is granting penalty relief for employers who fail to furnish a Form […]

By |December 4th, 2019|Employee Benefits, Employee Communications, Human Resources, Legislation|Comments Off on IRS Extends Deadline for Furnishing Form 1095-C, Extends Good-Faith Transition Relief

IRS Releases Draft 2019 ACA Reporting Forms and Instructions

IRS Releases Draft 2019 ACA Reporting Forms and Instructions

 The IRS has released draft forms and instructions for the 2019 B-Series and C-Series reporting forms (Forms 1094-B, 1095-B, 1094-C and 1095-C) used by employers and coverage providers to report certain information to full-time employees and the Internal Revenue Service (IRS).

As background, the Affordable Care Act (ACA) added Sections 6055 and 6056 to the Internal Revenue Code. These sections require employers, plans, and health insurance issuers to report health coverage information to the IRS and to participants annually. Section 6055 reporting requirements apply to insurers, employers that sponsor self-insured group health plans, and other entities that provide minimum essential coverage (such as multiemployer plans). Section 6056 reporting requirements apply to “applicable large employers” or “ALEs” (generally, employers with 50 or more full-time employees) and require reporting of health care coverage provided to the employer’s full-time employees.

Reporting under Sections 6055 and 6056 involves two sets of forms:  the “B-Series” (Forms 1094-B and 1095-B); and the “C-Series” (Forms 1094-C and 1095-C).  Each includes a transmittal form (Form 1094-B or 1094-C), which serves as a cover page and provides aggregate information, and an individualized form (Form 1095-B or 1095-C) for each employee for whom the employer is required to report.

The forms for calendar year 2019 are due to employees by January 31, 2020. Forms are due to the IRS by February 28, 2020 if filing by paper and by March 31, 2020 if filing electronically.  The forms that must be filed and distributed depend on whether the employer is an ALE and the type of coverage provided. Employers filing 250 or more of a particular form are required to file with the IRS electronically. The following table summarizes the […]

By |November 15th, 2019|Health Care Reform, Medical, Private Health Care Exchange, Retired, Wellness|Comments Off on IRS Releases Draft 2019 ACA Reporting Forms and Instructions

IRS Releases Guidance for Employers Offering Individual Coverage HRAs

On September 27, the Internal Revenue Service (IRS) released proposed regulations on the application of the Affordable Care Act’s (ACA) employer shared responsibility provisions to a new type of Health Reimbursement Arrangement (HRA) available starting in 2020.  In June 2019, the Department of Labor, the Department of Health and Human Services, and the Treasury Department (the “Departments”) released a final rule concerning HRAs that can be integrated with individual market coverage or Medicare.  This new type of HRA is referred to as an Individual Coverage HRA, or ICHRA.  The rule, based on an executive order from President Trump in 2017, is intended to increase the usability of HRAs, to expand employers’ ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with non-group coverage.

The ICHRA rule is effective for plan years beginning on or after January 1, 2020.  The IRS has also proposed regulations to guide employers in determining whether their contribution to an employee’s ICHRA results in an “affordable” offer of coverage under the ACA.  Specifically, the proposed regulations will assist employers who offer ICHRAs in determining the “required employee contribution” for purposes of line 15 of Form 1095-C.  Employers may continue to use the W-2, Rate of Pay, or Federal Poverty Level safe harbors to determine whether their entry in line 15 results in an “affordable” offer of coverage.  (See Example on page 3.)

The proposed regulations are effective for periods after December 31, 2019.  Employers may continue to rely on them during any ICHRA plan year beginning within six months from the publication of any final regulations.

 Proposed Safe Harbors

 The proposed regulations offer safe harbors for applicable large employers (ALEs), which are those who employed […]

By |October 29th, 2019|Compliance, Employee Benefits, Employee Communications, Health Care Reform, Human Resources, Legislation, Voluntary Benefits|Comments Off on IRS Releases Guidance for Employers Offering Individual Coverage HRAs

IRS Issues Affordability Percentage Adjustment for 2020

The Internal Revenue Service (IRS) has released Rev. Proc. 2019-29, which contains the inflation adjusted amounts for 2020 used to determine whether employer-sponsored coverage is “affordable” for purposes of the Affordable Care Act’s (ACA) employer shared responsibility provisions and premium tax credit program. As shown in the table below, for plan years beginning in 2020, the affordability percentage for employer mandate purposes is indexed to 9.78%.  Employer shared responsibility payments are also indexed.

Code Section 4980H(a) 4980H(b) 36B(b)(3)(A)(i)
Description Coverage not offered to 95% (or all but 5) of full-time employees. Coverage offered, but unaffordable or is not minimum value. Premium credits and affordability safe harbors.
2020* $2,580 $3,870 9.78%
2019* $2,500 $3,750 9.86%
2018 $2,320 $3,480 9.56%
2017 $2,260 $3,390 9.69%
2016 $2,160 $3,240 9.66%
2015 $2,080 $3,120 9.56%
2014** $2,000 $3,000 9.50%

*Section 4980H(a) and (b) penalties for 2019 and 2020 are projected.

**No employer shared responsibility penalties were assessed for 2014.

Under the ACA, applicable large employers (ALEs) must offer affordable health insurance coverage to full-time employees. If the ALE does not offer affordable coverage, it may be subject to an employer shared responsibility payment. An ALE is […]

By |July 24th, 2019|Health Care Reform, Human Resources, Legislation, Medical, Uncategorized|Comments Off on IRS Issues Affordability Percentage Adjustment for 2020