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ACA Information Reporting Penalties Increased for Returns Filed in 2025

 

IRS Revenue Procedure 2023-34 includes updated penalty amounts that may apply to reporting entities that fail to comply with the Affordable Care Act’s (ACA) requirements under Internal Revenue Code Sections 6055 and 6056. The increased amounts apply to 2024 information returns and individual statements that are required to be filed and furnished in 2025.

General Reporting Penalties

A reporting entity that fails to comply with the Section 6055 and Section 6056 reporting requirements may be subject to the general reporting penalties for:

  • Failure to file correct information returns (under Code Section 6721); and
  • Failure to furnish correct payee statements (under Code Section 6722).

However, penalties may be waived if the failure is due to reasonable cause and not willful neglect. Penalties may also be reduced if the reporting entity corrects the failure within a certain period of time (see below).

Adjusted Penalty Amounts

For 2024 information returns and individual statements that are filed and furnished in 2025, the adjusted penalty amounts are as follows:

  1. The penalty for failure to file an information return or provide an individual statement is $330 per return or statement (increased from $310);
  2. The penalty for returns that are corrected within 30 days after the due date, or statements corrected within 30 days after the required furnishing date, remains at $60 per return or statement;
  3. For returns or statements corrected after 30 days but before Aug. 1, 2025, the penalty is $130 per return or statement (up from $120); and
  4. The penalty for failing to file a correct information return or provide a statement due to intentional disregard is $660 (up from $630). In some cases, this penalty may be larger, as the penalty is equal to the greater of either the applicable amount or …
By |April 8th, 2024|Affordable Care Act, Compliance, IRS, Legislation|Comments Off on ACA Information Reporting Penalties Increased for Returns Filed in 2025
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Medicare Part D Changes May Impact Creditable Coverage Status of Employer Plans

The Inflation Reduction Act of 2022 (IRA) includes several cost-reduction provisions affecting Medicare Part D plans, which may impact the creditable coverage status of employer-sponsored prescription drug coverage beginning in 2025.

Employers that provide prescription drug coverage to individuals who are eligible for Medicare Part D must inform these individuals and the Centers for Medicare and Medicaid Services (CMS) whether their prescription drug coverage is creditable, meaning that the employer’s prescription drug coverage is at least as good as Medicare Part D coverage.

CMS’ Draft Part D Redesign Program Instructions state that given the significant changes that the IRA made to Medicare Part D, one of the methods for determining whether employer-sponsored prescription drug coverage is creditable will no longer be valid as of calendar year 2025. These draft program instructions are subject to change, and CMS will issue final program instructions for 2025 after considering the public comments received in response to the draft program instructions.

Creditable Coverage Determination

A group health plan’s prescription drug coverage is considered creditable if its actuarial value equals or exceeds the actuarial value of standard Medicare Part D prescription drug coverage, as demonstrated through the use of generally accepted actuarial principles and in accordance with CMS guidelines. In general, this actuarial determination measures whether the expected amount of paid claims under the group health plan’s prescription drug coverage is at least as much as the expected amount of paid claims under the Medicare Part D prescription drug benefit. For plans that have multiple benefit options (for example, PPOs, HDHPs and HMOs), the creditable coverage test must be applied separately for each benefit option.

Under existing CMS guidance, there are a few different ways for an employer to determine whether its …

By |March 26th, 2024|Compliance, Employee Benefits, Employee Benefits Adviser, Employee Communications, Health Care Reform, Medical, U.S. Department of Labor|Comments Off on Medicare Part D Changes May Impact Creditable Coverage Status of Employer Plans
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HHS Encourages Urgent Review of HIPAA Compliance Following Health Care Cyberattack

The U.S. Department of Health and Human Services (HHS) recently issued a letter addressing the cybersecurity incident impacting Change Healthcare, a unit of UnitedHealth Group. Given the “unprecedented magnitude” of this cyberattack, HHS’ Office for Civil Rights (OCR) is investigating whether these entities comply with the HIPAA Privacy, Security and Breach Notification Rules (HIPAA Rules), including whether a breach of protected health information (PHI) occurred.

OCR is also encouraging HIPAA-covered entities (e.g., health plans, health insurance issuers and health care providers) and their business associates to review their cybersecurity measures “with urgency” to ensure that health information is protected.

While many employers do not have access to PHI from their health plans, employers that use third-party vendors, such as third-party administrators (TPAs) and pharmacy benefit managers (PBMs), should investigate and verify these vendors’ cybersecurity measures during the selection process. Employers should also ensure they have business associate agreements in place that include adequate security protections for electronic PHI.

Health Care Cyberattacks

On Feb. 21, 2024, Change Healthcare, one of the largest platforms for managing health insurance billing and payments in the United States, experienced a large-scale cyberattack. This attack affected millions of health care providers and patients across the country. Cybersecurity experts have deemed the incident one of the most disruptive attacks in history.

According to OCR, ransomware and hacking are the primary cyberthreats in health care. Over the past five years, there has been a 256% increase in large breaches reported to OCR involving hacking and a 264% increase in ransomware. In 2023, hacking accounted for 79% of the large breaches reported to OCR.

Compliance Resources

Safeguarding PHI is a top priority for OCR. To help covered entities and business associates protect their systems from cyberattacks, OCR …

By |March 25th, 2024|Compliance, Employee Benefits, Employee Benefits Adviser, Human Resources, Legislation|Comments Off on HHS Encourages Urgent Review of HIPAA Compliance Following Health Care Cyberattack
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IRS Warning: HSAs, Health FSAs and HRAs Cannot Pay for Personal Health and Wellness Expenses

The IRS recently issued a bulletin to remind taxpayers that tax-advantaged medical savings accounts, such as health flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs), cannot pay for personal expenses for general health and wellness. Similarly, health savings accounts (HSAs) cannot be used to pay for these personal expenses on a tax-free basis.

The IRS provided this reminder as a warning to taxpayers to beware of companies’ misrepresentation of when personal health expenses can be reimbursed by health FSAs, HRAs and HSAs.

Qualified Medical Expenses

Health FSAs, HRAs and HSAs can be used to pay out-of-pocket costs for qualified medical expenses that are not covered by a health plan. Qualified medical expenses must be incurred primarily to alleviate or prevent a physical or mental defect or illness. These expenses include payments for medical services rendered by physicians, surgeons, dentists and other practitioners. They include the costs of equipment, supplies and diagnostic devices needed for these purposes. They also include the costs of medicines and drugs prescribed by a physician. However, expenses that are merely beneficial to general health are not qualified medical expenses.

Nutrition, Wellness and General Health Expenses

The IRS maintains a set of FAQs addressing when costs related to nutrition, wellness and general health are qualified medical expenses. These FAQs clarify that these costs are qualified medical expenses only in narrow circumstances. For example:

  • The cost of nutritional counseling or a weight-loss program is a qualified medical expense only if it treats a specific disease diagnosed by a physician (such as obesity or diabetes).
  • The cost of nutritional supplements is a qualified medical expense only if the supplements are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician.

    • …

By |March 10th, 2024|Employee Communications, IRS|Comments Off on IRS Warning: HSAs, Health FSAs and HRAs Cannot Pay for Personal Health and Wellness Expenses
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Employers Must File ACA Returns Electronically by April 1, 2024

The Affordable Care Act (ACA) created reporting requirements under Internal Revenue Code (Code) Sections 6055 and 6056. Under these rules, certain employers must provide information to the IRS about the health plan coverage they offer (or do not offer) to their employees.

Under the original rules, any reporting entity that was required to file at least 250 individual statements under Sections 6055 or 6056 had to file electronically. However, on Feb. 23, 2023, the IRS released a final rule implementing a law change by the Taxpayer First Act of 2019, which lowers the 250-return threshold for mandatory electronic reporting to 10 returns. This means most reporting entities will be required to complete their ACA reporting electronically starting in 2024.

This ACA Compliance Bulletin describes the process for reporting electronically under Sections 6055 and 6056.

Action Steps

Employers that have not requested an extension or an electronic filing waiver, and that are subject to the ACA reporting rules should be exploring options for filing ACA reporting returns electronically to ensure filing is completed by the April 1, 2024, deadline. For example, they may be able to work with a third-party vendor to complete the electronic filing.

Reporting entities that may be in a position to perform their own electronic reporting can review the IRS’ ACA Information Returns (AIR) Program main page for more information on the reporting standards for composing and successfully transmitting compliant submissions to the IRS.

The IRS has designated the AIR Help Desk as the first point of contact for electronic filing issues (1-866-937-4130).

Electronic Reporting Requirement

In prior years, any reporting entity that was required to file at least 250 individual statements under Sections 6055 or 6056 had to file electronically, and this requirement applied separately to each …

By |March 5th, 2024|Affordable Care Act, Compliance, Health Care Reform, IRS|Comments Off on Employers Must File ACA Returns Electronically by April 1, 2024
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Fair Employment – Equal Pay Laws For New Jersey

The federal Equal Pay Act (EPA) requires that men and women receive equal pay for equal work in the same establishment. In addition to the federal EPA, many states, including New Jersey, have enacted their own equal pay laws prohibiting wage discrimination based on gender and other characteristics.

This Employment Law Summary provides an overview of New Jersey’s Diane B. Allen Equal Pay Act (NJEPA), which prohibits certain pay differentials between men and women, and the Law Against Discrimination (LAD), which was amended by the NJEPA to expand protections against unequal pay based on various protected traits.

COVERED EMPLOYERS

The NJEPA applies to virtually all employers in the state, other than nonprofit hospital associations or corporations, and generally protects all employees, both male and female. However, it does not protect volunteers providing service for a nonprofit organization, farm workers, or domestic servants in a private home or hotel.

The LAD is a broader anti-discrimination law that prohibits a variety of entities, including all employers with one or more employees in the state (other than employers of domestic servants), from discriminating in compensation or against employees or job applicants based on any of several characteristics.

PROHIBITED PAY PRACTICES

The NJEPA prohibits employers from discriminating in any way in the rate or method of payment of wages to any employee based on sex. In addition, the LAD prohibits employers from discriminating against employees or applicants in compensation or the terms, conditions or privileges of employment based on any of the following, which are known as protected traits:

  • Race (including “traits historically associated with race,” such as hair texture, hair type and protective hairstyles);
  • Color;
  • Age (18+);
  • Sex (including pregnancy or breastfeeding);
  • Affectional or sexual orientation;
  • Gender identity or expression;
  • Creed/religion;
  • Marital status;

    • …

By |March 3rd, 2024|Broad Reach Benefits, Disability, Employee Benefits, Employee Communications, Human Resources, Legislation, U.S. Department of Labor|Comments Off on Fair Employment – Equal Pay Laws For New Jersey
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Legal Alert- Judge Delays Effective Date of NLRB’s New Joint-employer Standard to March 11

On Feb. 22, 2024, a federal judge in the U.S. District Court for the Eastern District of Texas delayed the implementation of a National Labor Relations Board (NLRB) new joint-employer rule to Mar. 11, 2024. The NLRB’s joint-employer rule had been set to take effect on Feb. 26, 2024.

The New Joint-employer Standard

The 2023 joint-employer standard establishes new criteria for determining joint-employer status as applied to labor issues related to the National Labor Relations Act. It will rescind the existing 2020 joint-employer standard and replace it with a more inclusive law, making it easier for employers to be classified as joint employers. Notable changes to the joint-employer standard include the following:

  • A clarification of the definition of “essential terms and conditions of employment;”
  • An identification of the types of control that are necessary to establish joint-employer status and the types that are irrelevant to the joint-employer inquiry; and
  • A description of the bargaining obligations of joint employers.

The existing rule requires joint employers to “possess and exercise … substantial direct and immediate control” over one or more essential terms and conditions of employment. The new rule will require only that joint employers have the authority to control one or more essential terms and conditions of employment, regardless of whether such control is exercised or whether such control is direct or indirect.  This more inclusive rule may result in more employers—particularly contractors and subcontractors—being reclassified as joint employers by the rule’s effective date.

Terms and Conditions of Employment

The 2023 rule limits essential terms and conditions of employment to:

  1. Wages, benefits and other compensation;
  2. Hours of work and scheduling;
  3. The assignment of duties to be performed;
  4. The supervision of the performance of duties;
  5. Work rules and directions governing the manner, …
By |February 25th, 2024|Uncategorized|Comments Off on Legal Alert- Judge Delays Effective Date of NLRB’s New Joint-employer Standard to March 11
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Legal Alert- DOL Releases Audit Results of ERISA Enforcement During 2023

The U.S. Department of Labor (DOL) has released the results of its Employee Benefits Security Administration’s (EBSA) enforcement actions during fiscal year (FY) 2023.

Through its enforcement of the Employee Retirement Income Security Act (ERISA), the EBSA oversees approximately 2.8 million health plans, 765,00 private pension plans, and 619,000 other welfare benefit plans. According to the audit, these plans cover 153 million workers, retirees and dependents.

Enforcement Statistics

In FY 2023, EBSA recovered over 1.4 billion dollars for plans, participants and beneficiaries. Other key EBSA enforcement results include the following:

  • EBSA closed 731 civil investigations. Of these, 69% resulted in monetary results for plans or other corrective actions;
  • EBSA referred 50 cases for civil litigation and closed 196 criminal investigations; and
  • EBSA’s criminal investigations led to the indictment of 60 individuals—including plan officials, corporate officers and service providers—for offenses related to employee benefit plans.

Compliance Assistance Statistics

The DOL audit fact sheet also includes statistics for the EBSA’s compliance assistance programs, the Voluntary Fiduciary Correction Program (VFCP) and the Delinquent Filer Voluntary Compliance Program (DFVCP).

The VFCP allows plan officials who have identified specified ERISA violations to take corrective action to remedy the breaches and voluntarily report the violations to EBSA without becoming the subject of an enforcement action. In FY 2023, EBSA received 1,192 applications through the VFCP.

The DFVCP encourages plan administrators to bring their plans into compliance with ERISA’s filing requirements. EBSA received 18,955 annual reports through this program in FY 2023, and the EFAST2 Help Desk handled over 16,000 inquiries to help filers meet their reporting obligations.

Enforcement Resources

The EBSA has a dedicated enforcement webpage, which includes outlines of ERISA civil violations and criminal provisions, as well as enforcement accomplishments and national enforcement priorities and projects. There …

By |February 14th, 2024|Compliance, Legislation|Comments Off on Legal Alert- DOL Releases Audit Results of ERISA Enforcement During 2023
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IRS Releases ACA Pay-or-Play Penalties for 2025

On Feb. 12, 2024, the IRS released updated penalty amounts for 2025 related to the employer shared responsibility (pay-or-play) rules under the Affordable Care Act (ACA). For calendar year 2025, the adjusted $2,000 penalty amount is $2,900, and the adjusted $3,000 penalty amount is $4,350. This is a decrease from the penalty amounts for the 2024 calendar year, which are $2,970 and $4,460, respectively.

Pay-or-Play Penalty Calculations

Under the pay-or-play rules, an applicable large employer (ALE) is only liable for a penalty if at least one full-time employee receives a subsidy for Exchange coverage. Employees who are offered affordable, minimum-value (MV) coverage are generally not eligible for these Exchange subsidies.

Depending on the circumstances, one of two penalties may apply under the pay-or-play rules: the 4980H(a) penalty or the 4980H(b) penalty.

  • Under Section 4980H(a), an ALE will be subject to a penalty if it does not offer coverage to “substantially all” (generally, at least 95%) of its full-time employees (and dependents) and any one of its full-time employees receives a subsidy toward their Exchange plan. The monthly penalty assessed on ALEs that do not offer coverage to substantially all full-time employees and their dependents is equal to the ALE’s number of full-time employees (minus 30) multiplied by 1/12 of $2,000 (as adjusted) for any applicable month.

 

  • Under Section 4980H(b), ALEs that offer coverage to substantially all full-time employees (and dependents) may still be subject to a penalty if at least one full-time employee obtains a subsidy through an Exchange because the ALE did not offer coverage to all full-time employees, or the ALE’s coverage is unaffordable or does not provide MV. The monthly penalty assessed on an ALE for each full-time employee who receives a subsidy is …
By |February 13th, 2024|Broad Reach Benefits, Compliance, Human Resources, IRS|Comments Off on IRS Releases ACA Pay-or-Play Penalties for 2025
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Legal Alert- Medicare Part D Disclosures due by Feb. 29, 2024 for Calendar Year Plans

Each year, group health plan sponsors are required to complete an online disclosure form with the Centers for Medicare & Medicaid Services (CMS), indicating whether the plan’s prescription drug coverage is creditable or non-creditable. This disclosure requirement applies when an employer-sponsored group health plan provides prescription drug coverage to individuals who are eligible for coverage under Medicare Part D.

CMS Disclosure Deadline

The plan sponsor must complete the online disclosure within 60 days after the beginning of the plan year. For calendar year health plans, the deadline for the annual online disclosure is Feb. 29, 2024 (since 2024 is a leap year).

In addition to the annual disclosure requirement, the disclosure to CMS must be made whenever any change occurs that affects whether the coverage is creditable. More specifically, within 30 days after any change in the plan’s creditable coverage status or after the termination of a plan’s prescription drug coverage.

Online Disclosure Method

Plan sponsors are required to use the online disclosure form on the CMS creditable coverage website. This is the sole method for compliance with the disclosure requirement unless the entity does not have internet access.

The disclosure form lists the required data fields that must be completed in order to generate the disclosure notice to CMS, such as types of coverage, number of options offered, creditable coverage status, period covered by the disclosure notice, number of Part D-eligible individuals covered, date the creditable coverage disclosure notice is provided to Part D-eligible individuals, and change in creditable coverage status.

CMS has also provided guidance and instructions on how to complete the form.

Action Steps

To determine whether the CMS reporting requirement …

By |February 5th, 2024|Compliance, Employee Benefits, Employee Benefits Adviser, Medical|Comments Off on Legal Alert- Medicare Part D Disclosures due by Feb. 29, 2024 for Calendar Year Plans
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