This is the Health Care Reform category of the Broad REach Benefits blog. At Broad Reach Benefits, we focus on employers that have between 30 and 500 benefit eligible employees. We’re employee benefit specialists, not a big box brokerage firm or payroll company with a sales force peddling policies.
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 […]
IRS Increases Health FSA Contribution Limit for 2020, Adjusts Other Benefit Limits
On November 6, 2019, the Internal Revenue Service (IRS) released Revenue Procedure 2019-44, which raises the health Flexible Spending Account (FSA) salary reduction contribution limit by $50 to $2,750 for plan years beginning in 2020. The Revenue Procedure also contains the cost-of-living adjustments that apply to dollar limitations in certain sections of the Internal Revenue Code.
Qualified Commuter Parking and Mass Transit Pass Monthly Limit Increase
For 2020, the monthly limits for qualified parking and mass transit are $270 each (up $5 from 2019).
Adoption Assistance Tax Credit Increase
For 2020, the credit allowed for adoption of a child is $14,300 (up $220 from 2019). The credit begins to phase out for taxpayers with modified adjusted gross income in excess of $214,520 (up $3,360 from 2019) and is completely phased out for taxpayers with modified adjusted gross income of $254,520 or more (up $3,360 from 2019).
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) Increase
For 2020, reimbursements under a QSEHRA cannot exceed $5,250 (single) / $10,600 (family), an increase of $100 (single) / $150 (family) from 2019.
Reminder: 2020 HSA Contribution Limits and HDHP Deductible and Out-of-Pocket Limits
Earlier this year, the IRS announced the inflation adjusted amounts for HSAs and high deductible health plans (HDHPs).
| 2020 (single/family) | 2019 (single/family) | |
| Annual HSA Contribution Limit | $3,550 / $7,100 | $3,500 / $7,000 |
| Minimum Annual HDHP Deductible | $1,400 / $2,800 | $1,350 / $2,700 |
| Maximum Out-of-Pocket for HDHP | $6,900 / $13,800 | $6,750 / $13,500 |
The ACA’s out-of-pocket limits for in-network essential health benefits have also increased for 2020. Note that all non-grandfathered group health plans must contain an embedded individual out-of-pocket limit within family coverage if the family out-of-pocket limit is above $8,150 (2020 plan years). Exceptions to the ACA’s out-of-pocket limit rule are also […]
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 […]
Departments Adopt Non-Enforcement Policy on Drug Manufacturer Coupons
Departments Adopt Non-Enforcement Policy on Drug Manufacturer Coupons
On August 26, 2019, the Departments of Labor (DOL), Health and Human Services (HHS), and Treasury released an FAQ that provides guidance to employers, plan sponsors and health insurance issuers regarding a recent HHS regulation that could be read to require group health plans to treat prescription drug manufacturers’ coupons as employee cost sharing for purposes of the ACA’s out-of-pocket limits, for plan years beginning in 2020. Currently, the ACA’s out-of-pocket limits for plan years beginning in 2019 are $7,900 individual / $15,800 family. The guidance in the FAQ is effective immediately, and provides that the Departments will not initiate enforcement action against a group health plan or issuer if the plan excludes the value of drug manufacturers’ coupons from the ACA’s annual limitation on cost sharing, even in circumstances in which there is no medically appropriate generic equivalent available.
The Departments have determined that HHS will address the interplay between manufacturers’ coupons and out-of-pocket limits in future guidance.
Overview
In its 2020 Notice of Benefit and Payment Parameters (2020 NBPP), HHS stated that drug manufacturers’ support to plan participants—in the form of discounts or coupons—“[is] not required to be counted” toward the cost-sharing limit of participants when a generic version is not available. Due to the strong negative inference in the rule (i.e., that coupons should count toward the participant’s out-of-pocket limit if a generic version is not available), the Departments received requests for clarification on whether group health plans and insurers are required to count the coupon or discount toward the annual cost-sharing with plan participants if a generic equivalent is not available.
If read to require a manufacturer’s coupon to count toward the out-of-pocket limit, the most significant […]
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 […]
IRS Expands HSA Preventive Care Safe Harbor to Include Chronic Conditions
On July 17, 2019, the Internal Revenue Service (IRS) released Notice 2019-45, which expands the definition of preventive care benefits that can be provided by a high deductible health plan (HDHP) to include certain chronic conditions. The guidance in the Notice may be relied uponimmediately. In general, most HDHP participants may establish and contribute to a health savings account (HSA), unless there is disqualifying coverage—such as having other medical benefits available besides preventive care before the minimum annual deductible is satisfied.
Overview
Under Section 223(c) of the Internal Revenue Code (Code), an HSA-qualified HDHP is not required to impose a deductible for certain preventive care services. This preventive care safe harbor includes services such as annual physicals, well-childcare, and immunizations. Notably, prior to the Notice, preventive care did not include any service to treat existing illnesses, injuries, or conditions. Likewise, drugs or medications were treated as preventive care only when taken by a person who has developed risk factors for a disease that has not yet manifested itself or has not yet become clinically apparent (i.e., the individual is asymptomatic) or when the drugs are taken to prevent the recurrence of a disease from which a person has recovered.
Ultimately, the goal of the preventive care safe harbor is to encourage HDHP participants to receive routine care with a lower cost barrier, which should lead to better health outcomes. By expanding the list of medical services that can be classified as preventive care, the IRS recognizes that cost barriers for care have resulted in some individuals with certain chronic conditions failing to seek care that would prevent exacerbation of their condition, which can lead to consequences such as amputation, blindness, heart attacks, and strokes that require considerably […]
Final Rule Released on Individual Coverage and Excepted Benefit HRAs
On June 13, 2019 the Department of Labor, the Department of Health and Human Services, and the Treasury Department (the “Departments”) released the final rule concerning health reimbursement arrangements (HRA) for individual market coverage and excepted health benefits. The rule, based on an executive order from President Trump in 2017, is intended to increase choice in plan options, which could lead to greater flexibility in choice and provide more affordable healthcare. The final rule impacts many different entities and individuals, including employers, health plan issuers, employees, plan sponsors, and those who purchase individual health plans. This rule is effective for plan years starting January 1, 2020. Background An HRA is an account-based health plan that allows employers to reimburse employees for medical care expenses. It is funded solely by employer contributions. Amounts reimbursable under an HRA are typically limited to a certain amount during a certain period (for example, $500 for expenses incurred during a calendar year). Under prior IRS rules issued as part of Affordable Care Act (ACA) implementation, HRAs offerings were limited to an extent. Under those rules, an employer may offer an HRA to employees only if the HRA is “integrated” with a qualifying group health plan. Under the new final rule, some of the restrictions have been eliminated, and the Departments have determined that other types HRAs can be integrated with individual market coverage and Medicare in a way that meets statutory requirements. Notably, under the final rule, an employer of any size could offer an Individual Coverage HRA that can be used to pay for Medicare (e.g., Parts B and D) and Medicare Supplement premiums, as well as other medical care expenses, without violating the Medicare Secondary Payer rules. […]
Get a Nasty Letter 226-J from the IRS? Enforcement for 2016 Pay Or Play Rules Begins
The Internal Revenue Service (IRS) began issuing enforcement letters related to employers’ compliance with the employer shared responsibility rules under the Affordable Care Act (ACA) for the 2016 calendar year. These letters, known as Letter 226-J, inform employers of their potential liability for an employer shared responsibility penalty, if any, for 2016.
The IRS only sends these letters to employers that are subject to the employer shared responsibility rules, known as applicable large employers (ALEs). The determination of whether an ALE may be liable for a penalty, and the amount of the proposed penalty in Letter 226-J, are based on information from Forms 1094-C and 1095-C filed by the ALE and the individual income tax returns filed by the ALE’s employees.
What You Need To Do
Employers that receive a Letter 226-J must respond to the letter, either agreeing with the proposed penalty or disagreeing with part or all of the proposed amount. The IRS provides an employer response form, Form 14764, for employers to use for this purpose. The IRS maintains a website on understanding Letter 226-J for employers who receive an enforcement letter.
Background
The ACA’s employer shared responsibility rules require ALEs to offer affordable, minimum value health coverage to their full-time employees or pay a penalty. These rules, also known as the “employer mandate” or “pay or play” rules, only apply to ALEs, which are employers with, on average, at least 50 full-time employees, including full-time equivalent employees, during the preceding calendar year.
The employer shared responsibility rules took effect for most ALEs beginning on Jan. 1, 2015. However, some ALEs may have had additional time to comply with these requirements. An ALE may be subject to a penalty only if one or more […]
District Court Judge in Texas Strikes Down the ACA – But Law Remains in Effect for Now
On Friday, December 14, a federal judge in Texas issued a partial ruling that strikes down the entire Affordable Care Act (ACA) as unconstitutional. The White House has stated that the law will remain in place, however, pending the appeal process. The case, Texas v. U.S., will be appealed to the U.S. Court of Appeals for the Fifth Circuit in New Orleans, and then likely to the U.S. Supreme Court.
The plaintiffs in Texas (a coalition of twenty states) argue that since the Tax Cuts and Jobs Act zeroed out the individual mandate penalty, it can no longer be considered a tax. Accordingly, because the U.S. Supreme Court upheld the ACA in 2012 by saying the individual mandate was a legitimate use of Congress’s taxing power, eliminating the tax penalty imposed by the mandate renders the individual mandate unconstitutional. Further, the individual mandate is not severable from the ACA in its entirety. Thus, the ACA should be found unconstitutional and struck down.
The court in Texas agreed, finding that the individual mandate can no longer be fairly read as an exercise of Congress’s Tax Power and is still impermissible under the Interstate Commerce Clause—meaning it is unconstitutional. Also, the court found the individual mandate is essential to and inseverable from the remainder of the ACA, which would include not only the patient protections (no annual limits, coverage of pre-existing conditions) but the premium tax credits, Medicaid expansion, and of course the employer mandate and ACA reporting.
Several states such as Massachusetts, New York and California have since intervened to defend the law. They argue that, if Congress wanted to repeal the law it would have done so. The Congressional record makes it clear Congress was voting only […]
IRS Extends Deadline for Furnishing Form 1095, Extends Good-Faith Transition Relief
The Internal Revenue Service (IRS) has released Notice 2018-94, extending the deadline for furnishing 2018 Forms 1095-B and 1095-C to individuals from January 31, 2019 to March 4, 2019, as well as penalty relief for good-faith reporting errors.
The due date for filing the forms with the IRS was not extended and remains February 28, 2019 (April 1, 2019 if filed electronically). Despite the repeal of the “individual mandate” beginning in 2019 as part of the Tax Cuts and Jobs Act, the ACA’s information reporting requirements remain in effect, as the IRS uses the reporting to administer the employer mandate and premium tax credit program. The IRS is studying whether and how the reporting requirements under section 6055 (relating to insurance companies and self-insured plans) should change, if at all, for future years.
The 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 2018 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 […]