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On Jan. 22, 2018, President Donald Trump signed into law a short-term continuing spending resolution to end the government shutdown and continue funding through Feb. 8, 2018. The continuing resolution impacts three taxes and fees under the Affordable Care Act (ACA).

Specifically, the continuing resolution:

• Delays implementation of the Cadillac tax on high-cost group health coverage until 2022;
• Provides an additional one-year moratorium on the health insurance providers fee for 2019 (although the fee continues to apply for 2018); and
• Extends the moratorium on the medical device excise tax for an additional two years, through 2019.

Employers should be aware of the evolving applicability of existing ACA taxes and fees so that they know how the ACA affects their bottom lines. Broad Reach Benefits, Inc will continue to keep you informed of changes.

Cadillac Tax Delayed

The ACA imposes a 40 percent excise tax on high-cost group health coverage, also known as the “Cadillac tax.” This provision taxes the amount, if any, by which the monthly cost of an employee’s applicable employer-sponsored health coverage exceeds the annual limitation (called the employee’s excess benefit). The tax amount for each employee’s coverage will be calculated by the employer and paid by the coverage provider who provided the coverage.

Although originally intended to take effect in 2013, the Cadillac tax was immediately delayed until 2018 following the ACA’s enactment. A federal budget bill enacted for 2016 further delayed implementation of this tax until 2020, and also:

•      Removed a provision prohibiting the Cadillac tax from being deducted as a business expense; and
•      Required a study to be conducted on the age and gender adjustment to the annual limit.

The continuing resolution …

The Internal Revenue Service (IRS), on Dec. 22, 2017, issued Notice 2018-06 to:

• Extend the due date for furnishing forms under Sections 6055 and 6056 for 2017 for 30 days, from Jan. 31, 2018, to March 2, 2018; and
• Extend good-faith transition relief from penalties related to 2017 information reporting under Sections 6055 and 6056.

Notice 2018-06 does not extend the due date for filing forms with the IRS for 2017. The due date for filing with the IRS under Sections 6055 and 6056 remains Feb. 28, 2018 (April 2, 2018, if filing electronically).

Action Steps

The IRS is encouraging reporting entities to furnish statements as soon as they are able. No request or other documentation is required to take advantage of the extended deadline.

Section 6055 and 6056 Reporting

Sections 6055 and 6056 were added to the Internal Revenue Code (Code) by the Affordable Care Act (ACA).

• Section 6055 applies to providers of minimum essential coverage (MEC), such as health insurance issuers and employers with self-insured health plans. These entities will generally use Forms 1094-B and 1095-B to report information about the coverage they provided during the previous year.
• Section 6056 applies to applicable large employers (ALEs)­­—generally, those employers with 50 or more full-time employees, including full-time equivalents, in the previous year. ALEs will use Forms 1094-C and 1095-C to report information relating to the health coverage that they offer (or do not offer) to their full-time employees.

Extended Furnishing Deadline

…

The U.S. Supreme Court issued a decision on June 5. 2017 holding that an employee benefit plan may be exempt from the Employee Retirement Income Security Act (ERISA) as a “church plan” even if a church did not establish it. The court held that the ERISA exemption for church plans applies to certain organizations that are affiliated with churches, regardless of how their benefit plans were established.

Because this is consistent with how federal agencies currently interpret and enforce ERISA, the ruling does not change any obligations for most employers. The decision does, however, settle and resolve a recent wave of litigation involving employers with religious affiliations, such as hospitals.

Action Steps

Employers with church affiliations should be aware of the specific criteria an employee benefit plan must meet to qualify for ERISA’s church-plan exemption. All employers that sponsor employee benefit plans should ensure that their plans either meet the criteria for an ERISA exemption or comply with all applicable ERISA requirements.  …

If you work in human resources the following scenario should sound familiar: An employee wanders in and starts to complain bitterly that they can no longer afford the medical or dental coverage they signed up for and demand you let them drop the coverage immediately (midyear).  Good luck explaining that it’s not you who won’t let them drop their coverage.  It’s those pesky rules in place within the IRS Section 125 plan you have in place.

Internal Revenue Code Section 125 cafeteria plans state that participant elections must be made before the first day of the plan year or the date taxable benefits would currently be available, whichever comes first. These elections are generally irrevocable until the beginning of the next plan year. This means that participants cannot make changes to their cafeteria plan elections during a plan year just because they no longer want the coverage.

IRS regulations do permit employers to design their cafeteria plans to allow employees to change their elections during the plan year if certain conditions are met. The IRS clearly lists permitted or qualifying events that allow participants to change his or her election midyear as long as the change is consistent with the event.  Some examples are an employee has a spouse who loses or gains employment, birth of a child, marriage and divorce.  Also, the IRS did expand the midyear election change rules in response to certain Affordable Care Act (ACA) provisions.

Download our Compliance Overview Brief, Cafeteria Plans: Midyear Election Changes, for all the details on permitted election changes:

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