Benefits Blog

Legal Alert: IRS Updates Employer Mandate FAQs: Indicates that Penalty Letters are Imminent

The Internal Revenue Service (IRS) has updated its list of frequently asked questions (FAQs) on the Affordable Care Act’s employer shared responsibility provisions – also known as the “pay or play” mandate. In particular, questions 55 through 58 provide guidance for employers who may be subject to shared responsibility payments.   The FAQs indicate that the IRS will begin sending penalty letters to applicable large employers (ALEs) that owe penalties for calendar year 2015 “in late 2017.” Around this time last year, the IRS had indicated that penalty letters for 2015 would be coming “in early 2017;” however, those letters never materialized.   Based on the latest update to its FAQs, it appears that the IRS has worked out the kinks in its systems and is prepared to begin sending penalty letters.

Background

Starting in 2015, the ACA requires ALEs to either “play” by offering affordable health coverage to their full-time employees, or “pay” a penalty if the employer fails to provide affordable health coverage and at least one full-time employee receives a premium tax credit to help purchase coverage through the Health Insurance Marketplace. ALEs are generally those with 50 or more full-time employees, including full-time equivalent employees. Transitional relief was available for 2015 (and, for non-calendar year plans, any portion of the 2015 plan year that fell in 2016) for ALEs with fewer than 100 full-time employees that satisfied the conditions of such transitional relief.

In general, there are two potential penalties (both non-deductible for tax purposes) that could be imposed on an ALE for failure to satisfy the mandate. The first penalty, known as the “no coverage” penalty, is based on whether an ALE fails to offer group health plan coverage to […]

By |November 7th, 2017|Compliance, Employee Benefits, Human Resources, Legislation, Medical, Uncategorized|Comments Off on Legal Alert: IRS Updates Employer Mandate FAQs: Indicates that Penalty Letters are Imminent
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IRS Increases Health FSA Contribution Limit for 2018, Adjusts Other Benefit Limits

On October 20, 2017, the Internal Revenue Service (IRS) released Revenue Procedure 2017-58, which raises the health Flexible Spending Account (FSA) salary reduction contribution limit by $50 to $2,650 for plan years beginning in 2018. The Revenue Procedure also contains the cost-of-living adjustments that apply to dollar limitations in certain sections of the Internal Revenue Code.   The following summarizes other adjustments relevant to individuals and employer sponsors of welfare and fringe benefit plans.

Qualified Commuter Parking and Mass Transit Pass Monthly Limit Increase

For 2018, the monthly limitation for the qualified transportation fringe benefit is $260, as is the monthly limitation for qualified parking (in both cases, a $5 increase from the 2017 limit).

Small Employer Health Insurance Tax Credit Average Annual Wage Limit Increase

For 2018, the maximum average annual wages of employees used for determining who is an eligible small employer for purposes of the credit is $53,400 (a $1,000 increase from the 2017 threshold). The average annual wage level at which the tax credit begins to phase out for eligible small employers is $26,700 (a $500 increase from the 2017 threshold).

Adoption Assistance Tax Credit Increase

For 2018, the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs is $13,840 (a $270 increase from the 2017 limit). The maximum amount that can be excluded from an employee’s gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $13,840 (a $270 increase from the 2017 limit). The amount excludable from an employee’s gross income begins to phase out for taxpayers with modified adjusted gross income in excess of […]

By |October 25th, 2017|Employee Benefits, Employee Communications, Health Care Reform|Comments Off on IRS Increases Health FSA Contribution Limit for 2018, Adjusts Other Benefit Limits
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President Trump Issues Executive Order on ACA, Separately Attempts to End Cost-Sharing Payments to Insurers

On October 12, President Trump signed an Executive Order directing the federal agencies in charge of implementing the Affordable Care Act (ACA) to propose new regulations or revise existing guidance to expand access to association health plans (AHPs), short-term insurance plans, and health reimbursement arrangements (HRAs). While the order directs the agencies to consider changes that would have a sweeping effect on the health insurance industry, it has no immediate effect – any changes in rules or regulations will be subject to standard notice and comment periods.

Separately, the President intends to stop the government’s reimbursement of cost-sharing reduction (CSR) payments made by insurance carriers that participate in the ACA’s Health Insurance Marketplaces.   A letter from Health and Human Services (HHS) to the Centers for Medicare and Medicaid Services (CMS) indicated that payments will stop immediately, effective with the payment scheduled for October 18, 2017. The move resulted in a lawsuit filed on October 13, 2017, in federal court in the Northern District of California by a coalition of nearly twenty states against the Trump administration seeking declaratory and injunctive relief requiring that the CSR payments continue to be made. If the CSR payments are not continued by Congress (by appropriating funds for the payments) or through judicial action (by finding that the ACA contains a permanent appropriation for the payments), it will have a much more immediate and disruptive effect on the individual market than the Executive Order. It may also impact the small and large group markets, which rely on the individual market to provide coverage in certain cases to part-time employees, an alternative to COBRA, and encourage early retirement by offering a bridge to Medicare, as well as avoiding […]

By |October 18th, 2017|Compliance, Legislation, Medical|Comments Off on President Trump Issues Executive Order on ACA, Separately Attempts to End Cost-Sharing Payments to Insurers
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IRS Reverses Policy on Certifying Individual Mandate Compliance

On Oct. 13, 2017, the Internal Revenue Service (IRS) reversed a recent policy change in how it monitors compliance with the Affordable Care Act’s (ACA) individual mandate. For the upcoming 2018 filing season (filing 2017 tax returns):

  • The IRS‎ will not accept electronically filed tax returns where the taxpayer does not certify whether the individual had health insurance for the year; and
  • Paper returns that do not certify compliance with the individual mandate may be suspended pending receipt of additional information, and any refunds due may be delayed.

Action Steps

To avoid refund and processing delays when filing 2017 tax returns in 2018, taxpayers should indicate whether they (and everyone on their return) had health coverage, qualified for an exemption or are paying an individual mandate penalty. This process reflects the ACA’s requirements and the IRS’s obligation to administer the law.

The Individual Mandate

The ACA’s individual mandate, which took effect in 2014, requires most individuals to obtain acceptable health insurance coverage for themselves and their family members or pay a penalty.

The individual mandate is enforced each year on individual federal tax returns. Starting in 2015, individuals filing a tax return for the previous tax year will indicate, by checking a box on their individual tax returns, which members of their family (including themselves) had health insurance coverage for the year (or qualified for an exemption from the individual mandate). Based on this information, the IRS will then assess a penalty for each nonexempt family member without coverage.

Previous Policy on “Silent Returns”

Effective Feb. 6, 2017, the IRS announced that it would not automatically reject individual tax returns that did not provide this health insurance coverage information for 2016 (known as “silent returns”). Instead, […]

By |October 17th, 2017|Compliance, Employee Benefits, Employee Communications, Health Care Reform, Human Resources, Legislation, Medical|Comments Off on IRS Reverses Policy on Certifying Individual Mandate Compliance
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White House Announces ACA Subsidies to Insurers Will End

OVERVIEW

The White House announced on October 12, 2017 that it will no longer reimburse insurers for cost-sharing reductions made available to low-income individuals through the Exchanges under the Affordable Care Act (ACA), effective immediately. Because Congress did not pass an appropriation for this expense, the Trump administration has taken the position that it cannot lawfully make the cost-sharing reduction payments.

This decision follows the U.S. House of Representatives’ position in a lawsuit it filed against the Obama administration in 2014 challenging the federal government’s authority to fund these cost-sharing reductions.

ACTION STEPS

While the immediate impact of this announcement is unclear, it could have a significant impact on individuals who enroll through the Exchange during the upcoming Nov. 1 open enrollment period. Some states have indicated their intention to sue the federal government to force these subsidies to be paid. However, until a federal court intervenes or Congress enacts an appropriation for these payments, it is possible that these cost-sharing reductions will no longer be paid.

ACA Subsidies

The ACA created two federal health insurance subsidies—premium tax credits and cost-sharing reductions—to help eligible individuals and families purchase health insurance through an Exchange. Cost-sharing reductions are available for individuals who have incomes of up to 250 percent of the federal poverty level and are also eligible for the premium tax credit.

Individuals who receive cost-sharing reductions will have lower out-of-pocket costs at the point of service (for example, lower deductibles and copayments).

The ACA requires insurers that offer Exchange health plans to reduce cost-sharing for eligible individuals and requires the federal government to reimburse insurers for the cost of that reduction on a monthly basis.

House of Representatives v. Burwell (now House v. Price)

On May 12, 2016, a federal district court judge for […]

By |October 13th, 2017|Health Care Reform, Legislation|Comments Off on White House Announces ACA Subsidies to Insurers Will End
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Legal Alert: Court Requires EEOC to Substantiate 30% Limit on Wellness Program Incentives

On August 22, 2017, a federal court in the District of Columbia ordered the Equal Employment Opportunity Commission (EEOC) to reconsider the limits it placed on wellness program incentives under final regulations the agency issued last year under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).  As part of the final regulations, the EEOC set a limit on incentives under wellness programs equal to 30% of the total cost of self-only coverage under the employer’s group health plan.  The court found that the EEOC did not properly consider whether the 30% limit on incentives would ensure the program remained “voluntary” as required by the ADA and GINA and sent the regulations back to the EEOC for reconsideration.

In the meantime, to avoid “potentially widespread disruption and confusion” the court decided that the final regulations would remain in place while the EEOC determines how it will proceed (e.g., provide support for its regulations, appeal the decision, or change the regulations). As background, under the ADA, wellness programs that involve a disability-related inquiry or a medical examination must be “voluntary.”  Similar requirements exist under GINA when there are requests for an employee’s family medical history (typically as part of a health risk assessment).  For years, the EEOC had declined to provide specific guidance on the level of incentive that may be provided under the ADA, and their informal guidance suggested that any incentive could render a program “involuntary.”  In 2016, after years of uncertainty on the issue, the agency released rules on wellness incentives that resemble, but do not mirror, the 30% limit established under U.S. Department of Labor (DOL) regulations applicable to health-contingent employer-sponsored wellness programs.  While the regulations appeared to be […]

By |September 11th, 2017|Compliance, Disability, Employee Benefits, Employee Communications, Health Care Reform, Legislation, Medical|Comments Off on Legal Alert: Court Requires EEOC to Substantiate 30% Limit on Wellness Program Incentives
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Legal Alert: Senate Republicans Release Updated Discussion Draft of ACA Repeal Bill

An updated version of the Better Care Reconciliation Act of 2017 was released on July 13th by the U.S. Senate Committee.

Senate Majority Leader Mitch McConnell of Kentucky released a healthcare “Discussion Draft” of legislation, called the Better Care Reconciliation Act of 2017 (BCRA) on Thursday, June 22, 2017, which is the Senate version of the Affordable Care Act (ACA) “repeal-and-replace” legislation American Health Care Act (AHCA) passed by the U.S. House of Representatives last month.  An updated “Discussion Draft” of the BCRA was released on June 26, 2017 with the intention of calling for a vote on the bill before the Fourth of July recess. […]

By |July 17th, 2017|Employee Benefits, Employee Benefits Adviser, Health Care Reform|Comments Off on Legal Alert: Senate Republicans Release Updated Discussion Draft of ACA Repeal Bill
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Legal Alert: Senate Republicans Release Healthcare Bill; Largely Mirroring House Bill but with Some Key Differences

On Thursday, June 22, 2017, Senate Majority Leader Mitch McConnell of Kentucky released a 142-page healthcare “Discussion Draft” of legislation, called the Better Care Reconciliation Act of 2017 (BCRA), which is the Senate version of the Affordable Care Act (ACA) “repeal-and-replace” legislation American Health Care Act (AHCA) passed by the U.S. House of Representatives last month.  An updated “Discussion Draft” of the BRCA was released on June 26, 2017.  A summary of the updated June 26 draft of the BCRA by the U.S. Senate Committee on the Budget is available here and a section-by-section summary of the June 26th version is available here.

The major substantive change in the updated Discussion Draft released on June 26 was to add a new Section 206, beginning in 2019, that would subject an individual who has a break in continuous “creditable coverage” for 63 days or more in the prior year to a six-month waiting period (in the individual market) before coverage begins.  This provision is intended to provide an incentive for young and healthier individuals to maintain health insurance since the bill would eliminate the individual mandate.  The AHCA proposed imposing a 30% surcharge on those without continuous creditable coverage, but there were concerns over whether that provision could pass Senate parliamentary rules.

The unveiling of the Senate bill comes after weeks of drafting by a small group of Senate Republican leadership behind closed doors that has frustrated Democrats and left out many Republicans from the drafting process.  The Congressional Budget Office released its score of the legislation on June 26, 2017, finding that the updated Discussion Draft of the BCRA would leave 22 million more uninsured by 2026 than under the ACA (versus 23 […]

By |June 28th, 2017|Employee Benefits, Health Care Reform, Human Resources, Medical|Comments Off on Legal Alert: Senate Republicans Release Healthcare Bill; Largely Mirroring House Bill but with Some Key Differences
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Draft ACA Replacement Bill Released by Senate

On June 22, 2017, Republicans in the U.S. Senate released their proposal to repeal and replace the Affordable Care Act (ACA), called the Better Care Reconciliation Act (BCRA). The Senate bill closely mirrors the proposal passed in the House of Representatives—the American Health Care Act (AHCA)—with some differences. For example, unlike the AHCA, the BCRA:

  • Would enhance the ACA’s Section 1332 State Innovation Waiver program; and
  • Would not allow issuers to impose a surcharge for individuals who do not maintain continuous coverage.

Impact On Employers

The Senate has not taken a vote on any ACA repeal or replacement proposal at this time. The proposal would need a simple majority vote in the Senate to pass. However, amendments may be made before a Senate vote is taken.

Senate Republicans indicated that they would like to take a vote prior to the Senate’s July 4 recess. If the BCRA passes the Senate, it would need to go back to the House for approval before being signed into law by President Donald Trump. […]

By |June 25th, 2017|Health Care Reform, Legislation|Comments Off on Draft ACA Replacement Bill Released by Senate
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Coordination of Benefits- Which plan pays the Bill?

Coordination of Benefits

Your employee is covered under your companies benefits and also under their spouses.  So which plan pays first? That’s the question that arises when a plan participant or beneficiary is entitled to coverage under more than one plan or insurance policy. Coordination of Benefit (COB) rules, as specified in plan documents or insurance policies, will answer these questions and that’s why it is important to make certain those plan documents address coordination of benefits. However, if those rules are unclear and therefore a dispute arises that isn’t resolved then the issue will be decided in court.

Often the way the courts resolve these disputes differs based on the kind of plan or insurance policies involved. To provide more information, some of the COB issues that self-funded Employee Retirement Income Security Act (ERISA) plans face are highlighted below. […]

By |June 20th, 2017|Compliance, Employee Benefits|Comments Off on Coordination of Benefits- Which plan pays the Bill?
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