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Compliance

This is the Compliance 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.

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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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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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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Compliance Matters: 30-Day Grace Period Election Myth

Myth: 

Employees may change their pre-tax election if they do so within 30 days of when the election first becomes effective.

Ex: Peanut’s Pro Shop has open enrollment from 11/1-11/15 and benefi ts become effective 1/1. Peanut’s Pro Shop allows employees to make changes to their elections if made prior to 1/31.

Fact:

Although most carriers will allow insurance elections to be changed within 30 days, there is no 30-day grace period under Code §125 permitting a change to a pretax election. Once the period of coverage starts, elections are irrevocable and may not be changed during the plan year unless another permissible midyear change in status event as recognized by Code §125 occurs, permitting the change to a pretax election.

The IRS has informally indicated that when there is “clear and convincing evidence” a mistake has been made an employer may correct the mistake.

  • Ex: Peanut’s Pro Shop discovers after open enrollment when auditing their first invoice in January that an administrative error occurred. Charlie elected employee-only coverage on his enrollment form but he is showing enrolled in family coverage on the invoice.

However, when an employee changes their mind or it is unclear whether it was a genuine mistake (i.e. subjective vs. objective), there is no IRS guidance suggesting a change is permissible.

An employer permitting a change to an employee’s unproven mistake risks jeopardizing the tax qualifi ed status of the entire plan, not just the employee whom which the change was made.  In other words, according to the regulations, failure to follow the terms of the plan or otherwise failing to comply with the requirements of Code §125, the plan is not a cafeteria plan and employees’ elections between taxable and nontaxable benefi ts will result in gross …

By |January 15th, 2024|Compliance|Comments Off on Compliance Matters: 30-Day Grace Period Election Myth
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DOL Proposes Rescinding Final Rule on Association Health Plans

On Dec. 19, 2023, the Department of Labor (DOL) released a proposed rule that would rescind in full a final rule it released in 2018 on association health plans (AHPs). According to the DOL, its proposal is intended to support critical health care protections for consumers under the Affordable Care Act (ACA) and resolve any uncertainty surrounding the final rule.

AHPs—Single ERISA Plans

An AHP is a type of ERISA-covered group health plan sponsored by a group or association of employers (instead of a single employer) to provide health coverage to employees of the AHP’s employer members. When an AHP is treated as a single ERISA plan, all employees covered by the plan are considered when determining the insurance market rules (that is, small group or large group) that apply to the plan. This allows small businesses to join together and enjoy many of the regulatory and negotiating advantages that large employers experience. For example, coverage in the large group market is not subject to the ACA’s reforms regarding premium rating restrictions and coverage of essential health benefits items and services, such as maternity and newborn care.

The DOL has released a series of advisory opinions that establish a narrow pathway for an AHP to qualify as a single ERISA plan (e.g., DOL Advisory Opinion 2008-07A). The DOL applies a facts and circumstances approach to determine whether a group or association of employers is a bona fide employer group or association capable of sponsoring an ERISA plan on behalf of its employer members.

Final Rule

The final rule from 2018 would have made it easier for an AHP to be considered a single ERISA plan. However, on March 28, 2019, a federal district court vacated key …

By |December 19th, 2023|Broad Reach Benefits, Compliance, Legislation|Comments Off on DOL Proposes Rescinding Final Rule on Association Health Plans
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2024 Health Plan Compliance Deadlines

Employers must comply with numerous reporting and disclosure requirements throughout the year in connection with their group health plans. This Compliance Overview explains key 2024 compliance deadlines for employer-sponsored group health plans. It also outlines group health plan notices employers must provide each year. Some compliance deadlines summarized below are tied to a group health plan’s plan year. For these requirements, the chart below shows the deadline that applies to calendar-year plans. For non-calendar-year plans, these deadlines will need to be adjusted to reflect each plan’s specific plan year.

Determining the Plan Year

The “plan year” is the calendar, policy or fiscal year on which the records of the plan are kept. Many employers operate their group health plans on a calendar-year basis from Jan. 1 through Dec. 31 of each year. Other employers operate their plans on a non-calendar-year basis, which may be consistent with the company’s taxable year or with an insured plan’s policy year.

 

Download the full document for reference.

2024 Health Plan Compliance Deadlines

By |November 14th, 2023|Broad Reach Benefits, Compliance|Comments Off on 2024 Health Plan Compliance Deadlines
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