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 Updated Form 720 Used For PCORI Fee Payments
As we recently reported, on June 8, 2020, the IRS released the applicable PCORI fee for plan years ending between October 1, 2019 and September 30, 2020. As we indicated in that alert, an updated Form 720 had not yet been released and, therefore, employers were advised to wait to file their PCORI fees until the IRS released the updated form. Late last week, the IRS issued the updated Form 720, which is the April 2020 Revised form. Employers who sponsored a self-funded health plan, including an HRA, with a plan year that ended in 2019 should use this updated Form 720 to pay the PCORI fee by the July 31, 2020 deadline.
As a reminder:
- The insurance carrier is responsible for paying the PCORI fee on behalf of a fully insured plan.
- The employer is responsible for paying the fee on behalf of a self-insured plan, including an HRA. In general, health FSAs are not subject to the PCORI fee.
- Plans that ended between January 1, 2019 and September 30, 2019 use Form 720 to pay their PCORI fee of $2.45 per covered life.
- Plans that ended between October 1, 2019 and December 31, 2019, use Form 720 to pay their PCORI fee of $2.54 per covered life.
Employers that sponsor self-insured group health plans, including health reimbursement arrangements (HRAs) should keep in mind the upcoming July 31, 2020 deadline for paying fees that fund the Patient-Centered Outcomes Research Institute (PCORI). As background, the PCORI was established as part of the Affordable Care Act (ACA) to conduct research to evaluate the effectiveness of medical treatments, procedures and strategies that treat, manage, diagnose or prevent illness or injury. Under the ACA, most employer sponsors and insurers were required to pay PCORI fees until 2019, as it only applied to plan years ending on or before September 30, 2019. However, the PCORI fee was extended to plan years ending on or before September 30, 2029 as part of the Further Consolidated Appropriations Act, 2020.
The amount of PCORI fees due by employer sponsors and insurers is based upon the number of covered lives under each “applicable self-insured health plan” and “specified health insurance policy” (as defined by regulations) and the plan or policy year end date. This year, employers will pay the fee for plan years ending in 2019.
For plan years that ended between January 1, 2019 and September 30, 2019, the fee is $2.45 per covered life and is due by July 31, 2020.
Since the extension of the PCORI fee deadline in December, issuers and sponsors of self-funded plans have been anxiously awaiting information from the IRS concerning the applicable PCORI fee for plans with plan years ending between October 1, 2019 and before October 1, 2020. On June 8, 2020, the IRS Issued Notice 2020-44, which sets the applicable PCORI fee for these plans at $2.54 per covered life. As of June 8, the IRS has not released the second quarter Form […]
On March 27, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act comes as a continued response to the Coronavirus 2019 (COVID-19) pandemic that is significantly impacting the United States. The Act is a $2.2 trillion economic package that is meant to stabilize individuals and employers, while the nation continues to experience shelter-in-place advisories/orders and hospitals report a surge of severely ill COVID-19 patients. The Act’s Paycheck Protection Program is retroactive to February 15, 2020, which is important for businesses that have been experiencing financial hardships starting in February.
Overview of CARES Act
The CARES Act amends several laws, as well as appropriates funds to assist individuals, families, and businesses that are experiencing financial difficulties due to COVID-19. There are loans available to small businesses for paycheck protection and loan forgiveness, and other assistance for individuals and businesses as it relates to unemployment insurance and tax relief. The Act supports the health care system by providing financial assistance for medical supplies and coverage. It also provides economic stabilization and assistance for severely distressed sectors (such as airlines), as well as additional COVID-19 relief funds, expanded telehealth and COVID-19 testing provisions, and emergency appropriations for COVID-19 health response and agency operations.
HSA and Telehealth Expansion
The CARES Act includes a new safe harbor under which high deductible health plans (HDHPs) can cover telehealth and other remote care before participants meet their deductibles (i.e., without cost-sharing). This temporary safe harbor applies for plan years beginning on or before December 31, 2021, unless extended. As a result of this safe harbor, no-cost telehealth may be provided for any reason–not just COVID-19 related issues–without disrupting HSA eligibility.
Prescription Drug Reimbursement under FSA/HRA/HSAs
The CARES Act […]
On January 31, 2020 the Centers for Medicare & Medicaid Services (CMS) announced a one-year extension to the transition policy (originally announced November 14, 2013 and extended six times since) for individual and small group health plans that allows issuers to continue policies that do not meet ACA standards. The transition policy has been extended to policy years beginning on or before October 1, 2021, provided that all policies end by January 1, 2022. This means individuals and small businesses may be able to keep their non-ACA compliant coverage through the end of 2021, depending on the policy year. Carriers may have the option to implement policy years that are shorter than 12 months or allow early renewals with a January 1, 2021 start date in order to take full advantage of the extension.
The Affordable Care Act (ACA) includes key reforms that create new coverage standards for health insurance policies. For example, the ACA imposes modified community rating standards and requires individual and small group policies to cover a comprehensive set of benefits.
Millions of Americans received notices in late 2013 informing them that their health insurance plans were being canceled because they did not comply with the ACA’s reforms. Responding to pressure from consumers and Congress, on Nov. 14, 2013, President Obama announced a transition relief policy for 2014 for non-grandfathered coverage in the small group and individual health insurance markets. If permitted by their states, the transition policy gives health insurance issuers the option of renewing current policies for current enrollees without adopting all of the ACA’s market reforms.
Transition Relief Policy
Under the original transitional policy, health insurance coverage in the individual or small group market that was renewed for a policy year starting […]
Legal Alert- Congress Repeals Unrelated Business Income Tax for Tax-Exempt Entities Offering Qualified Transportation Fringe Benefits
Congress Repeals Unrelated Business Income Tax for Tax-Exempt Entities Offering Qualified Transportation Fringe Benefits
As part of the Further Consolidated Appropriations Act, 2020 (the “Act”), Congress repealed Section 512(a)(7) of the Internal Revenue Code of 1986 (the “Code”). This Code section was added as part of the Tax Cuts and Jobs Act of 2017 (the “TCJA”) and resulted in an unrelated business income tax (UBIT) liability when a tax-exempt entity provides qualified transportation benefits to employees. The repeal is effective retroactively to December 22, 2017, the date the TCJA was enacted. Tax-exempt entities who paid an UBIT on transportation benefits in the last two years should be able to obtain a refund.
About UBIT and Qualified Transportation Fringe Benefits
The UBIT on qualified transportation fringe benefits only affected tax-exempt entities. UBIT generally applies to income that is not related to an entity’s exempt purpose, so it was unclear why Congress targeted expenses related to providing parking or transportation for employees. Under the TCJA, tax-exempt entities offering qualified transportation fringe benefits to their employees were exposed to a 21% UBIT tax. The tax applied regardless of whether the employer was providing the benefits or whether employees were paying pre-tax.
Qualified transportation benefits include transit passes, parking, and commuter highway vehicle rides. Notably, the amount of the UBIT was based on the qualified transportation benefit expenditures instead of the entity’s income. As a result, tax-exempt entities were experiencing larger UBIT bills, even though employees may have been paying for the benefits themselves via salary reduction.
What the Repeal Does
Under the Act, the UBIT for tax-exempt entities who offered qualified transportation fringe benefits is retroactively repealed. This means that tax-exempt entities are no longer subject to UBIT on qualified transportation benefits and […]
Updated December 21 to reflect that the bill has been signed into law.
On December 20, 2019, the House and Senate, with the final signature from President Trump, passed a bipartisan legislative package of spending bills to avoid a government shutdown. This package of bills is collectively referred to as the Further Consolidated Appropriations Act, 2020 (the “Act”). The Act includes a permanent repeal of three Affordable Care Act (ACA) taxes: the tax on high-cost health plans (the so-called “Cadillac Tax”), the Health Insurance Tax (HIT tax), and the medical device tax. Overall, the repeal of these ACA taxes may result in at least $300 billion in lost revenue to the government; however, the bill brings relief to employers and consumers, who may have experienced tax payments, increased health premiums and other costs. The repeal of the HIT tax is effective as of January 1, 2021, and the medical device tax is repealed as of January 1, 2020. The Cadillac Tax was already delayed until 2022, and thus will never take effect. The Patient-Centered Outcomes Research Institute (PCORI) fee has also been extended to 2029 (i.e., it will apply to plan years ending on or before September 30, 2029).
PCORI Fee Extension
The PCORI fee is now extended to plan years ending on or before September 30, 2029. PCORI fee extensions have been discussed frequently and have been included in previously introduced bills, such as the Protecting Access to Information for Effective and Necessary Treatment and Services Act (PATIENTS Act) that was approved by the House Ways and Means Committee in June 2019. The amount due per life covered under a policy will be adjusted annually, as it has been previously. Insurers of fully insured health […]
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 […]
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 […]
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
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.
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 […]