This is the Voluntary Benefits 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.
On April 7, 2021, the U.S. Department of Labor (DOL) released a link to its webpage dedicated to the COBRA premium assistance authorized under the American Rescue Plan Act, 2021 (ARPA), the third COVID-19 stimulus bill. The webpage includes model notices, frequently asked questions, and related information. With the exception of the model notices, the guidance appears targeted towards impacted workers, leaving many employer-related questions unanswered. This alert summarizes the recent guidance and model notices.
What does ARPA Provide and Who is an Assistance Eligible Individual?
Among other things, the ARPA provides a 100% subsidy for COBRA premiums for group health plans (other than health FSAs) from April 1, 2021 through September 30, 2021 for assistance eligible individuals (AEIs). AEIs are employees and their family members who are:
- eligible for, and enroll in, COBRA (or state mini-COBRA) due to a reduction in hours or involuntary termination of employment;
- not eligible for other group health plan coverage or Medicare; and
- still within their maximum COBRA continuation coverage period (generally, 18 months).
AEIs include individuals newly eligible for COBRA between April 1, 2021 and September 30, 2021, individuals who were in their COBRA election period as of April 1, 2021, and individuals who would be AEIs but whose COBRA coverage lapsed due to non-payment prior to April 1, 2021. AEIs also include any qualified beneficiaries, such as family members, who did not elect COBRA continuation coverage when first eligible. Generally, this means an employee (and their qualified beneficiaries) with a COBRA start date on or after November 1, 2019, would have one or more months of eligibility for the COBRA subsidy. Therefore, employers should identify any employees involuntarily terminated or whose hours were reduced on or after […]
Some employers may want to be selective and treat employees differently for purposes of group health plan benefits. For example, employers may consider implementing the following plan designs:
-A health plan “carve-out” that insures only select groups of employees (for example, a management carve-out);
– Different levels of benefits for groups of employees; or
– Varied employer contribution rates based on employee group.
In general, employers may treat employees differently, as long as they are not violating federal rules that prohibit discrimination in favor of highly compensated employees. These rules currently apply to self-insured health plans and arrangements that allow employees to pay their premiums on a pre-tax basis. The nondiscrimination requirements for fully insured health plans have been delayed indefinitely.
Employers should also confirm that any health plan rules do not violate other federal laws that prohibit discrimination. In addition, employers with insured plans should confirm that carve-out designs comply with any minimum participation rules imposed by the carrier.
Health Plan Design—General Rules
In general, a health plan will not have problems passing any applicable nondiscrimination test when the employer treats all of its employees the same for purposes of health plan coverage (for example, all employees are eligible for the health plan, and the plan’s eligibility rules and benefits are the same for all employees). However, treating employees differently may make it more difficult for a health plan to pass the applicable nondiscrimination tests. Examples of plan designs that may cause problems with nondiscrimination testing include:
- Only certain groups of employees are eligible to participate in the health plan (for example, only salaried or management employees);
- The health plan has different employment requirements for plan eligibility (for example, […]
Since 2019, employers faced uncertainty regarding the status of wellness program incentives under the ADA and GINA. On January 7, 2021, the EEOC issued a Notice of Proposed Rulemaking on Wellness Programs Under the ADA and GINA that addresses this issue. The proposed rules deviate somewhat from prior EEOC guidance and positions.
Specifically, the proposed rules apply the ADA’s insurance “safe harbor” to health contingent wellness programs offered as part of, or qualified as, an employer-sponsored group health plan, thereby segregating them from health contingent wellness programs offered to all employees, regardless of their participation in the employer’s health plan. Instead, the latter are lumped in with non-health contingent wellness programs (i.e., wellness programs that involve a disability-related inquiry or medical exam but are not activity-based or outcome-based) and subject to the ADA wellness rules.
Consistent with the EEOC’s announcement in the summer of 2020, the proposed rules require any incentives provided for participatory wellness programs and/or wellness programs not offered as part of a group health plan to be “de minimis.” If the rules are finalized as proposed, employers may no longer rely upon the 30% (or 50% for smoking cessation) limit on incentives for these types of programs.
Finally, the proposed rules amend the GINA regulations by, among other things, limiting wellness program incentives for employees who complete health risk assessments that contain information about their spouse or dependents’ family medical history or other genetic information to a similar de minimis amount.
The proposed rules are described in more detail below.
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 […]
Due to COVID-19 and state and local stay-at-home orders, utilization of group medical and dental insurance benefits is down. As a result, some carriers recently notified employers that they will be issued premium credits. When asking how these premium credits should be treated by the employer, we often compare then to the ACA’s medical loss ratio (MLR) rebates. While these premium credits are not MLR rebates, a similar decision must be made to determine whether they, like MLR rebates, are ERISA plan assets.
As background, the Affordable Care Act’s MLR rule requires health insurers to spend a certain percentage of premium dollars on claims or activities that improve health care quality, otherwise they must provide a rebate to employers. At the same time the U.S. Department of Health and Human Services issued the MLR rule, the U.S. Department of Labor (DOL) issued Technical Release 2011-04 (TR 2011-04), which clarifies how rebates should be treated under ERISA. Under ERISA, anyone who has control over plan assets, such as the plan sponsor, has fiduciary obligations and must act accordingly.
Clearly, the premium credits we are seeing are not subject to the MLR rule; however, a similar analysis applies. TR 2011-04 clarified that insurers must provide any MLR rebates to the policyholder of an ERISA plan. However, while the DOL’s analysis was focused on MLR rebates, it recognized that distributions from carriers can take a variety of forms, such as “refunds, dividends, excess surplus distributions, and premium rebates.” Regardless of the form or how the carrier describes them, to the extent that a carrier credit, rebate, dividend, or distribution is provided to a plan governed by ERISA, then the employer must always consider whether it is a “plan […]
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 […]
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 […]