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Health Care Reform

IRS Extends Deadline for Providing Small-Employer HRA Notices

As explained in our December 19, 2016, article, the 21st Century Cures Act allows small employers (those that are not subject to the Affordable Care Act’s “play-or-pay” requirements because they have fewer than 50 full-time employees, including full-time equivalents) to offer their employees a premium reimbursement arrangement that would otherwise violate the ACA. By establishing a “qualified small employer health reimbursement arrangement” (or “QSEHRA”), such an employer may subsidize its employees’ purchase of individual health insurance coverage. In its recent Notice 2017-20, the IRS has granted these employers additional time to comply with the QSEHRA notification requirement.

Cures Act Allows for Small-Employer HRAs

Before leaving DC for the winter holidays, Congress and President Obama agreed on a provision granting small employers a bit of relief from the Affordable Care Act. Tucked at the very end of the 21st Century Cures Act is a provision allowing certain small employers to offer their employees a health reimbursement arrangement (“HRA”) that need not be “integrated” with a group health plan. Employees may then use their employer’s pre-tax contributions to such an HRA to pay premiums under individual health insurance policies.

ACA-Reporting Deadline Extended by 30 Days

The Affordable Care Act (“ACA”) imposed additional reporting requirements on health coverage providers (including self-funded employer plans) and “applicable large employers” (those with 50 or more full-time employees). In Notice 2016-70, the IRS has granted coverage providers and employers 30 more days to issue the appropriate ACA-reporting forms to their insureds and full-time employees for coverage provided during 2016. Rather than January 31, 2017, these Forms 1095-B and 1095-C will now be due by March 2, 2017. In addition, the IRS has extended by one year the period of “good-faith compliance” with these reporting rules. As of now, however, the IRS has not extended the deadline for coverage providers and employers to transmit these ACA-reporting forms to the IRS.

IRS Extends ACA-Reporting Deadlines

In a belated Christmas present, the IRS on December 28th extended the deadlines for large employers and health insurers to comply with certain reporting requirements imposed by the Affordable Care Act (“ACA”).  Notice 2016-4 grants an additional two months to provide statements to employees, and an additional three months to transmit those statements to the IRS.

IRS Issues Guidance for Integrated HRAs

In a recent Chief Counsel Advice (CCA 201547006), the IRS has provided guidance for employers wishing to offer health reimbursement arrangements (“HRAs”) that both (1) provide reimbursements on a tax-free basis, and (2) satisfy the “market reform” requirements of the Affordable Care Act (“ACA”). In particular, this CCA focuses on HRAs (and similar “employer payment plans”) that reimburse employees for medical premiums paid for coverage under a health plan maintained by a spouse’s employer.

Certain Mid-Sized Employers May Have Even MORE Time to Comply with the ACA’s Play-or-Pay Rules

Thanks to a special transition rule, employers with 50 to 99 full-time employees (including full-time equivalents) are generally shielded from the Affordable Care Act’s “play-or-pay” penalties until January 1, 2016. Moreover, in a wrinkle that is easily overlooked, any such “mid-sized” employer that already sponsors a health plan operating on a non-calendar-year basis has even more time to comply with these rules.

Supreme Court Upholds Affordable Care Act Subsidies

The Supreme Court announced today that it has upheld Affordable Care Act (“ACA”) subsidies for insurance purchased on federally-facilitated exchanges. By a 6 to 3 vote, the Court concluded that the statute allows for subsidies on any exchange created under the ACA. The decision in King v. Burwell may come as a disappointment to some who hoped that the subsidies would be struck down and that the entire ACA would unravel in the aftermath.

IRS Grants Limited Transition Relief to Small-Employer Premium Reimbursement Arrangements

In a series of notices and FAQs, the IRS has clearly enunciated its view that an employer’s reimbursement of an employee’s premiums for individual health insurance violates certain provisions of the Affordable Care Act (“ACA”). While reiterating this key point, Notice 2015-17 does grant a limited period of relief for smaller employers. Nonetheless, even those employers should be working toward a June 30 deadline to comply with these ACA constraints.

No Good Deed…: Allowing Part-Time Employees to Make Health FSA Contributions May Trigger ACA Penalties

When it comes to health coverage, many employers draw a distinction between full-time and part-time employees. To be eligible to enroll in the employer’s health plan, an employee must work a minimum number of hours per pay period. But many of those same employers then allow even part-time employees to contribute to a health flexible spending account (“health FSA”). After all, doing so costs the employer nothing (and even saves a modest amount in employment taxes), and why not at least give those employees an opportunity to pay some of their medical expenses on a pre-tax basis? Unfortunately, this paternalistic approach may now subject an employer to substantial daily penalties under the Affordable Care Act (“ACA”).

Agencies Plug Several Holes in the ACA Dike

In the years since the 2010 enactment of the Affordable Care Act (“ACA”), the agencies charged with enforcing the ACA have worried that certain responses to the law’s requirements could negatively affect the overall health insurance system. For instance, because the ACA requires insurers to issue individual health insurance coverage without regard to health status, sponsors of self-funded employer plans may be tempted to shift their high-risk employees into the individual market. But by leaving only healthier employees in the self-funded plans, this approach could result in “adverse selection” – leading to an erosion of the individual insurance market.

When Does 9.5% Equal 9.56%?

Although 9.5% has been a key threshold in determining the “affordability” of employer health coverage, the IRS has just announced (in Revenue Procedure 2014-37) that this threshold will be adjusted to 9.56% for 2015. This adjustment reflects the fact that health insurance premiums have risen more rapidly than incomes. Similar adjustments have also been announced for related percentage thresholds.

Agencies Revise COBRA and CHIPRA Notices; Announce Special Marketplace Enrollment for COBRA Beneficiaries

The federal agencies charged with administering the Affordable Care Act (“ACA”) have issued revised versions of the model COBRA and CHIPRA notices.  Moreover, current COBRA beneficiaries have been given a special one-time window in which to enroll in Marketplace coverage.

IRS Announces 2015 Amounts for HSAs, HDHPs, and Out-of-Pocket Limits; Creates Another Trap for HDHP Sponsors

In Revenue Procedure 2014-30, the IRS has announced the 2015 inflation-adjusted amounts for health savings accounts (“HSAs”) and qualifying high deductible health plans (“HDHPs”), all as determined under Section 223 of the Internal Revenue Code. The maximum annual out-of-pocket expense amounts for all “essential health benefits” under non-grandfathered health insurance plans and policies will also increase for the 2015 plan and policy years. Unfortunately, there will now be a “disconnect” between the maximum HDHP out-of-pocket amount and the maximum amount allowed under other non-grandfathered plans.

Final Regulations Streamline ACA Reporting Rules

Final regulations under the Affordable Care Act’s information reporting provisions streamline and simplify the compliance burdens imposed on employers.  Some of these requirements apply to employers of any size, while other requirements apply only to large employers (i.e., those with 50 or more full-time employees, including full-time equivalents).  These information reporting provisions are effective for calendar year 2015, with the first returns and employee statements due in early 2016.

“Play-or-Pay” Road Map Updated to Reflect 2015 Transition Rules

As reported in our February 19, 2014, article, final regulations under the Affordable Care Act’s employer “play-or-pay” mandate include a number of special provisions that will apply only for 2015. We have now updated our Play-or-Pay Road Map to reflect many of those transition rules. For help in deciphering this Road Map, please contact any member of Spencer Fane’s Employee Benefits Group.

Wait a Minute (or 90 Days): Final and Proposed ACA Waiting Period Rules Issued

The three agencies charged with implementing the ACA’s 90-day cap on eligibility waiting periods have simultaneously issued final and new proposed regulations on that topic. All plans – both grandfathered and non-grandfathered – are already subject to the 90-day cap on waiting periods as of the 2014 plan year.However, the recently finalized regulations confirm earlier guidance regarding waiting periods, and also answer a number of questions that had remained unresolved until now.

Final Play-Or-Pay Regulations Include Significant Transition Rules

The recent finalized regulations under the Affordable Care Act’s employer “play-or-pay” provision give larger employers (those with 50 or more full-time employees) a reason to turn their attention back to compliance with these rules. These regulations answer a number of questions that had been left unresolved by the regulations proposed in December of 2012.

Employers with 50 to 99 full-time employees may be pleasantly surprised to learn of a transition rule that may allow them yet another year (until 2016) to come into compliance. But even employers with 100 or more employees may take advantage of transition rules making compliance easier – or penalties for noncompliance smaller – during 2015.

Agencies Slam the Door on Pre-Tax Payments for Individual Health Insurance

Many employers are concerned that the “market reforms” included in the Affordable Care Act (“ACA”) will lead to an unacceptable increase in the cost of providing health coverage to their employees. In response, some employers have considered moving to an “account balance” approach. They would simply deposit pre-tax dollars into an account (such as a health reimbursement arrangement, or “HRA”) that each employee could then use to purchase individual health insurance. However, in coordinated guidance issued on September 13, 2013, the three agencies charged with implementing the ACA have slammed the door on this approach.

Employee Assistance Programs under the Affordable Care Act

Employers offering employee assistance programs (“EAPs”) will want to take note of recent agency guidance concerning the impact of the Affordable Care Act (“ACA”) on those EAPs. This impact could be felt by their employees, as well. An employer’s immediate task will be to determine whether its EAP constitutes an “excepted benefit” under the ACA rules. If it does not, the EAP should be revised or terminated before January 1, 2014.

IRS Issues Transition Relief on Delay of ACA Employer Reporting and Penalties

As we reported last week, the government has postponed the implementation of the employer reporting and employer shared responsibility components of the Affordable Care Act (“ACA”) until 2015.  As we noted, however, last week’s announcement left many unanswered questions.  Some, but not all, of those questions have now been answered in IRS Notice 2013-45.

ACA’s Employer Mandate Penalties Postponed

The Obama Administration announced on Tuesday that it will postpone the implementation of two key components of the Affordable Care Act until 2015.  Notably, however, this one-year reprieve on the employer mandate penalties and reporting obligations does not apply to the other provisions of the ACA that are scheduled to take effect in 2014.

PCORI Fee Due by July 31

Most health insurers and sponsors of self-insured employer health plans are facing a July 31 deadline for reporting and paying the first of seven annual fees to support a Patient-Centered Outcomes Research Institute (“PCORI”).  The IRS has finally issued a revised version of the Form 720 to be used for that purpose, along with a General Counsel Memorandum confirming the deductibility of this fee for federal income tax purposes.

Model Exchange Notices and Revised COBRA Election Notice Issued

The Department of Labor has issued model notices for employers’ use in satisfying the Affordable Care Act requirement to provide employees with notice of coverage options available through a Health Insurance Marketplace.  Employers must distribute these notices to current employees no later than October 1, 2013, and beginning October 1, 2013, must distribute the notices to new employees within 14 days of hire.

Latest ACA Guidance Addresses HSAs, HRAs, and Wellness Programs

Recently proposed IRS regulations provide guidance to employers wanting to know whether they may consider their HSA contributions, HRA credits, or wellness program incentives when testing their health plans for compliance with the “affordability” and “minimum value” requirements of the Affordable Care Act’s play-or-pay provisions.  The chart accompanying this article summarizes this guidance.

IRS Announces 2014 Amounts for HSAs, HDHPs, and Out-Of-Pocket Limits

In Revenue Procedure 2013-25, the IRS has announced the 2014 inflation-adjusted amounts for health savings accounts (“HSAs”) and qualifying high deductible health plans (“HDHPs”), all as determined under Section 223 of the Internal Revenue Code.  The total annual out-of-pocket expense amounts will also apply to all “essential health benefits” offered under non-grandfathered health insurance plans and policies beginning in 2014.

More Agency Guidance on ACA Requirements for 2014

The agencies charged with implementing the Affordable Care Act (“ACA”) have issued additional guidance on requirements taking effect in 2014.  Although much of the focus has been on the ACA’s “play or pay” requirement, this most recent guidance explains the 90-day limit on eligibility waiting periods and describes the types of plans that must comply with limits on deductibles and out-of-pocket expenses.

Treatment of Seasonal Employees Under Health Care Reform

Many employers rely on seasonal workers – over the holidays, during the summer, or for a harvest season. How does the Affordable Care Act (“ACA”) apply to these seasonal employees?

Treatment of Noncitizen Employees Under the ACA’S “Play or Pay” Rules

Noncitizen employees who are lawfully present in the United States are generally treated as U.S. citizens under the Affordable Care Act. They should therefore be considered in an employer’s efforts to comply with the ACA’s “shared responsibility” (or “play or pay”) requirement.  However, employers should also be aware of certain exceptions, safe harbors, and transition rules that may apply to noncitizen employees – particularly those working on a seasonal basis.

Health Care Reform FAQs Address Exchange Notices, HRAs, and Indemnity Plans

In Part XI of their FAQs on the Affordable Care Act, the agencies charged with implementing Obamacare’s health care reforms have postponed the deadline for employers to notify their employees concerning the Affordable Health Exchanges, clarified which HRAs must comply with the ACA’s prohibition on annual or lifetime limitations on essential health benefits, and cautioned insurers as to the types of policies that will qualify for the “fixed indemnity” exception to many ACA requirements.

IRS Issues More “Play or Pay” Guidance

With less than a year to go before the Affordable Care Act’s “Play or Pay” mandate takes effect, the IRS has finally proposed a set of comprehensive regulations on the subject.  Although these regulations largely codify proposals made through four separate Notices issued during 2011 and 2012, they also contain a number of surprises.  Some of these will be welcomed by plan sponsors, while others may not.

Another Day, Another (Health Care Reform) Dollar: The ACA’s Transitional Reinsurance Program

The Department of Health and Human Services (“HHS”) has proposed regulations regarding the transitional reinsurance program under the Affordable Care Act (“ACA”).  This program will require group health plans to pay additional fees related to health care reform.  For 2014, these annual fees are estimated at $63 per enrollee.

IRS Issues Guidance on Additional 0.9% Medicare Tax

The IRS has now issued proposed regulations and revised answers to Frequently Asked Questions (“FAQs”) on the provision of the Affordable Care Act (“ACA”) imposing an additional 0.9% Medicare tax on wages in excess of specified thresholds.  Employers will want to familiarize themselves with this guidance, which will require that they withhold this additional Medicare tax from any employee’s “Medicare wages” in excess of $200,000 during a calendar year.

Further Guidance on Permissible Wellness Programs

One of the many aspects of the Affordable Care Act (“ACA”) is an emphasis on wellness. The goal is to encourage employers to implement wellness programs for their employees (and in some cases, their dependents), thereby slowing the growth in health care costs. Late last month, the agencies charged with implementing the ACA proposed a new round of regulations governing such programs. Although these latest regulations generally reaffirm the approach taken in regulations proposed in 2006, they also modify the 20% cap on wellness program rewards, offer further guidance on the “reasonableness” of any alternative standard for obtaining a reward, and clarify both the annual-eligibility and disclosure obligations.

HHS Proposes New Standards Related to Essential Health Benefits

The Department of Health and Human Services (“HHS”) has issued proposed regulations on the standards applicable to “essential health benefits”  or “EHBs” under the Affordable Care Act.  Although the proposed regulations largely defer to the states on the definition of EHBs, HHS has clarified a few points that may be of interest to both small and large employers. 

Election’s Over: So What’s Next Under Obamacare?

By reelecting President Obama and leaving the Democrats in control of the U.S. Senate, the voters essentially guaranteed the survival of the Affordable Care Act (now known by both opponents and proponents as “Obamacare”). As a result, employers who might have been hoping for a different result on Election Day will have a great deal of work to do in a relatively short period of time if they are to avoid the stiff monetary penalties embedded in the law.

More Guidance on “Full-Time” Employees and 90-Day Waiting Period

As the clock counts down to 2014 and the implementation of the Affordable Care Act’s “main event,” we continue to receive guidance from the implementing agencies. The latest guidance provides a safe-harbor approach for determining when “variable hour” or seasonal employees have met the ACA’s “full-time” definition of 30 or more hours per week. It also explains how various types of eligibility conditions will be analyzed in the context of the 90-day limitation on eligibility waiting periods. The agencies note that plan sponsors may rely on this guidance through at least the end of 2014.

Grandfathered Status for 2013

As health plan sponsors look ahead to 2013, they would be well-advised to consider the ongoing nature of the grandfathering rules that apply under the Affordable Care Act.  The sponsor of any such plan that is currently grandfathered will want to take particular care when setting contribution rates and making plan-design decisions for the upcoming plan year.

Supreme Court Upholds Affordable Care Act

In an 11th hour twist, the Supreme Court announced today that it has upheld the Affordable Care Act, including the controversial individual mandate.

Overview of Medical Loss Ratio Rebates

The Affordable Care Act requires health insurers to spend a minimum percentage of their premium dollars on medical claims and quality improvement.  Insurers that fail to achieve these percentages must issue rebates to their policyholders.  The first of these MLR rebates are due in August of 2012, so plan sponsors should begin planning how to handle any rebates they might receive.  Among other things, this article discusses both ERISA and tax implications that any plan sponsor receiving a rebate should consider.

IRS Issues Guidance on Implementation of $2,500 Health FSA Limit

In Notice 2012-40, the IRS has provided welcome guidance on the application of the $2,500 annual limit on salary deferral contributions to a health flexible spending account (“health FSA”).  This limit was imposed by the 2010 Affordable Care Act (“ACA”), though only for “taxable years beginning after 2012.”  Among other points made in the Notice, the IRS interprets “taxable year” to refer to an FSA’s plan year.  Thus, the earliest this limit will apply to any FSA is January 1, 2013.  The Notice also provides an extended period of time for FSA sponsors to adopt the required amendments.

New Fees Payable by Health Plan Sponsors and Insurers

Under the Affordable Care Act (“ACA”), both health insurers and sponsors of self-funded employer health plans will be assessed a fee to fund a new Patient-Centered Outcomes Research Institute.  This fee will start at $1.00 per covered life for the first year (which is the first plan year ending on or after October 1, 2012), but will then double to $2.00 per covered life during the following year.  The first deadline for paying this fee is July 31, 2013.

IRS Proposes Methods for Valuing Employer Health Coverage

In order to implement several provisions of health care reform, the Affordable Care Act (“ACA”) will require “large employers” (those with 50 or more full-time employees) to determine whether their employer health plans provide “minimum value.”  In Notice 2012-31, the IRS has proposed three different methods by which an employer might make this determination.

Ready Reference Chart: W-2 Reporting of Employer Health Coverage

Employers that issued 250 or more w-2s for 2011 must report the value of any employer-provided health coverage on their employees’ 2012 W-2s.  The chart found at this link shows the types of coverage that should be included in that reporting, the types that should not be included, and those for which reporting is optional.

Agencies Issue Guidance on Automatic Enrollment, Employer Mandate, and Waiting Periods

The agencies charged with implementing health care reform are continuing to churn out guidance for health plan sponsors.  The latest FAQs defer the effective date of the “automatic enrollment” requirement.  They also offer a number of insights into how the agencies intend to address both the employer “shared responsibility” requirement and the 90-day limitation on eligibility waiting periods.

More IRS Guidance on W-2 Reporting of Health Coverage

Large employers (those issuing more than 250 W-2s for 2011) must report the value of their employees’ health coverage on the W-2s they issue for 2012 (in January of 2013).  Given the complexities of this process, the time to start preparing is now.  As explained in this article, the IRS has just issued another round of guidance on this reporting requirement.  This is likely to be the last guidance available before the requirement takes effect.