Category Archives: Plan Reporting and Disclosure Duties

Qualified Small Employer HRAs Face Steep Compliance Path

Co-authored by
Christine P. Roberts, Mullen & Henzell L.L.P and
Amy Evans of Colibri Insurance Services, Inc.

climbing

Passed in December 2016, the 21st Century Cures Act backtracked in part on an abiding ACA principle – namely, that employers could not reimburse employees for their individual health insurance premiums through a “standalone” health reimbursement account (HRA) or employer payment plan (EPP).  Specifically, the Cures Act carves “Qualified Small Employer Health Reimbursement Arrangements” or QSE HRAs — out from the ACA definition of group health plan subject to coverage mandates, permitting their adoption by eligible small employers, subject to a number of conditions.  The provisions are effective for plan years beginning after December 31, 2016.

The compliance path for QSE HRAs is steep enough that they may not be adopted by a significant number of eligible employers. Below we list the top five compliance hurdles that small employers will face:

1.   Requirement that no group health plan be maintained.

In order to be eligible to maintain a QSE HRA an employer must not have more than 50 full-time employees, including full-time equivalents (measured over the preceding calendar year), and in addition it must not maintain any group health plan for employees.  Small businesses are more likely than not to offer some health coverage to employees, although eligibility may be limited as in a “management carve-out” arrangement.  Business owners may be reluctant to part with group coverage, such that QSE HRAs may have most appeal to small employers that never offered coverage at all.

2.  Confusion over impact on premium tax credits.

A significant amount of confusion exists as to whether QSE HRA benefits impact an employee’s eligibility for premium tax credits on a health exchange.  The confusion is natural as the applicable rules are quite confusing.  Fundamentally, if a QSE HRA benefit constitutes “affordable” coverage to an employee (which requires a fairly complicated calculation), then the employee will be disqualified from receiving premium tax credits.  If a QSE HRA is not affordable (that calculation again), then the QSE HRA benefit will reduce, dollar for dollar, the premium tax credit amount for which the employee qualified.  We have only statutory text at this point and regulations will no doubt provide more clarity, but small employers may still struggle to understand the interplay of these rules and may be even less equipped to assist employees with related questions.

3.  Annual notice requirement.

A small employer maintaining a QSE HRA must provide a written notice to each eligible employee 90 days before the beginning of the year that:

  • Sets forth the amount of permitted benefit, not to exceed annual dollar limits that are adjusted for inflation (currently $4,950 for individual and $10,000 for family coverage);
  • Instructs the employee to disclose the amount of their QSE HRA benefit when applying for premium tax credits on a health insurance exchange; and
  • Reminds the employee that, if he or she is not covered under minimum essential coverage (MEC) for any month a federal tax penalty may apply, and in addition contributions under the QSE HRA may be included in their taxable income. (The QSE HRA is not itself MEC.)

If compliance with the annual notice requirements under SEP and SIMPLE plans is any guide, small employers may find it difficult to consistently provide the required written notice. The Cures Act imposes a $50 per employee, per incident penalty for notice failures, up to $2,500 per person.  Penalty relief is available if the failure is demonstrated to have been due to reasonable cause and not willful neglect.

4.  Annual tax reporting duties.

Small employers must report the QSE HRA benefit amount on employees’ Forms W-2 as non-taxable income.   ACA tax reporting for providers of “minimum essential coverage” (MEC), namely, providing Form 1095-B to each eligible employee and transmitting  copies of all employee statements to the IRS under transmittal Form 1094-B  –would not appear to be required for sponsors of QSE HRAs, as MEC reporting will be done by the individual insurance carriers.  Clarity on this point would be welcome.

5.  Lack of financial incentive for benefit advisers.

Small employers will (reasonably) look to health insurance brokers for guidance and clarification on these complex issues. They will also need assistance with QSEHRA set-up, including shopping TPAs to compare services and fees, educating employees on enrollment and use, handling service issues during the year, and satisfying the annual notice requirement and annual tax reporting duties. Unfortunately, the benefit broker and adviser community has little financial incentive to recommend QSEHRAs, because commissions are based on a relatively low annual administrative fee and do not provide reasonable compensation for this work.  This in turn could result in low uptake by small employers.

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Filed under Affordable Care Act, Benefit Plan Design, Health Reimbursement Accounts, Health Reimbursement Arrangements, Plan Reporting and Disclosure Duties, PPACA, Premium Tax Credits, Qualified Small Employer HRAs

Webinar: Dept. of Labor 401(k) Audits – How Not to Get Selected (and How to Survive if You Do) UPDATED

 Y01VDYAX63Please join Christine Roberts and former DOL investigator David Kahn for a free, one-hour webinar on Wednesday, Aug 24, 2016 at 10:00 AM PDT which will provide tips on how to reduce the risk of audit, and how to survive an audit if one occurs. We will cover investigation triggers and issues that the DOL targets once an audit is underway. This no-charge webinar qualifies for continuing education credits for California CPAs and ASPPA. Join us for a webinar. Register now! https://lnkd.in/b-58niA

For those of you who missed the event, the PowerPoint and audio file are found here.

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Filed under 401(k) Plans, DOL Audit, Fiduciary and Fee Issues, Fiduciary Issues, Plan Reporting and Disclosure Duties, Profit Sharing Plan

Benefits Compliance: Where You Get It; What You Need (Poll)

Y01VDYAX63Changes in the law and continued advances in technology have made benefits compliance a constantly shifting landscape.  As one of many potential sources for your own path towards benefits compliance, E for ERISA would very much appreciate your participation in the following poll, which asks a few simple questions about where you currently get your benefits compliance services and what you may still need in that regard.  Thank you in advance for (anonymously) sharing your thoughts and experiences.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Filed under 401(k) Plans, 403(b) Plans, Affordable Care Act, Applicable Large Employer Reporting, Benefit Plan Design, Employer Shared Responsibility, ERISA, Federally Facilitated Exchange, Fiduciary and Fee Issues, Fiduciary Issues, Fringe Benefits, Health Care Reform, HIPAA and HITECH, Payroll Issues, Plan Reporting and Disclosure Duties, PPACA, Profit Sharing Plan, Uncategorized

ACA Reporting for Large Employers: Top 10 Rules for Success

Applicable Large Employers have approximately one month, until March 31, 2016,  to furnish Form 1095-C to full-time employees in relation to group health coverage offered (or not offered) in 2015.  Self-insured employers must also provide Form 1095-Cs to part-time employees who were covered under their plans in 2015.  Related IRS filing deadlines (transmittal Form 1094-C and attached Forms 1095-C) come later in the year, but the March 31, 2016 deadline to furnish employee statements is hard and final.  The attached PowerPoint presentation lists the Top 10 Rules for Success in completing Applicable Large Employer reporting, and includes bonus tips on opt-out payments, and increased ACA penalty amounts for 2015 and 2016.

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Filed under Affordable Care Act, Applicable Large Employer Reporting, Employer Shared Responsibility, Health Care Reform, Minimum Essential Coverage Reporting, Payroll Issues, Plan Reporting and Disclosure Duties, PPACA, Self-Insured Group Health Plans

IRS Proposes Revisions to ACA Reporting for Health Reimbursement Arrangements

As addressed in our prior post, IRS Notice 2015-68, issued on September 17, 2015, describes and requests comments on a number of ACA reporting issues, including several that that the IRS and Treasury Department plan to address in amended or new proposed regulations. Among the points addressed is avoiding duplicate reporting for multiple sources of MEC provided to the same individual (“supplemental coverage”). The Notice describes the current rule for reporting supplemental coverage as “confusing” and outlines a more streamlined alternative. Examples in the Notice describe how it will apply to Health Reimbursement Arrangements (“HRAs”) that are offered together with group health coverage.  Note:  MEC reporting generally is not required for HRAs, but per recent informal comments by the IRS on a payroll industry conference call, applicable large employers (ALEs) may have to report on HRA coverage that constitutes MEC via Part III of IRS Form 1095-C, under some circumstances.

The proposed new anti-duplication rules, which will apply month-by-month and individual-by-individual, will provide that if an individual is covered by multiple MEC plans or programs provided by the same provider, reporting is required for only one of them. Under this proposed rule, if an individual is enrolled in a self-insured group health plan for a given month and also is takes part in an HRA sponsored by the same employer, the employer, again via Section III of Form 1095-C, is required to report only one type of coverage for that individual (which most likely would be the self-insured group health plan) for that month. If an employee is covered under both arrangements for some months of the year but is covered only under the HRA for other months (for instance, because he or she retires or otherwise drops coverage under the self-insured group health plan), the employer must report coverage under the HRA for those months when it was the only MEC provided.

Under the second proposed anti-duplication rule, reporting generally is not required for MEC for which an individual is eligible only if the individual is covered by other MEC for which MEC reporting is required, so long as the two types of coverage are sponsored by the same employer. This describes the typical “integrated” HRA setting, in which an employer offers an HRA only to employees and dependents who enroll in the employer’s group health plan.  In this setting, a self-insured employer can take advantage of the first anti-duplication rule, and need not report the HRA as MEC for months in which an employee is enrolled in both plans.  However, an employer that is an ALE and sponsors an insured plan may have a reporting duty.  An insured employer that is an ALE need not provide MEC reporting in relation to the HRA for those months in which the employees and dependents are enrolled in the insured plan. However, if an employee is enrolled in an employer’s HRA and in a spouse’s employer’s group health plan, the employee’s employer must provide MEC reporting for the HRA.  If the employee’s employer is an ALE the HRA reporting is done via Form 1095-C, Section III.  If the employee’s employer is not an ALE it is done by completing Forms 1095-B and 1094-B.  In other words, the duty to report MEC coverage provided to non-employees under an integrated HRA applies even to an employer that is not an “applicable large employer” and need not report offers of coverage on Forms 1095-C and 1094-C.

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Filed under Affordable Care Act, Health Care Reform, Health Reimbursement Arrangements, Minimum Essential Coverage Reporting, Plan Reporting and Disclosure Duties, PPACA, Self-Insured Group Health Plans

ACA Reporting Update: New Procedures for Requesting Family Member SSNs

In Notice 2015-68, issued September 17, 2015, the IRS has modified the steps that must be followed by insurance carriers and self-insured employers to demonstrate a “reasonable effort” to obtain Social Security Numbers or other Tax Identification Numbers (collectively, TIN) for family members enrolled in Minimum Essential Coverage (MEC), and has requested public comment on further adjustments to the requirements. Pending future guidance, following the new procedures will entitle the reporting party to “reasonable cause” relief from penalties for late or incomplete tax returns and employee statements.

Internal Revenue Code § 6055 requires that, among other information, TINs for individuals who are enrolled in MEC be reported by MEC providers. Insurance carriers (issuers) report to insureds via IRS Form 1095-B and self-insured employers report to full-time employees on Section III of IRS Form 1095-C. (Forms 1095-B and 1095-C are transmitted to the IRS under Forms 1094-B and 1094-C, respectively. The IRS issued final 2015 versions of these forms, and instructions for same, also on September 17, 2015.) If the reporting party follows the “reasonable effort” steps to obtain a family member SSN/TIN without success, it may report a date of birth for that individual on the applicable form without penalty.

The new steps required to be followed in order to demonstrate that a reasonable effort has been made to obtain an enrolled family member’s SSN/TIN are as follows:

  1. The initial request is made at the time the individual first enrolls or, if the person is already enrolled on September 17, 2015, the next open enrollment period;
  2. The second request is made at “a reasonable time thereafter” and
  3. The third request is made by December 31 of the year following the initial request.

This sequence replaces the sequence described in the preamble to final regulations under Code § 6055: initial request made when an account is opened or a relationship established, first annual request made by December 31 of the same year (or, if the initial request was made in December, by January 31 of the following year), and second annual request made by December 31 of the following year. The Notice states that that this sequence, which was lifted directly from regulations under Code § 6724, the “reasonable cause” relief statute, prompted concerns among reporting parties that it was not practical in the context of MEC reporting.

Until further guidance, it remains the case that reporting a date of birth in one year does not eliminate the need to make the necessary follow-up requests as described in the Notice.

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Filed under Affordable Care Act, Applicable Large Employer Reporting, Employer Shared Responsibility, Minimum Essential Coverage Reporting, Plan Reporting and Disclosure Duties, Self-Insured Group Health Plans

Updated SBC Rules Reflect Full ACA Implementation

As 2014 came to a close, the federal agencies charged with ACA implementation (the Treasury, Labor & Health and Human Services Departments) published proposed regulations governing the contents and delivery of Summaries of Benefits and Coverage or “SBCs,” and made corresponding changes to the SBC template, and related glossary of medical and insurance terms.   The proposed regulations, if finalized, would apply to SBCs required to be provided for open enrollment periods beginning on or after September 1, 2015, and as of the first day of the plan year beginning on or after September 1, 2015 (January 1, 2016 for calendar year plans) for other SBD disclosures (such as for special enrollments).   With the proposed regulations the agencies also released updated SBC templates (blank, and completed), and an updated uniform of key medical and insurance terms.  If finalized, the proposed regulations would amend final SBC regulations published on February 14, 2012.

SBC Update:  Contents

In essence, the proposed regulations refresh SBC contents and terminology to reflect full ACA implementation, in particular its group market reforms and the rollout, over 2014 – 2016, of both individual and employer shared responsibility regimes.   Prior to the proposed regulations, these upgrades occurred piecemeal, in the form of Frequently Asked Questions, no fewer than six of which addressed SBC issues since the final regulations were published.  (See ACA Implementation FAQs Parts VII, VIII, IX, X, XIV and XIV, located here.)  The proposed regulations helpfully consolidate all that earlier guidance and make additional changes consistent with the post-ACA coverage landscape.  With particular regard to SBCs provided to participants and beneficiaries for group health coverage (insured, or self-insured) they include the following:

  • The mandated contents of the SBC template are reduced from 4 double-sided pages to only 2 ½ double-sided pages, freeing up 1 ½ pages for voluntary disclosures such as premium costs, if practical for the coverage arrangement, or additional “coverage examples,” as described below.   There is no requirement that the extra space be filled so long as all required template disclosures are made.
  • The extra space is gained in part by removing references to annual limits on essential health benefits and pre-existing condition exclusions, which are now obsolete.
  • Added to the SBC template is a third “coverage example” which is a hypothetical walk-through of likely covered and out-of-pocket expenses an individual would experience under the benefit package or plan for specific health issues. The new coverage example is a simple foot fracture with emergency room visit.
  • The SBC template also updates pricing data for the other two coverage examples, which are normal delivery of a baby, and well-regulated Type 2 diabetes. As mentioned, carriers and self-insured plan sponsors could add additional coverage examples so long as they remain within the maximum length of 4 double-sided pages (with at least a 12 point font).
  • Added to the uniform glossary are definitions for the following medical terms: “claim,” “screening,” “referral,” “specialty drug” as well as ACA terms such as “individual responsibility requirement,” “minimum value,” and “cost-sharing reductions.” These additions increase glossary page length from 4 to 6.
  • For insured or HMO coverage, the SBC must provide a web address at which individuals can view actual insurance policies, certificates, or HMO contracts related to the SBCs. (A sample certificate for group coverage may be posted while the terms of the actual certificate are under negotiation.) Existing regulations require web addresses for lists of in-network medical providers and drug formularies as well as the uniform glossary of insurance and medical terms.
  • The proposed regulations require that the SBC state whether or not the benefit package qualifies as “minimum essential coverage” or “MEC,” or whether or not it provided at least “minimum value”; these were not required by the 2012 final regulations, but were later added for coverage effective on or after January 1, 2014.
    • Note: Although this information was somewhat esoteric in 2012 and 2013, it has now become essential for most employees to complete their income tax returns for 2014. The MEC disclosure is needed to demonstrate they met individual mandate duties first in effect last year, and the minimum value disclosure is needed in relation to advance payment of premium tax credits. This tax season is the first time that individuals who received tax credits must reconcile them against actual household income, through use of the very complicated IRS Form 8962.  Compliance with the individual mandate is also required to be demonstrated on Form 1040, at line 61, or through reporting of an exemption from the mandate via Form 8965.

SBC Update:  Delivery

The proposed regulations are intended to streamline SBC delivery rules and prevent duplicate delivery of SBCs in certain situations:

  • When an insurer/HMO (“issuer”) or self-funded plan provides an SBC upon request to someone before they have applied for coverage, it need not re-supply one upon actual application for coverage unless the SBC contents have changed in the meantime (or if the person applies for a different benefit package).
  • When a plan sponsor provides an SBC to an applicant during negotiation of terms of coverage, and the terms of coverage change, the sponsor need not provide an updated SBC until the first day of coverage (unless separately requested).
  • A group health plan that uses two or more benefit packages, such as major medical coverage and a health flexible spending account, may synthesize the information into a single SBC, or provide multiple SBCs.
  • The rule permitting a plan sponsor or issuer, upon renewal or reissuance, to provide a new SBC only with respect to the benefit package that is being renewed or reissued is extended to apply to cases in which a plan or issuer automatically reenrolls participants and beneficiaries.
  • Where a plan sponsor or carrier required to provide an SBC with respect to an individual (“original provider”) enters into a binding contract with a third party (“contracted provider”) to provide the SBC to the individual, the original provider will be considered to have met their SBC delivery duties if all of the following requirements are met:
    • The original provider monitors the contracted provider’s performance under the contract;
    • The original provider corrects noncompliance by the contract provider under the SBC delivery contract as soon as practicable, if it has knowledge of the noncompliance and has all information necessary to correct the noncompliance; and
    • The original provider communicates with participants and beneficiaries about noncompliance of which it becomes aware, but which it is unable to correct, and takes significant steps as soon as practicable to avoid future violations.
  • In instances where an insured group health plan uses two or more insurance products provided by separate issuers to insure benefits under the plan, the plan administrator will be responsible for providing complete SBCs but may contract with one of the carriers or another service provider to provide the SBC; absent such an agreement one carrier has no obligation to provide SBCs describing benefits provided by the other carrier. (It remains permissible under prior FAQ guidance to also provide several separate partial SBCs under cover of a letter or notation on the partial SBCs explaining their interrelation.)
  • The proposed rules also incorporate prior FAQ guidance that “providing” an SBC means “sending” an SBC, and an SBC is timely provided if it is sent within seven business days of request, even if it is not received within that time period. This same timing rule applies to requests to receive copies of the uniform glossary. Provisions in the final regulations on electronic delivery of the SBCs continue to apply.

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Filed under Affordable Care Act, Employer Shared Responsibility, Federally Facilitated Exchange, Health Care Reform, Health Insurance Marketplace, Individual Shared Responsibility, Plan Reporting and Disclosure Duties, PPACA, State Exchange, Summaries of Benefits and Coverage