Waiting for the Other Shoe to Drop: IRS Begins ACA Reporting Penalty Process

Repeal and replacement of the Affordable Care Act (ACA) by the American Health Care Act (AHCA) may be underway in Washington D.C., but until a final version of the AHCA is signed into law, the ACA is the law of the land. In fact, the IRS is currently issuing notices to employers that require them to disclose whether they complied with ACA large employer reporting duties, or their excuse for not doing so, where applicable. This post describes the notices and how to respond to them.

By way of background, the ACA required large employers to furnish employee statements (Forms 1095-C) and file them with the IRS under transmittal Form 1094-C, and the Internal Revenue Code (“Code”) imposes separate penalty taxes for failing to timely furnish and file the required forms. Large employer reporting was required for 2015 and 2016, even if transition relief from ACA penalty taxes applied for 2015. The potential penalties can be very large – up to $500 per each 2015 Form 1095-C statement ($250 for not furnishing the form to the employee and $250 for not filing it with IRS) – up to a total annual penalty liability of $3 million. The penalty amounts and cap are periodically adjusted for inflation.

Employers that failed to furnish Form 1095-C and file copies with Form 1094-C may receive the IRS notices, called “Request for Employer Reporting of Offers of Health Insurance Coverage (Forms 1094-C and 1095-C)” and also known as Letter 5699 forms. Forms may be received regarding reporting for 2015 or 2016. Employers that receive a Letter 5699 form will have only thirty days to complete and return the form, which contains the following check boxes:

  • Employer already complied with reporting duties;
  • Employer did not comply but encloses required forms with return letter;
  • Employer will comply with reporting duties within ninety days (or later, if further explained in the form);
  • Employer was not an Applicable Large Employer for the year in question; or
  • Other (requiring a statement explaining why required returns were not filed, and any actions planned to be taken).

The Letter also provides: “[i]f you are required to file information returns under IRC Section 6056, failure to comply may result in the assessment of a penalty under IRC Section 6721 for a failure to file information returns.”

Employers receiving Letter 5699 forms should contact their benefit advisors immediately and plan to respond as required within the thirty-day limit; it may be necessary to request an extension for employers that are just realizing that they have reporting duties and need to prepare statements for enclosure with their response. In this regard, the IRS offers good faith relief from filing penalties for timely filed but incomplete or incorrect returns for 2015 and 2016, but relief from penalties for failures to file entirely for those years is available only upon a showing of “reasonable cause,” which is narrowly interpreted (for instance, due to fire, flood, or major illness).

Large employers should not look to coming ACA repeal/replacement process for relief from filing duties and potential penalties. The House version of the AHCA does not change large employer reporting duties and it is unlikely the Senate or final versions of the law will do so. This is largely because procedural rules limit reform/repeal provisions to those affecting tax and revenue measures, which would not include reporting rules.   Thus the reporting component of the ACA will likely remain intact (though it may be merged into Form W-2 reporting duties), regardless of the ACA’s long-term fate in Washington.

Note:  a modified version of this post was published in in the Summer 2017 issue of Risk & Business Magazine (Carle Publishing).

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Filed under Affordable Care Act, American Health Care Act, Applicable Large Employer Reporting, Post-Election ACA, PPACA

5 Things California Employers Should Know About the Current State of Health Care Reform

by Amy Evans, HIP, President, Colibri Insurance Services and Christine P. Roberts, Mullen & Henzell L.L.P.

There is still a lot of debate going on at the federal and state levels about health care reform. In Washington, D.C., the Senate is working on a second round of revisions to the American Health Care Act (AHCA), but there is lack of alignment within the Republican party about the new plan, and the current administration is now occupied by other items. At the state level, a Senate bill proposing a state-wide single-payer health care system is making its way through the legislature and generating a lot of conversation about a complete overhaul of health care financing and delivery. With all of the uncertainty and political noise, it can be difficult for employers to know where to put their attention and resources. Here are five things California employers should know about the current state of health care reform.

1) California is leading the discussion about single-payer. California Senate Bill 562 is currently making its way through the state legislation. If enacted, SB 562 would eliminate the private health insurance system in California, including health insurance carriers, health insurance brokers and employer-sponsored health insurance benefits. It would replace them with a state-run, “single-payer” system called the Healthy California program, which would be governed by a 9-member executive board, and guided by a 22-member public advisory committee. At this juncture, funding measures for the bill are vague but include appropriation of existing federal funding for Medicare, Medi-Cal, CHIP and other health benefits provided to California residents, as well as an increase in payroll taxes. The estimated cost for this system is $400 billion annually, which is twice the size of the current budget for the entire state. SB 562 is widely popular in concept but also widely misunderstood, with many confusing it for a universal coverage system that would be supplemented by private and employer-sponsored coverage. The bill is currently in suspense with the Appropriations Committee in Sacramento. The committee chair (who is also the author of the bill) may wait for the results of a detailed study on the bill’s cost and impact, or he may choose to send it to the Senate for a vote. If the bill makes it through the Senate and the Assembly (which it is likely to do because it is such a popular concept), it is anticipated that it will be vetoed by Governor Jerry Brown, who has already expressed concerns about the bill’s financing. Alternatively, the legislature could vote on the bill and then table it until a new governor takes office in 2018. Either way, the bill would become a ballot measure to be approved by voters. Progress of the American Health Care Act in Washington, D.C. will impact SB 562 because the state bill would make use of state innovation waivers, which are slated to expand under the AHCA, but federal retooling of health care reform won’t impede SB 562’s progress to the Governor’s desk. Employers who offer health insurance as a benefit to attract and retain quality employees should be aware of the meaning and impact of this single-payer bill and should continue to track its progress.

 2) “Play or Pay” is still in play. The Affordable Care Act (ACA)’s “play or pay” penalties are still in place, so Applicable Large Employers are required to offer affordable, minimum value health insurance to eligible employees or pay a penalty. The current administration has suggested that they will reduce the penalties to $0 retroactive to 2016, but that has not happened yet. The 1094/1095 reporting requirements also remain in place. There has been some recent talk that penalty notices for 2015 and 2016 may be going out soon, perhaps first to the employers who have the largest penalty assessments.†  However, the Internal Revenue Service is also significantly understaffed so the availability of resources to enforce these penalties remains in doubt. Applicable Large Employers should continue to assess their play or pay options, track employee hours and offers of coverage, and complete 1094/1095 reporting for 2017. They should also address any penalty notifications from the IRS in a timely manner.

3) If there are no penalties, revenue has to come from another source. The extremely unpopular revenue-generating pieces of the ACA, including the individual mandate, the employer mandate, and the Cadillac Tax (currently delayed to 2020) are likely to be cut from the new AHCA, but that would create a shortfall in revenue that would need to made up elsewhere. The employer exclusion is a popular target in current discussions – this is the tax benefit that allows employer contributions to health insurance to be considered separate from employee income. If the employer exclusion is capped or eliminated, it will effectively increase taxes on the approximately 50% of U.S. residents who receive health insurance through their employers, and deliver a huge blow to the employer-sponsored health insurance system. Employers who offer health insurance as a benefit to attract and retain quality employees should be aware of the meaning and impact of capping or eliminating the employer exclusion.

4) 2018 Health insurance renewals will be business as usual. Insurance carriers filed their health insurance plan designs and rates with the regulatory agencies (Department of Insurance and Department of Managed Health Care) for 2018, so any substantive changes to plans (for example, removing Essential Health Benefits) won’t happen until 2019. For employers offering coverage, this means business as usual for 2018 health insurance renewals. Expect increases to premiums to average 10-15%. Also expect lots of plan changes – some plans may be discontinued and participants will be mapped to new plans; benefits many change even if plan names remain the same; carriers may reduce networks and pharmacy benefits and increase deductibles and out of pocket maximums to keep premiums in check.

5) Cost-containment tools are gaining in popularity. As out of pocket costs continue to increase for health insurance participants, we will continue to see a move towards consumer-driven health care, where participants are encouraged to be more involved in the spending of their health care dollars. Health Savings Accounts (HSAs) are growing in popularity again, carriers are providing tools to promote transparency for comparison shopping, and alternative delivery systems like telehealth, nurse on call, minute clinics, free-standing urgent care centers, and even flat-fee house calls are gaining in popularity. Health Reimbursement Arrangements (HRAs), self-funding arrangements and cash-benefit policies can also be effective tools for cost containment. Employers should work with their health insurance brokers and other benefit advisers to assess the value of these tools in their current employee benefits programs.

In closing, employer-provided health benefits rest on shifting legal sands and that is likely to remain the case for some time.   Planning opportunities, and pitfalls, will arise as the reform process moves forward and the informed employer will be in the best position to navigate the changes ahead.

†Hat tip to Ryan Moulder, Lead Counsel at Accord-ACA for this detail.

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Filed under Affordable Care Act, American Health Care Act, Applicable Large Employer Reporting, Benefit Plan Design, California Insurance Laws, California SB 562, Employer Shared Responsibility, Health Care Reform, Post-Election ACA, Single Payer Health Systems

The Emerging Benefit Trend of Student Loan Assistance

Employers are by now familiar with the scary statistics on mounting student loan indebtedness, including that approximately 71% of 2015 college seniors graduated with a student loan, and almost 80% of millennials believe that student loan debt will make it harder for them to meet their financial goals.  Per Mark Kantrowitz of Cappex.com, the average student loan balance increased by almost 50% between 2005 and 2015, and now hovers around $35,000 per graduate.

Large student loan debt impacts current employees and prospective new hires in many ways: it may cause rejection of a desired position or promotion due to income needs, it may postpone retirement plan participation due to cash flow needs, and it may delay or even rule out home ownership or starting families, leading to a less stable and community-involved workforce.

Employers want to be able to help mitigate some of the downside of high student loan debt among their employees, but their efforts are hindered by the fact that employer loan payments on behalf of an employee are currently taxable to the employee.

Several pieces of new legislation proposed for the 2017-2018 Congressional term encourage or facilitate employer assistance with student loan repayments through tax incentives. A survey of some of these measures follows:

The Higher Education Loan Payments (HELP) for Students and Parents Act (H.R. 1656)

  • This measure would permit employers to make up to $5,250 per year in tax-free student loan repayments on behalf of employees, and provide an employer tax credit based on 50% of contributions made within that dollar limit.
  • It would also permit employers to make up to $5,250 per year in the form of “qualified dependent 529 contributions” direct to employees’ tax-exempt tuition savings accounts set up on behalf of their children (up to age 19; students up to age 24), and would provide a corresponding 50% employer tax credit.
  • If passed it would thereby double the current $5,250 limit on employer education assistance under Internal Revenue Code (“Code) § 127.
  • Significant for smaller employers, the HELP for Students and Parents Act would treat sole proprietors and partners as employees for purposes of the excludible contributions.

The Student Loan Repayment Act (H.R. 615)

  • This bill would offer employers a 3-year business tax credit equal to 50% of startup costs for a student loan program (up to $500 per participating employee) under which the employer matches employees’ student loan repayments, up to $2,000 per year.
  • The startup costs are program creation costs, not amounts used for employer matching contributions.
  • The bill would also allow employers who hire “qualified student loan repayers” to claim the Work Opportunity Tax Credit, which encourages hiring of select populations such as veterans and recipients of certain types of public assistance. A “qualified student loan repayer” must have at least an associate’s degree, and outstanding education loans of at least $10,000.

The Student Loan Repayment Assistance Act (H.R. 108)

  • This bill would amend the Code to allow businesses a tax credit for employer-paid student loan repayments made direct to the lender, equal to 10% of the amounts that the employer pays on behalf of any employee, not to exceed $500 per employee per month.
  • The credit would be refundable for small businesses and non-profits who cannot use the credit against taxes.
  • The bill would require a written plan document, notice to employees, annual reporting to IRS and must be made “widely available” to employees (not discriminate in favor of “highly compensated employees”).

The Retirement Improvement and Savings Enhancement (RISE) Act of 2016

  • This measure took the form of a discussion draft in the 2014-2016 Congress but likely will be re-introduced in the current 115th Congress.
  • It would permit employers to make matching contributions to an employee’s 401(k) or SIMPLE IRA account based on his or her student loan repayments, essentially treating employee student loan repayment as equivalent of a 401(k) salary deferral.
  • Its retirement provisions would also curtail currently permissible IRA strategies including “mega Roth IRAs” and stretch IRAs, and would permit IRA contributions after reaching age 70 1/2.

As legislative efforts progress, vendors are already stepping in to the breach. Tuition.io provides a software interface that permits employer money to go direct to repay student loans, without going through employee pay.  The average employer contribution per paycheck is $50 – $200.   Other vendors include Student Loan Genius, PeopleJoy, Peanut Butter, and Gradifi.

One compliance question that these programs raise is whether student loan repayment programs would comprise ERISA plans, subject to trust and reporting requirements, or simply be viewed as “payroll practices” exempt from Title I of ERISA.  They do not provide retirement income or defer compensation to retirement age, thus would not likely be an ERISA pension plan, and do not provide benefits within the definition of ERISA “health and welfare” plans, so probably would not fall within ERISA’s scope.  This should help encourage formation of these programs by employers, as ERISA compliance burdens can be complicated and costly. Employers may still need to meet certain requirements in order to ensure tax-qualified status, however, as in the case of the Student Loan Repayment Assistance Act, which imposes documentation, notice and reporting duties.

Employers that want to address their employees’ student loan debt through workplace financial assistance can take the following steps to help select the program or policy that best suits their needs:

  • Talk to your recruiters and use other methods to estimate the student loan burden faced by your staff and new hire candidates.
  • Carefully evaluate various student loan aid vendors and identify those with the best fit for your organization.
  • Invest time in plan design and scheduling a roll out.
  • Remember that communication and ease of use are both key success factors.
  • Continue to monitor legislation for new assistance options.

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Filed under 401(k) Plans, Benefit Plan Design, IRA Issues

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.

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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

Using Forfeitures for Corrective Contributions: Look Before You Leap

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When a 401(k) plan fails nondiscrimination testing that applies to employee salary deferrals, one way to correct the failure is for the plan sponsor to make qualified nonelective contributions (QNECs) on behalf of non-highly compensated employees. The same approach may apply to matching contribution failures, but in that instance the corrective contributions are called qualified matching contributions or QMACs.   QNECs and QMACs must satisfy the same vesting and distribution restrictions that apply to employee salary deferrals – they must always be 100% vested and must not be allowed to be distributed prior to death, disability, severance from employment, attainment of age 59.5, or plan termination (i.e., they may not be used for hardship distributions).

Existing Treasury Regulations provide that QNEC and QMAC contributions must be 100% vested at when they are contributed to the plan, not just when they are allocated to an account.

Forfeitures are unvested employer contributions when originally contributed to the plan, and for this reason the IRS has taken the position that a plan sponsor may not use forfeitures to fund QNECs or QMACs. And in fact, the prohibition on using forfeitures to make QNECs or QMACs is reflected in the Internal Revenue Manual, and the IRS Employee Plans Compliance Resolution System (EPCRS) which outlines voluntary correction methods for plan sponsors.

On January 18, 2017, the IRS changed course by publishing a proposed regulation requiring that QNECs and QMACs be 100% vested only when they are allocated to an account, and need not be 100% vested when originally contributed to a plan. This means that forfeitures may be used to make QNECs and QMACs if the underlying plan document permits.  It would logically follow that other employer contributions that are not fully vested when made may be re-designated as QNECs to satisfy ADP testing for a plan year.

The proposed regulation is applicable for plan years beginning on or after January 18, 2017 (January 1, 2018 for calendar year plans) but may be relied upon prior to that date.

Caution is advised, however, for plan sponsors wanting to make immediate use of forfeiture accounts for QNECs and QMACs. First, they must confirm that their plan document does not prohibit use of forfeitures for this purpose.  In the author’s experience, master and prototype and volume submitter basic plan documents may expressly prohibit use of forfeitures for QNECs and QMACs.  The language below was taken from a master and prototype basic plan document:

7) Limitation on forfeiture uses. Effective for plan years beginning after the adoption of the 2010 Cumulative List (Notice 2010-90) restatement, forfeitures cannot be used as QNECs, QMACs, Elective Deferrals, or Safe Harbor Contributions (Code §401(k)(12)) other than QACA Safe Harbor Contributions (Code §401(k)(13)). However, forfeitures can be used to reduce Fixed Additional Matching Contributions which satisfy the ACP test safe harbor or as Discretionary Additional Matching Contributions.

Plan sponsors that locate a similar prohibition in their plan document should contact the prototype plan sponsor to determine whether they will be amending their plan document to permit use of forfeitures for QNECs and QMACs and when such an amendment will take effect.

In instances where there is no express plan prohibition, plan sponsors that are making use of EPCRS to correct plan failures should try to ascertain from the IRS whether or not they may use forfeitures to fund QNECs or QMACs as part of a self-correction or VCP application, as the most recently updated EPCRS Revenue Procedure (Revenue Procedure 2016-51, 2016-41 I.R.B. 465), expressly disallows this at Section §6.02(4)(c) and Appendix A §.03. Hopefully, the IRS will issue some guidance on this point without too much delay.

 

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Filed under 401(k) Plans, ADP and ACP Testing, Benefit Plan Design, Nondiscrimination Testing for Qualified Retirement Plans, Uncategorized

State Auto-IRA Programs: What Employers Need to Know

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California and four other states (Connecticut, Illinois, Maryland and Oregon) have passed legislation requiring employers that do not sponsor employee retirement plans to automatically withhold funds from employees’ pay, and forward them to IRAs maintained under state-run investment programs. Provided that these auto-IRA programs meet safe harbor requirements recently defined by the Department of Labor in final regulations, the programs will be exempt from ERISA and employers cannot be held liable for investment selection or outcome.  The DOL has also finalized regulations that would permit large cities and other political subdivisions to sponsor such programs where no statewide mandate exists; New York City has proposed its own such program, tentatively dubbed the New York City Nest Egg Plan.

In light of this growing trend, what do employers need to know about auto-IRA programs?   Some key points are listed below:

  1. Some Lead Time Exists. Even for state auto-IRA programs that become effective January 1, 2017 (e.g., in California and Oregon), actual implementation of employee contributions is pushed out to July 1, 2017 (in Oregon) and, in California, enrollment must wait until regulations governing the program are adopted. The California program, titled the California Secure Choice Retirement Savings Program, also phases in participation based on employer size. Employers with 100 or more employees must participate within 12 months after the program opens for enrollment, those with 50 or more within 24 months, and employers with fewer than 50 employees must participate within 36 months. These deadlines may be extended, but at present the earliest round of enrollment is anticipated to occur in 2019.
  2. Employer Involvement is Strictly Limited. The DOL safe harbor prohibits employer contributions to auto-IRAs and requires that employers fulfill only the following “ministerial” (clerical) tasks:
    • forwarding employee salary deferrals to the program
    • providing notice of the program to the employees and maintaining contribution records
    • providing information to the state as required, and
    • distributing state program information to employees.  Note that in California, the Employment Development Department will develop enrollment materials for employers to distribute, and in addition a state-selected third party administrator will collect and invest contributions, effectively limiting the employer role to forwarding salary deferrals.
  3. Employers Always Have the Option of Maintaining their Own Plan. Generally the state auto-IRA programs established to date exempt employers that maintain or establish any retirement plan (401(k), pension, SEP, or SIMPLE), even plans with no auto-enrollment feature or employer match used to encourage employee salary deferrals. Therefore employers need not be significantly out of pocket (other than for administrative fees) to avoid a state auto-IRA mandate. Employers should bear in mind that an employer-sponsored retirement program, even if only a SEP or SIMPLE IRA, helps to attract and retain valued staff, and should consider establishing their own plan in advance of auto-IRA program effective dates for that reason.
  4. Penalties May Apply. California’s auto-IRA program imposes a financial penalty on employers that fail to participate.   The penalty is equal to $250 per eligible employee if employer failure to comply lasts 90 or more days after receipt of a compliance notice; this increases to $500 per employee if noncompliance extends 180 or more days after notification. The Illinois auto-IRA program imposes a similar penalty.
  5. Voluntary Participation in Auto-IRA Program May Create an ERISA Plan. One of the requirements of the DOL safe harbor is that employer participation in auto-IRA programs (referred to as “State payroll deduction savings programs” be compulsory under state law. If participation is voluntary, an employer will be deemed to have established an ERISA plan. In theory, this rule could be triggered when an employer that was mandated to participate later drops below the number of employees needed to trigger the applicable state mandate (for instance, a California employer that drops below 5 employees), but continues to participate. The DOL leaves it to the states to determine whether participation remains compulsory for employers despite reductions in the number of employees.   The DOL also notes that, under an earlier safe harbor regulation from 1975, an employer that is not subject to state mandated auto-IRA programs can forward employees’ salary deferrals to IRAs on their behalf without triggering ERISA, provided that the employee salary deferrals are voluntary and not automatic.   The DOL final regulations can be read to suggest that a payroll-to-IRA forwarding arrangement that is voluntary and that meets the other requirements of the 1975 safe harbor will constitute a pre-existing workplace savings arrangement for purposes of exempting an employer from a state-mandated auto-IRA program.
  6. The Trump Administration Will Likely Support Auto-IRA Programs. Early and necessarily tentative conclusions are that the Trump Administration will continue to support the DOL’s safe harbor regulation exempting auto-IRA programs from ERISA, as well as other state-based efforts to address the significant savings gap now known to confront much of the country’s workforce.   One unknown variable is the degree to which the Trump Administration will be influenced by opposition to the programs mounted by the financial industry. Until the direction of the Trump Administration becomes clearer, employers that do not currently maintain a retirement plan should track auto-IRA legislation in their state or city and otherwise prepare to comply with a state or more local program in the near future, ideally by adopting their own retirement plan for employees.

 

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Filed under 401(k) Plans, 403(b) Plans, California Secure Choice Retirement Savings Program, ERISA, Fiduciary Issues, Payroll Issues, State Auto-IRA Programs

Post-Election ACA Prognosis

roadsignChange is the order of the day and that extends to the Affordable Care Act, arguably the signature legislative mark made by the Obama Administration.  In short, the ACA as we know it has a limited lifespan.  President-Elect Trump has pledged to repeal it and replace it with something better.  Even if we knew what that something better was, which we don’t, from a practical standpoint, a wholesale repeal of the law is unlikely as it would be subject to filibuster.  As an alternative, the law could be dismantled through the revenue reconciliation process, which is filibuster proof.  That process, however, is limited to provisions in the law that are revenue related such as the individual and employer mandates, premium tax credits, the insurer tax, and other measures meant to pay for the costs of the law, which include the insurance market reforms.  Those reforms, including most notably the prohibition on pre-existing condition exclusions, are not revenue-related but they are expensive for carriers to maintain.  So the Trump Administration and Congress will need to work together to find alternatives to the coverage mandates so that the popular market reforms remain financially viable for carriers.  In short, the legislative process of fixing and/or replacing the ACA will resemble a game of Jenga and like Jenga it will require time and patience.  In the short term, those subject to the law should be keeping their heads down and following the provisions of the law currently in place, including planning for ACA reporting for applicable large employers, due early in 2017.

Employers and the brokers and other benefit advisers who serve them will need more help in this environment than they would if the ACA just continued to unfold in its current form.  This blog remains committed to helping its audience weather the coming changes.

In the meantime, you can find more detailed information on the legislative measures described above, here and here.

 

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Filed under Applicable Large Employer Reporting, Employer Shared Responsibility, Individual Shared Responsibility, Post-Election ACA, PPACA, Pre-Existing Condition Exclusion, Premium Tax Credits