December 28th, 2015 § § permalink
Today (12/28) the Internal Revenue Service (IRS) sent out a belated Christmas present to employers and other plan sponsors when it announced it was delaying the 2016 Affordable Care Act reporting requirements. In Notice 2016-4 the IRS announced that the deadline for providing to individuals the 2015 Form 1095-B and Form 1095-C is delayed from February 1, 2016 to March 31, 2016. Similarly, the deadline for filing with the IRS Forms 1094-B and 1094-C is delayed from February 29 to May 31, 2016 for non-electric filers and from March 31 to June 30, 2016 for electronic filers.
Because of the delay, some employees will not receive their forms until after the April 15 tax filing deadline. The IRS indicates that these employees do not have to file an amended tax return. They should simply keep their forms in a file should they need them later.
This alert was prepared for Benico, Ltd. by Peter Marathas and Stacy Barrow. Mr. Marathas and Mr. Barrow are nationally recognized experts on the Affordable Care Act. Their firm, Marathas Barrow & Weatherhead LLP, is a premier employee benefits, executive compensation and employment law firm.This alert is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Benefit Advisors Network and its smart partners are not attorneys and are not responsible for any legal advice. To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.
© Copyright 2015 Benefit Advisors Network. All rights reserved.
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August 18th, 2015 § § permalink
The IRS has released draft 2015 instructions for the B-Series and C-Series reporting forms (Forms 1094-B, 1095-B, 1094-C and 1095-C) that will be used by employers and coverage providers to report certain information to full-time employees and the Internal Revenue Service (IRS).
By way of background, the Affordable Care Act (ACA) added Sections 6055 and 6056 to the Internal Revenue Code. These new sections require employers, plans, and health insurance issuers to report health coverage information to the IRS and to participants annually. The Section 6055 reporting requirements apply to insurers, employers that sponsor self-insured group health plans, and other entities that provide minimum essential coverage (such as multiemployer plans). The Section 6056 reporting requirements apply to “applicable large employers” or “ALEs” (generally, employers with 50 or more full-time employees) and require reporting of health care coverage provided to the employer’s full-time employees.
Reporting under Sections 6055 and 6056 will involve one or both of two sets of forms – the “B-Series” (Forms 1094-B and 1095-B) and the “C-Series” (Forms 1094-C and 1095-C). Each set of forms includes a transmittal form (Forms 1094-B and 1094-C), which serves as a cover page and provides aggregate information, and an individualized form (Forms 1095-B and 1095-C) for each employee for whom the employer is required to report.
ACA reporting became mandatory for responsible entities starting in 2015. The first forms will be provided in early 2016 reflecting the 2015 calendar year. The forms that must be filed and distributed depend on whether the employer is an ALE and the type of coverage provided. Employers filing 250 or more of a particular form are required to file with the IRS electronically. The following table summarizes the responsible parties and forms applicable to the ACA’s reporting requirements.
||Fully Insured Plan
|Applicable Large Employer (ALE)50 or more full-time equivalent employees on average in prior calendar year
||Forms 1094-C and 1095-C(Parts I and II of Form 1095-C)
||Forms 1094-C and 1095-C(Parts I, II and III of Form 1095-C)
Either B-Series or C-Series Forms for covered non-employees
|Non-ALEFewer than 50 full-time equivalent employees on average in prior calendar year
||Not required to file
||Forms 1094-B and 1095-B
||Forms 1094-B and 1095-B
2015 Draft Instructions
The draft forms and instructions can be found here:
Highlights of changes/clarifications contained in the draft forms and instructions are discussed below.
- Form Revisions. For 2015, form 1094-C is reorganized to move line 19 (the Authoritative Transmittal question) into Part I of the form. Line 23 of Part III of form 1094-C is also revised to allow for an entry in the “All 12 Months field.” Form 1095-C is revised to include a first month of the plan year indicator (plan start month) in Part II and “Covered Individuals Continuation Sheet” in Part III.
- Increased Penalties. The draft instructions reflect the newly increased penalty structure (generally increasing penalties from $100 per return to $250 per return, and increasing the penalty cap from $1.5M to $3M).
- Hand Delivery. The draft instructions clarify that hand delivery is an acceptable method of delivery. Electronic delivery is permissible with the recipient’s affirmative consent.
- ALE Determination Transition Relief. The draft instructions reiterate that employers may determine their ALE status for 2015 over a period of at least six consecutive months in 2014 (rather than having to use the entire calendar year when determining average employee count).
- COBRA Coverage (for Terminating Employees). The instructions provide that COBRA coverage offered to a terminating employee is reported as an offer of coverage only if the terminating employee enrolls in COBRA. If the former employee does not enroll in COBRA, the employer should use code 1H in line 14 of form 1095-C (the “no offer” code) even if the employee’s spouse or dependent enrolls in COBRA.
- COBRA Coverage (for Reductions in Hours). The instructions provide that COBRA coverage offered to an employee who has experienced a reduction in hours that resulted in a loss of coverage under the plan is reported in the same manner and using the same code as an offer of that type of coverage to any other active employee.
- Multiemployer Plans. The draft instructions provide relief for employers reporting on offers of coverage made under a multiemployer plan. The instructions direct ALEs to use code 1H on line 14 of form 1095-C for any month for which the employer enters code 2E on line 16 of form 1095-C (indicating that the employer is eligible for relief under the interim guidance for multiemployer plans). This allows employers to enter Code 1H regardless of whether coverage was actually offered under the multiemployer plan (in case the employer is unable to obtain such information from the multiemployer plan).
- Filing Extensions (for Returns to the IRS). Employers may obtain automatic extensions of time to file the applicable returns with the IRS; however, extensions of time to provide the employee statement (e.g., 1095-B or 1095-C) are more limited. The draft instructions provide that entities filing form 8809 before the returns are due are granted an automatic 30-day extension. An additional 30-day hardship extension may be requested (see the instructions for form 8809 for more information).
- Filing Extensions (for Employee Statements). Thedraft instructions allow employers to request an extension of time to furnish the employee statements by sending a letter to the IRS. The letter must include certain identifying information (e.g., filer name, address and TIN) along with the reason for the delay. The request must be postmarked by the date on which the statements are due to the recipients. If approved, the extension will generally be for a maximum of 30 days.
- Waiver of Electronic Filing Requirement. The draft instructions allow employers to request a waiver from having to file information returns electronically via Form 8508. The form must be filed at least 45 days before the due date of the returns. An employer cannot apply for a waiver for more than one year at a time.
Employers should continue to work closely with their insurance broker and other trusted advisors when determining how their organization will address these new requirements.
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August 18th, 2015 § § permalink
The Internal Revenue Service, U.S. Department of Labor, and Health and Human Services (the “Agencies”) have released final regulations on several aspects of the Affordable Care Act’s (ACA’s) preventive care requirements. The regulations finalize prior guidance on coverage of preventive services and define standards regarding a “closely held” for-profit entity’s decision not to provide coverage for contraceptive services. The final regulations are effective for plan years beginning on or after September 14, 2015.
The final regulations related to the coverage of preventive services generally follow prior guidance and contain relatively few changes. Additions include standards to ensure that when a recommended preventive service is downgraded mid-year, a plan generally must continue coverage for the service with no cost sharing through the end of the plan year.
Most notably, the regulations finalize the definition of “closely held” for purposes of determining whether a for-profit entity whose owners have a religious objection to providing coverage for some or all contraceptive services qualifies for an “accommodation” (i.e., an exemption) from the contraceptive coverage requirement. Under the ACA, non-grandfathered group health plans must provide coverage for all FDA-approved contraceptive methods prescribed by a physician, unless a religious exemption applies.
Accommodation for Closely Held For-Profit Entities
In response to the U.S. Supreme Court’s decision in the Hobby Lobby case in 2014, the Agencies released proposed regulations that solicited comments on expanding the availability of an accommodation previously reserved for non-profit organizations to closely held for-profit organizations that have a religious objection to providing coverage for certain contraceptive services.
The final regulations confirm the availability of the accommodation for closely held for-profit organizations and establish parameters for the types of for-profit entities that can be considered “closely held.” To be considered a closely held for-profit entity, the entity:
- Must not be a non-profit organization;
- Cannot have any publicly traded ownership interests; and
- Must have more than 50% of the value of its ownership interest, owned directly or indirectly by five or fewer individuals.
For these purposes, ownership interests held by family members are treated as being owned by a single individual. Family members are limited to brothers and sisters (including half-brothers and half-sisters), a spouse, ancestors, and lineal descendants. Also, ownership interests owned by a nonprofit entity are considered to be owned by a single owner. In other words, any for-profit entity that is controlled directly or indirectly by a nonprofit eligible organization may be eligible for an accommodation because the nonprofit entity will represent one shareholder that owns more than 50% of the ownership interests in the for-profit entity.
Under the final regulations, eligible employers may avail themselves of either of two accommodation options identified in prior guidance. An eligible employer may file EBSA Form 700 with its insurance carrier or TPA, or simply notify HHS in writing of its religious objection to providing coverage for contraceptive services. The Agencies will work with insurers and TPAs to ensure that participants will receive separate payments for contraceptive services, with no additional cost to the participant or involvement by the employer.
Employers that wish to confirm their eligibility for an accommodation may send a letter describing their ownership structure to HHS at email@example.com. If they do not receive a response from HHS within 60 calendar days, and the letter properly described the entity’s current ownership structure, then as long as the entity maintains that structure, it will be considered to have satisfied the 50% ownership test.
In terms of documenting an eligible organization’s intent to avail itself of an accommodation, the organization’s highest governing body (such as its board of directors, board of trustees, or owners, if managed directly by the owners) must adopt a resolution (or take other similar action consistent with the organization’s applicable rules of governance and with state law) establishing that the organization objects to covering some or all of the contraceptive services on account of its owners’ sincerely held religious beliefs.
The final regulations generally rely on current notice and disclosure standards and do not establish any additional requirements to disclose the decision. Current standards require that, for each plan year to which the accommodation applies, an issuer or TPA that is required to provide coverage for contraceptive services, provide to participants written notice of the availability of separate payments for these services contemporaneous with (to the extent possible), but separate from, any application materials distributed in connection with enrollment or re-enrollment in health coverage. Model language for this notice is provided in the regulations.
Lastly, the regulations do not require eligible organizations to operate in a manner consistent with religious principles or “hold themselves out” as religious organizations. The Supreme Court’s decision in Hobby Lobby discussed the application of the Religious Freedom Restoration Act (“RFRA”) in connection with the religious beliefs of the owners of a closely held corporation. The Final Regulations likewise focus on the religious exercise of the owners of the closely held entity and provide that the entity, in advancing the religious objection, represent that it does so on the basis of the religious beliefs of the owners. The Agencies do not require that the entity itself demonstrate by its bylaws, mission statement, or other documents or practices that it has a religious character.
Eligible employers that wish to consider opting out of providing coverage for some or all contraceptive services should consult with their insurance broker or employee benefits attorney to ensure that they meet the requirements for an accommodation and document their intent accordingly.
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August 17th, 2015 § § permalink
On July 31, 2015, the Internal Revenue Service (“IRS”) released Notice 2015-52 (the “Notice”), the second installment in the IRS’s process of developing regulatory guidance regarding the ACA’s “excise tax on high cost employer-sponsored health coverage” – commonly known as the “Cadillac tax.” The Cadillac tax applies starting in 2018, and imposes a 40% nondeductible excise tax on the aggregate cost of “applicable employer-sponsored coverage” in excess of certain statutory limits ($10,200 for self-only coverage and $27,500 for coverage other than self-only).
The first piece of IRS guidance on the Cadillac tax was Notice 2015-16, which was released in February 2015. This Notice is intended to supplement Notice 2015-16 by addressing additional issues under the Cadillac tax, including identifying the entities that may be liable for the tax, how to allocate the tax among aggregated entities (e.g., entities within the same tax controlled group), and how to pay the tax. After considering the comments on both notices, the IRS intends to issue proposed regulations, which will provide further opportunity for comment. The IRS did not provide a timeframe for when proposed regulations might be released. The following summarizes key points from the Notice.
Cadillac Tax Liability
In general, in the case of coverage provided under an insured group health plan, the insurance carrier is responsible for any tax that might apply. With respect to coverage under a health savings account (“HSA”) the employer is responsible for any tax that might apply. For self-insured plans, the entity liable for any tax is “the person that administers the plan benefits.” However, that phrase is not defined in the law, nor is it used elsewhere in the ACA or ERISA. Therefore, the IRS is considering two alternative approaches to determining the identity of the “person that administers the plan benefits.”
The “Claims Administrator” Approach
Under one approach, the entity that is responsible for performing the day-to-day functions that constitute the administration of plan benefits, such as receiving and processing claims for benefits, responding to inquiries, or providing a technology platform for benefits information would be the responsible entity. The IRS anticipates that this entity generally will be a third-party administrator (“TPA”) for self-insured plans, unless the plan is self-administered by the employer or the employer owns the TPA (which is rare). It is anticipated that in most cases, it should be fairly easy to identify the responsible entity under this approach; however, it may be more complicated when the plan uses a separate vendor for pharmacy benefits or mental health benefits, but uses one rate when determining the cost of coverage. The Notice requests comments on this issue and any other concerns this approach would raise.
The “Plan Sponsor” Approach
Under the second approach the IRS is considering, the responsible entity would be the entity that has the ultimate authority or responsibility with respect to the plan administration (including final decisions on administrative matters), regardless of whether that person routinely exercises that authority or responsibility. For this purpose, relevant administrative matters could include eligibility determinations, claims administration, and arrangements with service providers (including the authority to terminate service provider contracts). The IRS anticipates that the entity with such ultimate administrative authority or responsibility would be identifiable based on the terms of the plan and often would not be the entity that performs the day-to-day routine administrative functions under the plan. In other words under this approach the responsible entity would generally be the employer. The IRS requests comments whether this approach would allow easy identification of the responsible entity or whether this approach might raise other issues.
The Cadillac tax provides that all employers treated as a single employer for federal tax purposes are treated as a single employer. This is the same standard that applies when determining if an employer is a member of an “aggregated ALE group” for purposes of the ACA’s employer reporting requirements. The Notice requests comments on the application of the employer aggregation rules for identification of (1) coverage “as made available by an employer;” (2) the employees taken into account for the age and gender adjustment, and the adjustment for employees in high risk professions; (3) the entity responsible for calculating and reporting the tax; and (4) the employer liable for any penalty for failure to properly calculate the tax.
Cost of Applicable Coverage
The Cadillac tax is expected to apply on a calendar year basis, regardless of plan year. To calculate the amount of any tax due for the year, an employer must determine the extent to which the cost of coverage provided to an employee during any month exceeds the dollar limit. The employer then must notify both IRS and the coverage provider of the amount of the excess benefit, and the tax must be paid by the coverage provider (the insurance carrier, TPA or employer). The IRS anticipates that the employer notification will occur sufficiently soon after the end of the year to enable coverage providers to pay any applicable tax in a reasonably timely manner.
The Cadillac tax statute provides that the cost of coverage is to be determined using rules “similar to the rules” used for determining the COBRA premiums. The Notice requests further comments on any issues raised by the anticipated need to determine the cost of coverage reasonably soon after the end of the year.
The IRS anticipates that the potential timing issues are likely to be different for insured plans and self-insured plans, and will also be different for HSAs, health flexible spending arrangements (FSAs), and health reimbursement arrangements (HRAs). For example, with respect to a health FSA or HRA that operates on a calendar year basis, the cost may be determinable only after the end of the calendar year and a subsequent run-out period during which employees may submit claims for reimbursement. In that case, an employer will need additional time to compute the cost of coverage before it can calculate any excess benefit for each employee and allocate it among coverage providers. The IRS also requests comments on how payments related to experience-rated contracts may impact the timing of an employer’s calculation and allocation of any excess benefit.
Pass-Through of Tax to an Employer
The IRS recognizes that in some cases, a coverage provider such as an insurance carrier or TPA may seek to pass the amount of any Cadillac tax through to the employer. If the coverage provider is reimbursed for the tax, the reimbursement will be additional taxable income to the coverage provider. This is known as the “Cadillac tax reimbursement.”
It is also anticipated that the amount passed through may include an amount to account for the additional income tax the coverage provider will incur. This is known as the “income tax reimbursement.”
The IRS anticipates that the amount of any Cadillac tax reimbursement should be excluded from the cost of applicable coverage (i.e., it should not be counted when determining if the cost of coverage exceeds the threshold). It is expected that future regulations will reflect this interpretation. The IRS requests comments on whether some or all of the income tax reimbursement could be excluded from the cost of applicable coverage, and how such an exclusion might be administered, given the potential variability of tax rates and other factors among different coverage providers.
The IRS also anticipates that coverage providers would be permitted to exclude the amount of any Cadillac tax reimbursement or income tax reimbursement only if it is separately billed and identified as attributable to the cost of the Cadillac tax. Separately billed amounts in excess of the Cadillac tax reimbursement or the income tax reimbursement could not be excluded from the cost of coverage.
Income Tax Reimbursement Formula
If the IRS concludes that an income tax reimbursement can be excluded from the cost of coverage, it is anticipated that the amount of the income tax reimbursement would be determined using a formula commonly used to calculate “tax gross-ups.” Under the formula, the amount of the income tax reimbursement that would be excludable from the cost of coverage would be equal to the amount of the tax divided by (1 – [coverage provider’s marginal tax rate]) minus the amount of the tax. For example, if the amount of the Cadillac tax due is $1,000 and the coverage provider’s marginal tax rate is 20%, the gross up would be $1,000 / (1 – 0.2) – $1,000, or $250.
If it is determined that an income tax reimbursement can be excluded from the cost of coverage, the IRS is considering two possible approaches for applying the formula described above. The first approach would use the coverage provider’s actual marginal tax rate in the formula. This approach could provide greater flexibility to taxpayers, but also could create administrative difficulties, as a coverage provider’s marginal tax rate may change from year to year (including potential retroactive changes due to amended returns, audits, or other circumstances), and may be determined based on its fiscal year rather than the calendar year basis which applies to the Cadillac tax.
The second approach involves applying a standard marginal tax rate based on typical marginal tax rates applicable to different types of health insurance issuers.
Allocation of Contributions to HSAs, FSAs, HRAs
Under the ACA, coverage subject to the Cadillac tax includes coverage under certain HSAs, FSAs, or HRAs. The IRS is considering an approach under which contributions to account-based plans would be allocated on a pro-rata basis over the period to which the contribution relates (generally, the plan year), regardless of the timing of the contributions during the period.
For example, if an employer contributes an amount to an HSA for an employee for a plan year, That contribution would be allocated ratably to each calendar month of the plan year, regardless of when the employer actually contributes the amount to the HSA. Similarly, if an employee elects to contribute to an FSA for a plan year, the employee’s total contributions would be allocated ratably to each calendar month of the plan year, even though the entire amount contributed for the plan year would be available to reimburse qualified medical expenses on the first day of the plan year. Comments are requested on this approach as well as alternative approaches.
Cost of Applicable Coverage under FSAs with Employer Flex Credits
In general, the cost of coverage of a health FSA for any plan year would be the greater of the amount of an employee’s salary reduction or the total reimbursements under the FSA. Under this general rule, in determining the portion of the cost of coverage attributable to non-elective flex credits (employer FSA contributions), the cost of the non-elective flex credit would be the amount that is actually reimbursed in excess of the employee’s salary reduction election for that plan year. For example, if an employee elects to contribute $1,000 to a health FSA for the plan year and the employer makes a non-elective flex credit of $500 available to the employee, but the employee only has $1,200 in reimbursable medical expenses that year, the cost of coverage for the FSA for the plan year would be $1,200 (comprised of the $1,000 salary reduction plus the additional $200 in reimbursements attributable to the non-elective flex credit provided by the employer) rather than the full $1,500 elected or available under the FSA for the plan year.
With regard to FSA carryovers, the IRS is considering providing a safe harbor under which unused amounts that are carried forward would be taken into account when initially funded by salary reduction but would be disregarded when used to reimburse expenses in a later year. For example, if an employee elected to reduce his salary by $1,200 to contribute to an FSA in a given year, the FSA’s cost of coverage in that year would be $1,200 regardless of the actual amount of reimbursements. Accordingly, if that same employee carried over $500 of unused funds that were used to reimburse expenses in the second year, and elected no new salary reduction for the second year, the FSA’s cost of applicable coverage in the second year would be $0. It is anticipated that this safe harbor approach would be limited to cases in which the employer is not making non-elective flex credits available for use in the FSA.
The IRS is also considering a variation to the safe harbor to address situations in which non-elective flex credits are available under a cafeteria plan that includes an FSA. Under the variation, an FSA could be treated as funded solely by salary reduction if the amount elected by the employee for the FSA was less than or equal to the maximum permissible employee contribution to an FSA. For example, if an employee with a $1,000 non-elective flex credit available reduces salary by an additional $5,000 under a cafeteria plan and allocates $2,550 to the FSA, the FSA would be treated as funded solely by salary reduction. As a result, the cost of coverage would be $2,550. Comments are requested on the allocation of FSA amounts between non-elective flex credits and salary reduction when the total election for the FSA exceeds the maximum salary reduction amount permitted by law (e.g., $2,550 for plan years beginning in 2015).
Inclusion of Self-Insured Coverage Includible in Income
The Cadillac tax includes coverage under any group health plan made available to the employee by an employer that is excludable from the employee’s gross income. In general, employer-provided coverage under a health plan is excludable from an employee’s gross income. In addition, the reimbursements for medical expenses received by the employee are also excluded unless the reimbursements are paid to a highly-compensated individual (“HCI”) under a self-insured plan that discriminates in favor of HCIs.
Under the ACA, certain employers must report the aggregate cost of employer-provided coverage on the Form W-2 (generally those who issued 250 or more W-2s in the prior year). Current IRS guidance (Notice 2012-9) permits employers to reduce the amount reported on the Form W-2 by any excess reimbursement included in gross income due to the rules applicable to self-insured plans.
Although excess reimbursements currently can be excluded from the cost reported on the Form W-2, the IRS intends to modify Notice 2012-9 (its guidance on the ACA’s W-2 reporting requirement) to make excess reimbursements subject to the W-2 informational reporting and that the forms and instructions will be modified to reflect this change. Notice 2012-9 should be followed until modification is issued.
The effect of this provision is that although an HCI is taxed on the value of the discriminatory coverage, that value of that coverage is includible for Cadillac tax purposes.
Age and Gender Adjustment to the Dollar Limit
The Cadillac tax contains two baseline per-employee dollar limits for 2018 ($10,200 for self-only coverage and $27,500 for other than self-only coverage) but the law also provides that various adjustments will apply to these amounts, including an increase based on the age and gender characteristics of all employees of an employer, determined separately for self-only coverage and other than self-only coverage. The IRS intends to publish adjustment tables to facilitate and simplify the calculation of the age and gender adjustment.
Notice and Payment
The employer must notify both IRS and the coverage provider of the amount of the excess benefit, and the tax must be paid by the coverage provider (the insurance carrier, TPA or employer). The law provides that each coverage provider is liable for the excise tax on its applicable share of the excess benefit, but does not specify the time and manner in which the excise tax is paid. The IRS is considering using Form 720 as the method for payment of the tax.
Employer Action Steps
As with the first Notice, this latest guidance does not provide a great deal of concrete guidance. However, it offers further insight into the IRS’s intended approach to implementation. It also presents an opportunity for practitioners to provide comments to the IRS for consideration. Public comments on these issues are due by October 1, 2015.
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June 25th, 2015 § § permalink
Employers that sponsor self-insured group health plans, including health reimbursement arrangements (HRAs) should keep in mind the upcoming July 31, 2015 deadline for paying fees that fund the Patient-Centered Outcomes Research Institute (“PCORI”). As background, PCORI was established as part of health care reform to conduct research to evaluate the effectiveness of medical treatments, procedures and strategies that treat, manage, diagnose or prevent illness or injury. PCORI fees were first due by sponsors of self-insured group health plans and insurers last July for plan and policy years that ended on or after October 1, 2012. Under health care reform, most employer sponsors and insurers will be required to pay PCORI fees until 2019.
The amount of PCORI fees due by employer sponsors and insurers is based upon the number of covered lives under each “applicable self-insured health plan” and “specified health insurance policy” (as defined by regulations) and the applicable plan or policy year.
- For plan years that ended between January 1, 2014 and September 30, 2014, the fee is $2.00 per covered life and is due by July 31, 2015.
- For plan years that ended between October 1, 2014 and December 31, 2014, the fee is $2.08 per covered life and is due by July 31, 2015.
- The fee will be paid by July 31, 2016 for any plan years ending in 2015.
- NOTE: The insurance carrier is responsible for paying the PCORI fee on behalf of a fully insured plan. The employer is responsible for paying the fee on behalf of a self-insured plan, including an HRA.
Historical information for prior years:
- For plan years that ended between October 1, 2012 and December 31, 2012, the fee was $1 per covered life and was due by July 31, 2013.
- For plan years that ended between January 1, 2013 and September 30, 2013, the fee was $1 per covered life and was due by July 31, 2014.
- For plan years that ended between October 1, 2013 and December 31, 2013, the fee was $2 per covered life and was due by July 31, 2014.
The fee-amount per covered life generally increases each year based upon health expenditure data released by the Department of Health and Human Services annually. Employers that sponsor self-insured group health plans should report and pay PCORI fees using IRS Form 720, Quarterly Federal Excise Tax Return.
Final regulations issued by the Internal Revenue Service contain special rules regarding the types of plans and policies for which fees are due and also include several different methods that may be used by employers to determine the number of covered lives under each plan. There are additional rules for counting the number of covered lives under an HRA (in general, the fee applies on a per-covered employee basis for HRAs). Employers that sponsor self-insured plans should review these rules closely to ensure that the correct PCORI fees are paid.
Note that because the PCORI fee is assessed on the plan sponsor of a self-insured plan, it should not be included in the premium equivalent rate that is developed for self-insured plans if the plan includes employee contributions. However, an employer’s payment of PCORI fees should be tax deductible as an ordinary and necessary business expense.
HR & Legal Alerts Archive
Contact Benico, Ltd. at 888-669-4883 or www.benico.com
This alert was prepared for Benico, Ltd. by Peter Marathas, an ERISA and Executive Compensation lawyer with over 20 years’ experience assisting clients nationally with benefits and compensation matters. He is a partner at Marathas Barrow & Weatherhead LLP, a premier employee benefits, executive compensation and employment law firm. He can be reached at firstname.lastname@example.org or (617) 830-5456.
The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and out lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency and Marathas Barrow & Weatherhead LLP are not obligated to provide updates on the information presented herin. Those reading this alert are encouraged to seek direct counsel on legal questions.
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June 11th, 2015 § § permalink
Thursday, June 24, at 2 PM ET / 1 PM CT, John Garven, President of Benico Ltd., and Bobbi Kloss, Director of Human Resources Management Services for the Benefit Advisors Network, will be conducting a webinar addressing this topic.
Ask yourself these questions…
- Is my company / organization an “Applicable Large Employer” (ALE) subject to the Affordable Care Act’s Employer Shared Responsibility provision? If “yes”, then…
- Do we employ variable hour or temporary employees? If yes, then…
- Have we conducted a look-back analysis to determine which variable hour employees must be offered benefits, and have we established measurement, stability and administrative periods for tracking them?
- Are we prepared to deal with the reporting requirements during 1Q2016 under Sections 6055 and 6056 of the Internal Revenue Code?
If you do not yet have a process in place for managing this aspect of compliance, then please register. Even if you feel that you are in pretty good shape with your compliance efforts, still consider registering if for no reason other than to reinforce your understanding of the law’s requirements.
To register, visit our webinars page.
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May 12th, 2015 § § permalink
The U.S. Small Business Administration and the U.S. Small Business Majority (a national nonprofit advocacy organization) will continue their Affordable Care Act 101 Webinar Series for small businesses. The hour-long webinars will take place every other Thursday through June, and two Spanish-language webinars will be available.
The series is designed to help business owners understand key pieces of the law, including the small business health care tax credit, employer shared responsibility (“pay or play”), updates regarding the small business health insurance marketplace (SHOP), and resources available for small businesses interested in learning more about the law. The same webinar is offered each time.
The webinars will take place on the following dates:
Spanish-Language Webinars Also Available
The Spanish-language webinars will take place on the following dates:
After registering, you will receive a confirmation email with all of the information needed to access the webinar by telephone. A brief question and answer period will follow each presentation.
March 24th, 2015 § § permalink
In February 2015, the IRS released final forms and instructions related to information reporting under the Affordable Care Act (the “ACA”). These forms include Form 1095-B, Health Coverage, Form 1094-B, Transmittal of Health Coverage Information Returns, Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, and Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage.
The issuance of the final forms is a critical step in implementing the ACA’s reporting requirements, which enable the government to track compliance with the individual and employer mandates, and to determine eligibility for premium tax credits used to purchase health insurance coverage through a Health Insurance Marketplace (the “Marketplace”). Read more
March 10th, 2015 § § permalink
The Affordable Care Act (ACA) created new reporting requirements under Internal Revenue Code (Code) Sections 6055 and 6056, and the clock is ticking! Under these new reporting rules, certain employers must provide information to the IRS about the health plan coverage they offer (or do not offer) to their employees. The additional reporting is intended to promote transparency with respect to health plan coverage and costs. It will also provide the government with information to administer other ACA mandates, such as the large employer shared responsibility penalty and the individual mandate.
Click here do download the ACA Reporting Responsibilities information sheet and timeline.
June 4th, 2014 § § permalink
On Tuesday, June 3rd, the IRS issued a revised Form 720 and instructions for filing the PCORI fees by July 31, 2014. Filers will enter covered-lives counts and applicable rates ($1 for plan years ending before Oct. 1, 2013; $2 for plan years ending on or after Oct. 1, 2013) in Part II of Form 720 (line 133) to calculate the amount owed.
Instructions include a table for use by filers with plans or policies subject to both the $1 and $2 applicable rates. Though Form 720 is generally used for quarterly excise taxes, PCORI filers remit that fee annually – by July 31 – and complete only line 133 (unless also submitting excise taxes).
Under the Affordable Care Act, the PCORI fee applies to each plan or policy year that ends after Sept. 30, 2012, and before Oct. 1, 2019.
Link to a copy of Form 720:
Link to instructions to Form 720:
May 22nd, 2014 § § permalink
On May 1, 2014, CMS released the most detailed exchange enrollment analysis to date. The analysis includes data from October 1, 2013- April 19, 2014.
- 8,019,763 people selected marketplace plans from October 1, 2013 through April 19, 2014.
- Nearly 2.6 million signed up via state-based exchanges, and there were over 5.4 million plan selections via the federally facilitated and partnership marketplaces.
- About 3.8 million people were procrastinators and enrolled from March 2-April 19.
- Of the more than 8 million:
- 54% female, 46 % male
- 63% Caucasian, 17% African-American, 11% Latino, and 8% Asian
- 34% < 35 years old;
- 28% are between 18 and 34 years of age;
- 65% selected a Silver plan;
- 20% went with a Bronze plan; and
- 85% were eligible for a premium tax credit
Being a red state or a blue state didn’t really matter. More than a third of the sign-ups came from three states with large numbers of uninsured residents. California had 1.4 million of its citizens sign up, whereas Florida and Texas brought in 980,000 and 730,000 enrollees respectively. The next closest states were New York and North Carolina, which each signed up more than 350,000 residents.
The states that enrolled the smallest % of their uninsured populations were Iowa, South Dakota, and Massachusetts.
May 13th, 2014 § § permalink
John Garven PPACA speech (May 1, 2014)
I was privileged to be asked to speak at the 43rd Annual Mini-Institute for the Central Illinois Society of Financial Service Professionals on May 1st in Bloomington, Illinois on the subject of “Health Care Reform – Challenges and Opportunities”. Basically the speech provided a retrospective (what’s occurred to date), perspective (what’s currently in play), and prospective (what things may look like in the near and longer terms) around the Patient Protection & Affordable Care Act (PPACA). Since it was geared to financial advisors, the takeaways address the sorts of things that advisors should be speaking with their clients about as it relates to the law and its impact on their lives and businesses.
March 3rd, 2014 § § permalink
At the end of 2013 many companies and organizations with less than 50 employees did something called an “early renewal” with their group health insurance plans as a means of kicking the can down the road, many until December 1, 2014, to defer their compliance with Health Care Reform for up to 11 months. The principal reason for doing such in most cases was to avoid a significant rate increase at the end of 2013 with the thought of “Let’s buy some time”.
QUESTION – If your company is one of these companies that bought some time by doing an early renewal, what is your strategy at the end of 2014 for reasonably managing costs of complying then?
Did you know that there are viable group health insurance financing options available in the market to help you avoid the Health Care Reform “cost conundrum” later this year when your company’s / organization’s group plan renews? Self-insurance either with an insurance company or third party administrator (TPA) providing plan administration and purchasing catastrophic insurance coverage called “stop loss insurance” will, no doubt, be a solution for many small employers wrestling with this issue this year.
Self-insured medical plans are exempt from some of the more onerous provisions of Health Care Reform, such as the Health Insurance Tax (HIT) and Modified Community Rating. Avoiding these two aspects of Health Care Reform alone can result in saving tens and even potentially hundreds of thousands of dollars of expense.
Benico, Ltd. provides private companies, public sector employers, and not-for-profit organizations of all sizes with strategic advice around the design, risk management, communication, and enrollment of their health and welfare plans and with compliance around the laws and regulations relating to the same. To discuss your company’s situation, please contact Benico’s principal, John Garven, at 847-669-4800, ext. 202.
March 3rd, 2014 § § permalink
The purpose of this blog post is to provider our readers with some perspective about where things currently stand and where they are headed this year with regard to the timing and types of guidance around the Affordable Care Act (“ACA”, aka “ObamaCare”) that we should expect to receive from the federal agencies having jurisdiction (principally HHS, DOL, and the IRS).
First, we believe everyone will agree that February was a VERY BUSY MONTH with regard to ACA guidance. To this point, the final regulations around the employer mandate were released on Monday, February 10th. Following are our thoughts about this development:
1) Generally speaking, we are sure the fact of the delay for compliance with the employer mandate until 2016 for businesses / organizations having less than 100 but more than 50 full-time equivalent employees (FTEs) will at least come as welcome news in the short term.
2) Perhaps even as significant as the 1st point, though, is the transitional relief afforded businesses / organizations having 100 or more FTEs under Section 4980H(a) of the law. Specifically, larger employers next year will NOT be subject the $2,000-per-employee “no coverage” penalty if they, in fact, offer compliant, “qualified” coverage to at least 70% of their full-time employees. This is a change from the proposed rule, under which employers would have had to offer coverage to at least 95% of their full-time employees right away.
3) It should be kept in mind that next year under the 70% standard and, in 2016 and thereafter under the 95% standard for all “applicable large employers” (businesses / organizations with 50 or more FTEs), employers may still be subject to an “affordability” penalty of $3,000 for any otherwise eligible employee who obtains government-subsidized coverage through the public exchange.
4) It should also be kept in mind by businesses / organizations that the “no coverage” and “affordability” penalties are excise taxes, meaning that they’re NOT deductible business expenses for tax purposes.
5) There is some helpful guidance in the final regulations around seasonal employees who may be excluded entirely if they work less than 6 months as well as for educational employees.
Second, we anticipate that the rest of 1Q2014 will prove to be a very important period in terms of guidance and developments, including the final stretch before the end of the Marketplace open enrollment period on March 31st. It was recently reported that there are 56 active items of ACA guidance currently in the works between the IRS, DOL, and HHS. 43 of the 56 items are expected to be released during 2014, and several of them are frankly needed very soon. In addition, the continued Congressional negotiations on the debt ceiling and the federal budget could have ACA implications.
Finally, just a note that our firm offers the following “on-demand” Health Care Reform (HCR) resources:
- Inform on Reform© is an HCR compliance resource provided exclusively by the Smart Partner® member firms of the Benefit Advisors Network and its Compliance Director, Peter Marathas, a Partner in the Employee Benefits, Executive Compensation & ERISA Litigation Practice Center of Proskauer Rose, LLP. You may access this particular resource by logging in at www.benefitadvisorsoffice.com/HCReform.
- Visit http://benico.com/health-care-reform-updates/ for the latest HCR updates. This particular feed is constantly being updated through a professional outsourced service that Benico contracts with.
If you are not a client yet but would like access to Inform on Reform© please email a note requesting such to email@example.com. If you make such a request, we will also email you our 2014 Health Care Reform Compliance Checklist which provides the reader with virtually everything that the he / she needs to know with regard to important dates and actionable steps needing to be taken during 2014.
In closing, our continued challenge is education. Most Americans (62% according to a recent Kaiser Health News poll) do not realize that most significant ACA provisions have taken effect. 2013 was in many ways a year of survival. 2014 will be a year of strategy. To this end, our firm stands ready to engage with our clients to deliver real-world and practicable solutions that fit their strategy around compliance and cost management.
January 22nd, 2014 § § permalink
- The open enrollment period is expected to end on March 31, 2014. Anyone can sign up for an individual medical plan during this time period. There is speculation that the open enrollment period will be extended because of the problems with the initial roll-out of the exchanges, but for now it is still scheduled to end on March 31, 2014.
- Applications and premium payments for coverage, whether purchased on the exchange or off, must be received by the 15th of the month to receive an effective date of the 1st of the following month. For example, an application must be submitted and the initial premium must be paid by January 15th to receive a February 1st effective date. The application submission dates and premium due dates may be different for off-exchange health plans.
- After the open enrollment period ends on March 31st, individuals must experience a qualifying event to be eligible to enroll in a medical plan or make a plan change mid-year. Individuals will have 60 days from the date of the qualifying event to sign up for coverage or make a plan change. See the list of qualifying events below.
- As long as an individual submits an application by March 31st they will be exempt from the health care law’s individual mandate penalties provided they maintain coverage throughout the rest of the year. This statement holds true even if the individual receives an effective date that would cause them to be without coverage for more than 3 consecutive months. Individuals that are without coverage for 3 or more consecutive months out of the year for other reasons will be subject to the Individual Mandate penalties unless they qualify for an exemption.
- The next open enrollment period will occur from Nov. 15, 2014 to Jan. 15, 2015. It was originally scheduled to occur between Oct. 15, 2014 and Dec. 7, 2014, but has since changed. During this time period anyone may sign up for coverage or make a plan change without a qualifying event.
List of Qualifying Events – Special Enrollment Periods for Individual Medical Plans
If an individual experiences a qualifying event he/she will have 60 days from the date of the qualifying event to apply for an individual medical plan or make a change to their existing coverage. The following list outlines the qualifying events that have been identified by the Affordable Care Act (ACA).
- Involuntary loss of minimum essential coverage, for example, because of a job loss (voluntarily terminating coverage or policies that are canceled for non-premium payment are not qualifying events);
- Change of family structure (i.e. marriage, divorce, death, newborn);
- Gaining citizenship or permanent resident status;
- Becoming newly eligible for a premium or cost sharing subsidy (generally results from mid-year income changes);
- Becoming ineligible for a premium or cost sharing subsidy (generally results from mid-year income changes);
- Change of residential address that results in new medical plan options available;
- Did not enroll during the open enrollment period because of a mistake, misrepresentation or inaction of an officer, employee or agent of the Health Insurance Marketplace;
- The insurance company substantially violated a material provision of its health insurance contract;
- The individual is a member of an American Indian Tribe (can enroll or make a plan change one time per month); or
- The individual can demonstrate to the Health Insurance Marketplace that he/she has other extenuating circumstances that qualify him/her for special enrollment.