by admin | Apr 13, 2018 | ACA, Benefit Management, Group Benefit Plans
States that permit carriers to renew medical policies without adopting various Affordable Care Act (ACA) requirements may continue to do so through 2019, according to a bulletin released April 9, 2018, by the U.S. Department of Health and Human Services. The bulletin extends transitional relief for non-ACA-compliant policies for another year. The affected category of non-ACA-compliant policies, available in some individual and small group insurance markets, is commonly referred to as grandmothered.
By way of background, the ACA imposes numerous requirements on health plans. Whether a specific requirement applies, however, depends in part on the type of plan – and grandfathers and grandmothers are not the same.
Grandfathers
First, a grandfathered health plan is one that was established no later than March 23, 2010, when the ACA was enacted. The plan can maintain grandfathered status indefinitely, as long as it does not make certain changes to reduce its benefits or increase the employee’s out-of-pocket costs. Basic ACA rules, such as coverage for children up to age 26 and prohibiting annual and lifetime dollar limits on essential health benefits, apply to all plans. A plan that maintains grandfathered status, however, is exempt from many other ACA rules, such as coverage mandates for preventive care, and small group market rules for essential health benefits and adjusted community rating.
Grandmothers
A grandmothered policy does not have grandfathered plan status. It is an individual or small group policy originally issued before 2014 that has been allowed to renew year after year in accordance with the state’s insurance laws. Grandmothering does not apply to policies issued in the large group market. Most states that permit grandmothering also limit small group policies to groups with up to 50 employees.
Depending on the specific state’s rules, a grandmothered policy may be exempt from various ACA rules that otherwise would have taken effect in 2014, such as required coverage for all categories of essential health benefits and adjusted community rating. Currently about 30 states allow some type of grandmothering for individual policies or small group policies, or both, but the details vary from state to state.
States that allow grandmothering may continue to do so for renewals through October 1, 2019, provided the policy ends by December 31, 2019. Note, however, that even if the state’s insurance laws allow grandmothering, carriers are not required to continue renewing non-ACA policies.
What This Means
In summary, state insurance laws continue to control the options, provisions, and requirements that apply to group policies issued in their state. (Self-funded plans are not subject to state insurance laws.) For information about your state’s current insurance laws, refer to a carrier or broker that is licensed to sell products in your state.
Originally posted on ThinkHR.com
by admin | Mar 14, 2018 | ACA, HSA/HRA, IRS
Taking control of health care expenses is on the top of most people’s to-do list for 2018. The average premium increase for 2018 is 18% for Affordable Care Act (ACA) plans. So, how do you save money on health care when the costs seems to keep increasing faster than wage increases? One way is through medical savings accounts.
Medical savings accounts are used in conjunction with High Deductible Health Plans (HDHP) and allow savers to use their pre-tax dollars to pay for qualified health care expenses. There are three major types of medical savings accounts as defined by the IRS. The Health Savings Account (HSA) is funded through an employer and is usually part of a salary reduction agreement. The employer establishes this account and contributes toward it through payroll deductions. The employee uses the balance to pay for qualified health care costs. Money in HSA is not forfeited at the end of the year if the employee does not use it. The Health Flexible Savings Account (FSA) can be funded by the employer, employee, or any other contributor. These pre-tax dollars are not part of a salary reduction plan and can be used for approved health care expenses. Money in this account can be rolled over by one of two ways: 1) balance used in first 2.5 months of new year or 2) up to $500 rolled over to new year. The third type of savings account is the Health Reimbursement Arrangement (HRA). This account may only be contributed to by the employer and is not included in the employee’s income. The employee then uses these contributions to pay for qualified medical expenses and the unused funds can be rolled over year to year.
There are many benefits to participating in a medical savings account. One major benefit is the control it gives to employee when paying for health care. As we move to a more consumer driven health plan arrangement, the individual can make informed choices on their medical expenses. They can “shop around” to get better pricing on everything from MRIs to prescription drugs. By placing the control of the funds back in the employee’s hands, the employer also sees a cost savings. Reduction in premiums as well as administrative costs are attractive to employers as they look to set up these accounts for their workforce. The ability to set aside funds pre-tax is advantageous to the savings savvy individual. The interest earned on these accounts is also tax-free.
The federal government made adjustments to contribution limits for medical savings accounts for 2018. For an individual purchasing single medical coverage, the yearly limit increased $50 from 2017 to a new total $3450. Family contribution limits also increased to $6850 for this year. Those over the age of 55 with single medical plans are now allowed to contribute $4450 and for families with the insurance provider over 55 the new limit is $7900.
Health care consumers can find ways to save money even as the cost of medical care increases. Contributing to health savings accounts benefits both the employee as well as the employer with cost savings on premiums and better informed choices on where to spend those medical dollars. The savings gained on these accounts even end up rewarding the consumer for making healthier lifestyle choices with lower out-of-pocket expenses for medical care. That’s a win-win for the healthy consumer!
by admin | Jan 5, 2018 | ACA, Compliance, IRS
The ACA requires employers to report the cost of coverage under an employer-sponsored group health plan. Reporting the cost of health care coverage on Form W-2 does not mean that the coverage is taxable.
Employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations, and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). Federally recognized Indian tribal governments are not subject to this requirement.
Employers that are subject to this requirement should report the value of the health care coverage in Box 12 of Form W-2, with Code DD to identify the amount. There is no reporting on Form W-3 of the total of these amounts for all the employer’s employees.
In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. See the chart below from the IRS’ webpage and its questions and answers for more information.
The chart below illustrates the types of coverage that employers must report on Form W-2. Certain items are listed as “optional” based on transition relief provided by Notice 2012-9 (restating and clarifying Notice 2011-28). Future guidance may revise reporting requirements but will not be applicable until the tax year beginning at least six months after the date of issuance of such guidance.
|
Form W-2, Box 12, Code DD |
| Coverage Type |
Report |
Do Not
Report |
Optional |
| Major medical |
X |
|
|
| Dental or vision plan not integrated into another medical or health plan |
|
|
X |
| Dental or vision plan which gives the choice of declining or electing and paying an additional premium |
|
|
X |
| Health flexible spending arrangement (FSA) funded solely by salary-reduction amounts |
|
X |
|
| Health FSA value for the plan year in excess of employee’s cafeteria plan salary reductions for all qualified benefits |
X |
|
|
| Health reimbursement arrangement (HRA) contributions |
|
|
X |
| Health savings account (HSA) contributions (employer or employee) |
|
X |
|
| Archer Medical Savings Account (Archer MSA) contributions (employer or employee) |
|
X |
|
| Hospital indemnity or specified illness (insured or self-funded), paid on after-tax basis |
|
X |
|
| Hospital indemnity or specified illness (insured or self-funded), paid through salary reduction (pre-tax) or by employer |
X |
|
|
| Employee assistance plan (EAP) providing applicable employer-sponsored healthcare coverage |
Required if employer charges a COBRA premium |
|
Optional if employer does not charge a COBRA premium |
| On-site medical clinics providing applicable employer-sponsored healthcare coverage |
Required if employer charges a COBRA premium |
|
Optional if employer does not charge a COBRA premium |
| Wellness programs providing applicable employer-sponsored healthcare coverage |
Required if employer charges a COBRA premium |
|
Optional if employer does not charge a COBRA premium |
| Multi-employer plans |
|
|
X |
| Domestic partner coverage included in gross income |
X |
|
|
| Governmental plans providing coverage primarily for members of the military and their families |
|
X |
|
| Federally recognized Indian tribal government plans and plans of tribally charted corporations wholly owned by a federally recognized Indian tribal government |
|
X |
|
| Self-funded plans not subject to federal COBRA |
|
|
X |
| Accident or disability income |
|
X |
|
| Long-term care |
|
X |
|
| Liability insurance |
|
X |
|
| Supplemental liability insurance |
|
X |
|
| Workers’ compensation |
|
X |
|
| Automobile medical payment insurance |
|
X |
|
| Credit-only insurance |
|
X |
|
| Excess reimbursement to highly compensated individual, included in gross income |
|
X |
|
| Payment/reimbursement of health insurance premiums for 2% shareholder-employee, included in gross income |
|
X |
|
| Other situations |
Report |
Do Not
Report |
Optional |
| Employers required to file fewer than 250 Forms W-2 for the preceding calendar year (determined without application of any entity aggregation rules for related employers) |
|
|
X |
| Forms W-2 furnished to employees who terminate before the end of a calendar year and request, in writing, a Form W-2 before the end of the year |
|
|
X |
| Forms W-2 provided by third-party sick-pay provider to employees of other employers |
|
|
X |
By Danielle Capilla
Originally Published By United Benefit Advisors
by admin | Dec 12, 2017 | ACA, Benefit Management, Compliance, Group Benefit Plans, IRS
Beginning in 2015, to comply with the Patient Protection and Affordable Care Act (ACA), “large” employers must offer their full-time employees health coverage, or pay one of two employer shared responsibility / play-or-pay penalties. The Internal Revenue Service (IRS) determines the penalty each calendar year after employees have filed their federal tax returns.
In November 2017, the IRS indicated on its “Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act” webpage that, in late 2017, it plans to issue Letter 226J to inform large employers of their potential liability for an employer shared responsibility payment for the 2015 calendar year.
The IRS’ determination of an employer’s liability and potential payment is based on information reported to the IRS on Forms 1094-C and 1095-C and information about the employer’s full-time employees that were received the premium tax credit.
The IRS will issue Letter 226J if it determines that, for at least one month in the year, one or more of a large employer’s full-time employees was enrolled in a qualified health plan for which a premium tax credit was allowed (and the employer did not qualify for an affordability safe harbor or other relief for the employee).
Letter 226J will include:
- A brief explanation of Section 4980H, the employer shared responsibility regulations
- An employer shared responsibility payment summary table that includes a monthly itemization of the proposed payment and whether the liability falls under Section 4980H(a) (the “A” or “No Offer” Penalty) or Section 4980H(b) (the “B” or “Inadequate Coverage” Penalty) or neither section
- A payment summary table explanation
- An employer shared responsibility response form (Form 14764 “ESRP Response”)
- An employee premium tax credit list (Form 14765 “Employee Premium Tax Credit (PTC) List”) which lists, by month, the employer’s assessable full-time employees and the indicator codes, if any, the employer reported on lines 14 and 16 of each assessable full-time employee’s Form 1095-C
- Actions the employer should take if it agrees or disagrees with Letter 226J’s proposed employer shared responsibility payment
- Actions the IRS will take if the employer does not timely respond to Letter 226J
- The date by which the employer should respond to Letter 226J, which will generally be 30 days from the date of the letter
- The name and contact information of the IRS employee to contact with questions about the letter
If an employer responds to Letter 226J, then the IRS will acknowledge the response with Letter 227 to describe further actions that the employer can take.
After receiving Letter 227, if the employer disagrees with the proposed or revised shared employer responsibility payment, the employer may request a pre-assessment conference with the IRS Office of Appeals. The employer must request the conference by the response date listed within Letter 227, which will be generally 30 days from the date of the letter.
If the employer does not respond to either Letter 226J or Letter 227, then the IRS will assess the proposed employer shared responsibility payment amount and issue a notice and demand for payment on Notice CP 220J.
Notice CP 220J will include a summary of the employer shared responsibility payment, payments made, credits applied, and the balance due, if any. If a balance is due, Notice CP 220J will instruct an employer how to make payment. For payment options, such as an installment agreement, employers should refer to Publication 594 “The IRS Collection Process.”
Employers are not required to make payment before receiving a notice and demand for payment.
The ACA prohibits employers from making an adverse employment action against an employee because the employee received a tax credit or subsidy. To avoid allegations of retaliation, as a best practice, employers who receive a Letter 226J should separate their employer shared responsibility penalty assessment correspondence from their human resources department and employees who have authority to make employment actions.
By Danielle Capilla
Originally Published By United Benefit Advisors
by admin | Nov 30, 2017 | ACA, Employee Benefits, IRS
On December 13, 2016, President Obama signed the 21st Century Cures Act (Cures Act) into law. The Cures Act provides a method for certain small employers to reimburse individual health coverage premiums up to a dollar limit through HRAs called “Qualified Small Employer Health Reimbursement Arrangements” (QSE HRAs). The provision went into effect on January 1, 2017. On October 31, 2017, the IRS released Notice 2017-67, providing guidance on the implementation and administration of QSE HRAs.
Unless an employer meets all the requirements for offering a QSE HRA, previous IRS guidance prohibiting the reimbursement of individual premiums directly or indirectly, after- or pre-tax, through an HRA, a Section 125 plan, a Section 105 plan, or any other mechanism, remains in full effect. Reimbursing individual premiums in a non-compliant manner will subject an employer to a Patient Protection and Affordable Care Act (ACA) penalty of $100 a day per individual it reimburses, with the potential for other penalties based on the mechanism of the non-compliant reimbursement.
If an employer fails to meet the requirements of providing a QSE HRA, it will be subject to a penalty of $100 per day per affected person for being a non-compliant group health plan. An arrangement will be a group health plan that is not a QSE HRA if it:
- Is not provided by an eligible employer (such as an employer that offers another group health plan to its employees).
- Is not provided on the same terms to all eligible employees.
- Reimburses medical expenses without first requiring proof of minimum essential coverage (MEC).
- Provides a permitted benefit in excess of the statutory dollar limits.
An arrangement’s failure to be a QSE HRA will not cause any reimbursement of a properly substantiated medical expense that is otherwise excludable from income to be included in the employee’s income or wages. Furthermore, an arrangement designed to reimburse expenses other than medical expenses (whether or not also reimbursing medical expenses) is neither a QSE HRA nor a group health plan. Accordingly, all payments under such an arrangement are includible in the employee’s gross income and wages. An employer’s failure to timely provide a compliant written notice does not cause an arrangement to fail to be a QSE HRA, but instead results in the penalty of $50 per employee, not to exceed $2,500.
Answers to Top Three FAQs about QSE HRAs
1, Which employers may offer a QSE HRA?
Employers with fewer than 50 full-time and full-time equivalent employees (under ACA counting rules) that do not offer a group health plan. Employers that do not offer a group health plan, but offer a retiree-only plan to former employees may offer a QSE HRA.
2. Which employers may not offer a QSE HRA?
- Employers with 50 or more full-time and full-time equivalent employees (under ACA counting rules).
- Employers of any size that offer a group health plan, including plans that only provide excepted benefits, such as vision or dental benefits.
- Employers that provide current employees with access to money from health reimbursement arrangements (HRAs) offered in prior years (through a carry-over).
- Employers that offer employees access to carryover amounts in a flexible spending account (FSA).
3. What are the rules for employers in a controlled group?
- Employers with less than 50 full-time and full-time equivalent employees (under ACA counting rules) may offer QSE HRAs, with the headcount including all employees across an entire controlled group.
- If one employer within a controlled group offers a QSE HRA, it must be offered to all employees within the entire controlled group (or each employer must offer an identical QSE HRA).
BY Danielle Capilla
Originally Published By United Benefit Advisors
by admin | Nov 27, 2017 | ACA, COBRA, IRS
Recently, the Internal Revenue Service (IRS) issued the instructions for Forms 1094/1095 for the 2017 tax year, announced PCORI fees for 2017-18, and announced cost-of-living adjustments for 2018. The IRS provided additional guidance on leave-based donation programs’ tax treatment and released an information letter on COBRA and Medicare. Here’s a recap of these actions for your reference.IRS Announces Cost-of-Living Adjustments for 2018
The IRS released Revenue Procedures 2017-58 and Notice 2017-64 to announce cost-of-living adjustments for 2018. For example, the dollar limit on voluntary employee salary reductions for contributions to health flexible spending accounts (FSAs) is $2,650, for taxable years beginning with 2018.
Request UBA’s 2018 desk reference card with an at-a glance summary of the various limits.
IRS Announces PCORI Fee for 2017-18
The IRS announced the Patient-Centered Outcomes Research Institute (PCORI) fee for 2017-18. The fee is $1.00 per covered life in the first year the fee is in effect. The fee is $2.00 per covered life in the second year. In the third through seventh years, the fee is $2.00, adjusted for medical inflation, per covered life.
For plan years that end on or after October 1, 2016, and before October 1, 2017, the indexed fee is $2.26. For plan years that end on or after October 1, 2017, and before October 1, 2018, the indexed fee is $2.39.
For more information, view UBA’s FAQ on the PCORI Fee.
IRS Provides Additional Guidance on Leave-Based Donation Programs’ Tax Treatment
Last month, the IRS provided guidance for employers who adopt leave-based donation programs to provide charitable relief for victims of Hurricane and Tropical Storm Irma. This month, the IRS issued Notice 2017-62 which extends the guidance to employers’ programs adopted for the relief of victims of Hurricane and Tropical Storm Maria.
These leave-based donation programs allow employees to forgo vacation, sick, or personal leave in exchange for cash payments that the employer will make to charitable organizations described under Internal Revenue Code Section 170(c).
The employer’s cash payments will not constitute gross income or wages of the employees if paid before January 1, 2019, to the Section 170(c) charitable organizations for the relief of victims of Hurricane or Tropical Storm Maria. Employers do not need to include these payments in Box 1, 3, or 5 of an employee’s Form W-2.
IRS Releases Information Letter on COBRA and Medicare
The IRS released Information Letter 2017-0022 that explains that a covered employee’s spouse can receive COBRA continuation coverage for up to 36 months if the employee became entitled to Medicare benefits before employment termination. In this case, the spouse’s maximum COBRA continuation period ends the later of: 36 months after the employee’s Medicare entitlement, or 18 months (or 29 months if there is a disability extension) after the employment termination.
By Danielle Capilla
Originally Published By United Benefit Advisors
