New Concerns for Employer Plan Sponsors Under the Fair Labor Standards Act and ERISA § 510
Original post jdsupra.com
The Affordable Care Act (ACA) anti-retaliation provisions have been in effect for several years, but have so far largely gone unnoticed. Now that employees can get financial assistance through the Health Insurance Marketplace, employers should revisit these provisions and carefully structure their actions to limit potential exposure. In addition, a recent lawsuit brought by employees under ERISA suggests employers should use care when taking employment action that might impact health benefits. As a result, employers and insurers should consider implementing and/or updating and revising their employment policies and procedures now.
CMS Issues 2017 Benefit and Payment Parameters Rule, Letter to Issuers and FAQ
Original post healthaffairs.org
On February 29, 2016, the Department of Health and Human Services released its final 2017 Benefit and Payment Parameters Rule (with fact sheet) and final 2017 Letter to Issuers in the Federally Facilitated Marketplaces (FFMs). It also released a bulletin on rate filings for individual and small group non-grandfathered plans during 2016, a frequently asked questions documenton the 2017 moratorium on the health insurance provider fee recently adopted by Congress, and a bulletin announcing that CMS intends to allow transitional (grandmothered) policies to continue (if states permit it) through December 31, 2017, rather than requiring them to terminate by October 1, 2017, as earlier announced.
The final payment rule and letter include most of the provisions proposed earlier, but differ in important respects.Here are a few headlines, focusing on issues of particular interest to health insurance consumers.
Standardized Plans
To begin, the final rule and letter adopt with a few changes proposals regarding standardized plans. Beginning in 2017, qualified health plan insurers would have the option of offering six standardized plans: a bronze, a gold, and a standard silver, as well as three silver plan options, at the 73 percent, 87 percent, and 94 percent actuarial-value levels, for individuals eligible for cost sharing reduction payments. The plans would have
- standard deductibles (ranging from $6,650 for the bronze plan to $3,500 for the standard silver to $250 for the 94 percent silver cost-sharing variation),
- four-tier drug formularies,
- only one in-network provider tier,
- deductible-free services (for the silver level plan including urgent care, primary care visits, specialist visits, and drugs),
- and a preference for copayments over coinsurance.
Insurers will not be required to offer standardized plans and could offer non-standardized plans (as long as they met meaningful difference standards), but standardized plans will be displayed in the marketplaces a manner that will make them easy for consumers to find.
Network Adequacy Requirements
The final rule and letter adopt some, but not all of the network adequacy requirements that were proposed, and delay some until 2018. The NPRM payment rule would have required states to adopt time and distance network adequacy standards for 2017 and imposed a federal default time and distance standard in states that failed to do so. The final rule backs off this requirement but provides that the FFM will itself generally apply quantitative time and distance standards in determining network adequacy for qualified health plans.
Provider Termination Notice
The final rule requires that health plans give patients 30 days notice when terminating a provider and continue to offer coverage for up to 90 days for a patient in active treatment by a provider who is terminated without cause. The insurer would only have to pay network rates to a provider for continuation coverage and the provider could balance bill. CMS is proceeding with its proposal to label health plans as to their relative network breadth on HealthCare.gov.
Out-Of-Network Bills At In-Network Facilities
CMS is not finalizing until 2018 a requirement the insurers apply to the in-network cost sharing limit the cost of services provided by out-of-network providers at an in-network facility; the agency is also weakening this already weak requirement. As finalized, the requirement only applies to ancillary providers, such as anesthesiologists or radiologists; can be avoided by giving notice (including form notice) 48 hours ahead of time or at the time of prior authorization that treatment might be received from out-of-network providers; and does not apply to balance bills as such where the provider bills for the difference between its charge and the network payment rate.
Open Enrollment Period And Procedures
Open enrollment for 2017 and 2018 will last from November 1 until January 31, as was true this year, but in future years, open enrollment will run from November 1 to December 15, to align enrollment with the calendar year. CMS is not finalizing until 2018 a proposal to allow applicants to remain on a web broker’s or insurer’s non-FFM website to complete a Marketplace applicant and enroll in coverage. Until then, web brokers and insurers will have to use the current direct enrollment process.
The rule changes the reenrollment hierarchy, requiring marketplaces to prioritize reenrollment in silver plans and allowing marketplaces to enroll consumers into plans offered by other insurers if their insurer does not have a plan available for reenrollment through the marketplace. Other proposals to change the reenrollment process were not adopted.
FFM User Fees In State Marketplaces
The final rule and letter finalize the status of state-based marketplaces using the federal enrollment platform, which this year included Hawaii, Oregon, Nevada, and New Mexico. In future years insurers in these states will pay a FFM user fee of 3 percent, but for 2017 the user fee will be 1.5 percent. The standard user fee for other FFM states will be 3.5 percent again for 2017.
Navigators In The FFMs
The final rule requires navigators in FFMs as of 2018 to provide consumers with post-enrollment assistance, including assistance with filing eligibility appeals (though not representing the consumer in the appeal), filing for shared responsibility exemptions, providing basic information regarding the reconciliation of premium tax credits, and understanding basic concepts related to using health coverage. Navigators will also be required to provide targeted assistance to vulnerable or underserved populations.
“Vertical Choice” In The FF-SHOPs
The final rule allows FF-SHOPs to offer a “vertical choice” option, under which employers could allow their employees to choose any plan at any actuarial level offered by a single carrier. This is in addition to the options currently available where employers can offer a single plan or any plans offered by an insurer at a single level. States could recommend against the FF-SHOP offering vertical choice in their states and states with state-based marketplaces using the FFM could opt out of making vertical choice available.
Fraud Prevention In The Medical Loss Ratio Calculation
CMS decided not to allow insurers to count fraud prevention expenses in the numerator in calculating their medical loss ratios, as it had suggested it might in the NPRM.
Other Topics
The insurer fee FAQ clarifies that insurers will not be charged the insurer fee for the 2017 fee year (which would have based the fee on 2016 data). Insurers are expected to adjust their premiums downward to account for the fact that they will not owe the fee.
CMS is allowing states to extend transitional plans, which antedate 2014 and do not have to comply with the 2014 ACA insurance reforms through the end of 2017. Earlier guidance had allowed insurers to renew transitional plans ending before October 1, 2017. CMS concluded that it would be better to allow people in transitional plans to transition into ACA compliant plans during the 2018 open enrollment period rather than having them start a new ACA compliant plan in October 2017 that would only last for three months, and then have to restart a new deductible on January 1, 2018.
There is much more in the rule and letter. The rule is well over 500 pages long, the letter almost 100. Watch for further installments over the next couple of days.
Health Care Reform Added 20 Million Adults to Coverage Rolls
Original post businessinsurance.com
More than 20 million adult Americans have gained health insurance coverage due to the health care reform law, the U.S. Department of Health and Human Services said in a report released Thursday.
“Thanks to the Affordable Care Act, 20 million Americans have gained health care coverage. We have seen progress in the last six years that the country has sought for generations,” HHS Secretary Sylvia Burwell said in a statement.
The HHS report noted that coverage gains varied widely by race and ethnicity. For example, among white non-Hispanic adults, the uninsured rate as of Feb. 22 was 7%, down from 14.3% as of Oct. 1, 2013, while during the same period the uninsured rate among black non-Hispanic adults declined to 10.6% from 22.4%, and among Hispanic adults to 30.5% from 41.8%.
Several health care reform law provisions are credited with the gains in coverage, including those that authorized federal premium subsidies to lower-income individuals obtaining coverage in ACA-authorized exchanges and others that expanded Medicaid eligibility and required group health care plans to extend coverage to employees' adult children until they turn 26.
Prior to that last change, employers typically ended coverage for employees' children at age 18 or 19, or 23 or 24 if a full-time college student.
Agencies Propose Revised SBC Template and Uniform Glossary
Original post shrm.org
The federal agencies overseeing the Affordable Care Act announced a 30-day comment period ending on March 28, 2016, regarding proposed revisions to the Summary of Benefits and Coverage (SBC) and related documents that employers must provide to eligible employees for each of their health plans, following the Feb. 26 publication of an official notice in the Federal Register.
The revisions could be effective for employer-provided plan years beginning with the second quarter of 2017.
On Feb. 25, the Departments of Labor (DOL), Treasury, and Health and Human Services (HHS) released the proposed revised SBC template and revised uniform glossary, along with revised instructions for group plans. Under the Affordable Care Act, SBCs and the uniform glossary must be given to new hires and to employees during open enrollment.
The agencies had issued a final rule regarding SBCs and related documents in June 2015. However, revisions to the SBC template and the uniform glossary were delayed to allow the agencies to complete consumer testing and receive additional input from the public and stakeholders.
Providing Plan Details
In an analysis posted at the Health Affairs Blog, Timothy Jost, a professor at the Washington and Lee University School of Law in Lexington, VA., noted that among the proposed changes the revised documents would:
• Better identify services covered before the deductible applies.
• Disclose whether the plan has “embedded” deductibles and out-of-pocket limits (under which enrollees in family coverage can meet individual deductibles or out-of-pocket limits before the family limits are met).
• Disclose more information on tiered networks in relation to coverage of common medical events.
Though it may not provide the clarity employers and employees are looking for, "on the whole, the proposed revised SBC is a distinct improvement over the current SBC,” commented Jost.
‘Where’s My 1095?’ Addressing Tax Filing Confusion
Many employees are confused over how to report that they received health coverage when filing their income tax returns this tax season, the first in which they’re required to affirm that they had Affordable Care Act (ACA)-compliant coverage throughout the year or risk penalties under the individual coverage mandate.
Much of this confusion involves Form 1095-B (Health Coverage) and Form 1095-C (Employer-Provided Health Insurance Offer and Coverage).
“There are two different 1095 forms that an employee or former employee might get, depending on how coverage was provided,” explained Mike Chittenden, a counsel at Miller & Chevalier in Washington, D.C. “If it’s fully insured coverage from a large employer”—with 50 or more full-time employees or equivalents, refered to as an applicable large employer (ALE)—“then they’ll receive a Form 1095-C from their employer and a Form 1095-B from the insurance company. If it’s self-insured coverage from an employer, they’ll just receive a 1095-C that combines the information that would otherwise appear on both forms.”
These forms are also filed with the IRS by large employers; Forms 1094-B and 1094-C are transmittal forms submitted to the IRS along with Forms 1095-B and 1095-C, respectively.
For small businesses with fewer than 50 full-time employers or equivalents that provide employees with an ACA-compliant group plan, the rules are a bit different. If fully insured (as most small companies are), the insurance company that provides coverage is required to send enrollees a copy of Form 1095-B and to submit Forms 1995-B (along with transmittal Form 1094-B) to the IRS in order to report minimum essential coverage.
If a small company is self-insured and provides coverage, it must provide employees and the IRS with Form 1095-B. But small business that offer insurance are not required to send Form 1095-Cs to employees or to the IRS.
| Fewer than 50 full-time employees/equivalents (non-ALEs) | 50 or more full-time employees/equivalents (ALEs) | |
| No coverage offered | Not subject to reporting | |
| Fully insured plan | Insurance company completes Forms 1094-B and 1095-B | Employer completes Forms 1094-C and 1095-C (Parts l and ll only) |
| Self-insured plan | Employer completes Forms 1094-B and 1095-B | Employer completes Forms 1094-C and 1095-C (Parts l, ll and lll) |
Originally, these forms were intended to be given to employees or former employees by Feb. 1 (as Jan. 31 fell on a Sunday this year), along with Form W-2. Filers would then use them when completing Line 61 of their individual tax returns, showing that they had qualifying health coverage from their employer—referred to as minimum essential coverage—during the year. The form could be shared with tax preparers and retained with other tax documents.
But as many employers seemed unlikely to meet this deadline, the IRS issued Notice 2016-4 at the end of 2015, extending the due date for providing employees with Forms 1095-B and 1095-C until March 31, and extended other ACA reporting deadlines as well:
| Forms | Previous IRS Due Date | New IRS Due Date |
| Forms 1095-B and 1095-C due to employees. | Feb. 1, 2016 | March 31, 2016 |
| Forms 1094-B, 1095-B, 1094-C and 1095-C to be filed with the IRS if filing on paper (fewer than 250 employees). | Feb. 29, 2016 | May 31, 2016 |
| Forms 1094-B, 1095-B, 1094-C and 1095-C to be filed with the IRS if filing electronically. | March 31, 2016 | June 30, 2016 |
| Source: ADP, based on IRS Notice 2016-4 and IRS Tax Tip 2016-27. | ||
Tax Filing Conundrum
The problem is that many employees had been told that they would need these forms to prepare their 2015 income taxes. Many even believed, incorrectly, that Form 1095s were to be filed with their tax returns, along with their Form W-2s.
To mitigate these concerns, in January the IRS updated its webpage with Questions and Answers about Health Care Information Forms for Individuals. In Q&A number 3, the IRS answers the question, “Must I wait to file until I receive these forms?” as follows:
If you are expecting to receive a Form 1095-A [for those enrolled in a nongroup plan through the ACA’s Health Insurance Marketplace], you should wait to file your 2015 income tax return until you receive that form. However, it is not necessary to wait for Forms 1095-B or 1095-C in order to file.
Some taxpayers may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2015 tax return. While the information on these forms may assist in preparing a return, they are not required. Individual taxpayers will generally not be affected by this extension and should file their returns as they normally would.
Like last year, taxpayers can prepare and file their returns using other information about their health insurance. You should not attach any of these forms to your tax return.
But employees don’t typically read the latest IRS updates posted online. Employers, therefore, should inform workers to expect these forms by March 31, and assure them they may go ahead and file their taxes—and collect any refunds that may be coming their way—without waiting until the form is in their hands.
Filing Without Form 1095
“While the form is helpful, obviously, in that it gives you all the information you need in one place, most employees won’t need the form to complete their taxes,” Chittenden explained. “For example, if an employee worked for the same company and had coverage all year, then they can go ahead and complete their taxes and check the box that indicates coverage all year. Similarly, if they changed jobs but had coverage under their old and their new employer without a gap, they also can check the box saying ‘yes.’ You don’t have to attach a copy of the form to your return, whether you’re filing paper returns or filing electronically. So you don’t actually need Form 1095-B or Form 1095-C to complete your tax return.”
Given the deadline extension for providing these forms, “employees should be reassured that they don’t need them to complete their taxes, and employers should be telling them that,” Chittenden said.
Employers should also be prepared for questions when employees do receive their 1095s in March. Many who have already submitted their returns may worry that having done so without the form will require filing a corrected return.
Ask HR
If employees think they might have had a gap in health coverage but aren’t sure, they still don’t necessarily need the form. “They could look at their pay stubs to see if they include information about coverage—for example, if there are deductions in each month for coverage, then it’s a pretty safe bet that they probably had coverage in each month,” said Chittenden. “They can also go to the employer and ask HR, which can give them the answer about whether or not they had coverage.”
ACA reporting has been a challenge for many employers, and “they’re doing their best to get these forms out as quickly as they can,” said Chittenden. Due to the rush, “employees may subsequently receive corrected forms, if the employer determines later that they were inaccurate, so that’s something they should be aware may be coming. And employers should be aware that they have an obligation to correct incorrect forms.”
Penalties Reduced If Timely Correction Made
The penalty for not filing an information return with the IRS generally is $250 for each return. The penalty for providing an incorrect statement to employees/enrollees is $250 for each erroneous statement. Since there are separate penalties for returns filed with the IRS and for statements furnished to individuals, filing failures could easily result in “double” penalties.
The IRS has provided short-term relief from reporting penalties for 2015 filings, as long as the employer has made a good faith effort to comply with the reporting requirements, and has filed returns and provided statements on time. However, even employers that were late might be eligible for penalty relief if the IRS determines there was reasonable cause,
ACA Makes Tax Season Tougher For Small Companies
Original post insurancenewsnet.com
As more requirements of the health care law take effect, income tax filing season becomes more complex for small businesses.
Companies required to offer health insurance have new forms to complete providing details of their coverage. Owners whose payrolls have hovered around the threshold where insurance is mandatory need to be sure their coverage — if they offered it last year — was sufficient to avoid penalties.
Here are some of the issues related to the health care law that small businesses need to be aware of:
HOW MANY EMPLOYEES DO YOU HAVE?
Companies with 100 or more workers were required to offer affordable health insurance to employees and their dependents, but not their spouses, starting in 2015. Businesses with 50 to 99 workers must offer coverage starting this year; those with under 50 are exempt.
Owners who were on the hook for affordable insurance last year but didn't provide it may face thousands of dollars in penalties — $2,000 per employee per year, not counting the first 80 employees for the 2015 tax year, and the first 30 for 2016. So it's critical for them to know what their head count was — and many may not realize the calculations are based on a company's 2014 payroll, not 2015.
Here's where it gets complicated: Part-time workers and those fired during the course of the year can all be counted toward the threshold where coverage is required. So can some seasonal workers.
Part-timers work fewer than 30 hours a week under the health care law. They must be counted toward what are called full-time equivalent workers. If, for example, a company has two people who each work an average 15 hours a week, they count as one full-time equivalent employee working 30 hours. A company with 30 full-timers and 40 part-timers who average 15 hours a week each has 50 full-time equivalent workers and is required to offer insurance.
Another wrinkle: Owners with multiple companies that combined have 50 or more workers may be required to offer insurance, even if each of the individual companies has fewer than 50.
NEW TAX FORMS
Starting this year, businesses required to comply with the health care law must complete forms that detail the cost of their coverage and the names and Social Security numbers of employees and their dependents. The government will use the information to determine whether a company provided coverage that was affordable under the law, or whether it must pay a penalty.
Accountants have described the forms as labor-intensive, because they require information from a number of sources including payroll and health insurance records. Many companies have had to hire workers or payroll services to complete the forms.
The IRS, recognizing the forms' complexity, has extended the deadlines for the forms to be filed. Forms 1095-B and 1095-C, which must be given to workers, are now due March 31. Forms 1094-B and 1094-C, required to be filed with the IRS, are due by May 31 if they're not being submitted on paper, and June 30 if filed online.
WELL-INTENTIONED BUT ILLEGAL
Some employers with fewer than 50 workers and who don't offer insurance have tried to help staffers with the costs of coverage by giving them money toward their premiums, with the intention that the money will be tax-free. That could get owners into expensive trouble with the IRS — they can be fined $100 per day per employee receiving the money, a total of $36,500 per year for each worker.
The problem is that some employers treat this money as a health benefit, but it's not coverage that complies with the law. So they can be penalized.
Companies can help employees with their premium costs by giving them a raise or a more traditional bonus, says Mark Luscombe, a tax analyst with the business information company Wolters Kluwer. That means withholding income and what's known as payroll taxes — Social Security and Medicare — from employees' paychecks, and for companies to pay their payroll tax share.
What employees need to know now to file tax forms for PPACA
Original post benefitspro.com
The Patient Protection and Affordable Care Act (PPACA) reporting deadlines are rapidly approaching, presenting a major administrative burden for employers who face penalties for failing to report in a timely and accurate manner.
While there has been significant discussion of employer roles and responsibilities, employees have been largely left out of the equation.
However, many employees will soon be receiving new forms that are critical to their ability to file their tax returns and to their employers’ ability to accurately fulfill their own reporting requirements. Among these are Forms 1095-A, 1095-B, and 1095-C.
With this in mind, it is important for employers to educate individual taxpayers on what they are required to do and when and how to complete these requirements in the easiest and most efficient manner.
1095-C
The most commonly received form will be the new 1095-C, which millions of Americans will be receiving for the first time this year.
This new government form is used to tell the Internal Revenue Service that you were eligible for insurance coverage under the Affordable Care Act and whether you took advantage of or waived this coverage.
This form will be sent by employers no later than March 31 to all eligible full-time employees who worked for a company with a total of 100 or more full-time or full-time equivalent employees in 2015. For the purposes of this form, full-time is any employee working 30 or more hours per week or 130 hours in a calendar month.
According to the IRS guidance, Form 1095-C helps to determine whether both the employer and the employee have complied with the “shared responsibility” clause of the ACA.
The form also determines whether an individual or family qualifies for the Premium Tax Credit, which reduces the burden of purchasing health insurance.
Anyone who does not have coverage elsewhere and chose to decline employer-sponsored health care coverage will be required to pay a penalty for not carrying coverage--this penalty will be assessed on their tax return.
For 2015, the penalty for declining all health care coverage is $325 per uninsured adult and $162.50 per uninsured child or 2 percent of household income, whichever is greater up to a family maximum of $975.
The penalty will increase to $695 per uninsured adult and $347.50 per child or 2.5 percent of household income up to a family maximum of $2,085 in 2016, and will continue to rise with inflation year-over-year.
However, the IRS offers special exemptions based on income, circumstance and membership in certain groups, so those without coverage should research their options or consult a tax professional. (The most common exemption is for those who declined employer-sponsored coverage that would have cost more than 8 percent of their total household income.)
Health care exemptions can be claimed by filing IRS form 8965 with your taxes. As previously noted, the form also determines who may be eligible for premium credits to help defray the expense of coverage.
Employers are required to submit insurance coverage information, along with social security numbers and other identifying employee information to the IRS, and employee failure to disclose a waiver of coverage may result in an audit and penalties greater than the ACA individual mandate penalty.
1095-B
Form 1095-B essentially serves the same purpose as form 1095-c, but is used by and sent to employees of companies with fewer than 100 employees.
It may also be sent directly by an insurer to certify that individuals/families had non-employer sponsored coverage in place in 2015. This coverage may have come from:
- Government health care plans such as Medicare Part A, Medicare Advantage, Medicaid, the Children's Health Insurance Program, and Tricare for military members, veterans’ medical benefits and plans for Peace Corps volunteers.
- Health coverage purchased through the "Marketplace" -- Web-based federal and state insurance markets set up under the Affordable Care Act.
- Any individual health insurance policy in place before the Affordable Care Act took effect.
Depending on the way a health care plan is structured, some employees may receive both a 1095-B and a 1095-C.
1095-A
Form 1095-A is only applicable to those who purchased their health care coverage through ACA’s health care exchanges.
This form plays a critical role in reconciling the Advanced Premium Tax Credits (also known as APTCs)--a yearly stipend based on modified adjusted gross income designed to help lower-income individuals and families defray the cost of purchasing exchange-based health insurance--for 2015 and in determining future credits for 2016.
Per IRS and ACA requirements, any excess APTC received in the previous year must be repaid through income tax.
What to do with these forms
Like the more familiar W-2 or 1099 forms, the 1095-A, B, and C will be needed to file a 2015 tax return for anyone who receives it.
Those using a tax preparer will need to bring it with them along with their other filing documents, and those doing their own taxes or using tax preparation software will need to keep this document with their tax records in case of any further inquiry /audit by the IRS.
Help is available
Of course, this is just one important factor in gaining a more thorough understanding of the complexities of the ACA. While the IRS has worked to streamline the process as much as possible, many employers and employees are struggling to understand and keep pace with changing requirements.
However, for quick questions, there are many good resources available to both employers and employees. One of the best is the IRS website.
As in all tax-related issues, the most important factors in handling ACA reporting for all groups are to know what’s coming, prepare in advance, keep excellent records, take note of deadlines and avail yourself of helpful resources.
The Affordable Care Act's reporting requirements
These new reporting obligations require employers and other entities to report information to assist the IRS with enforcing the individual mandate (i.e., the requirement for individuals to maintain minimum essential health care coverage) as well as the employer mandate (i.e., penalties that are imposed on certain employers if minimum health insurance coverage is not offered by the employer).
In order to monitor compliance with both the individual and employer mandates, the ACA requires reporting by employers and insurers. To understand these reporting obligations, one must understand the general manner in which both the individual mandate and the employer mandate operate.
If an individual does not have minimum essential coverage, the IRS will collect a tax penalty from him or her. The monthly tax penalty is equal to 1/12th of the greater of:
- For 2015: $325 per uninsured adult in the household (capped at $975 per household) or 2.0 percent of the amount by which the household income exceeds the filing threshold (e.g., single person making more than $10,150 in 2015 must file a tax return).
- For 2016: $695 per uninsured adult in the household (capped at $2,085 per household) or 2.5 percent of the amount by which the household income exceeds the filing threshold.
- 9.5% of an employee’s W-2 wages (such wages amount being net of any salary reductions under a 401(k) plan or cafeteria plan)
- 9.5% of an employee’s monthly wages (hourly rate x 130 hours per month)
- 9.5% of the Federal Poverty Level for a single individual
- Name of each individual who has minimum essential coverage (including covered spouse and dependents);
- Name and address of the “responsible person” through whom the individual has coverage (generally the primary participant, employee, or applicant);
- Taxpayer identification number (TIN, which is generally the Social Security Number) for each covered individual, including covered spouse and dependents; and
- Calendar months for which each individual was covered during the calendar year.
- Name, address and employer identification number (EIN) of the ALE;
- Name and telephone number of a contact person;
- Calendar reporting year;
- Certification as to whether the ALE offered its full-time employees and their dependent children the opportunity to enroll in minimum essential coverage by calendar month;
- Number of full-time employees for each month in the calendar year;
- For each full-time employee, the months for which minimum essential coverage was made available;
- For each full-time employee, the employee’s share of the lowest-cost monthly premium for “employee-only” coverage providing minimum value, by calendar month; and
- Name, address and TIN for each full-time employee, and the months, if any, for which the full-time employee was covered under an employer-sponsored plan. (This information would be the same as data provided for Section 6055 reporting.)
- Information Technology – to ensure that all the required data is accessible;
- Finance – to budget and allocate compliance resources needed;
- Legal – to interpret and apply the regulations;
- Human Resources – to make decisions regarding employee scheduling and monitoring hours over 30 hours per week;
- Payroll – to track hours (to identify full-time employees) and calculate affordability; and
- Benefits – to develop plan design, eligibility, and communications to employee
IRS clarifies FSA carryover and HRA coverage issues
Original post by Stephen Miller, shrm.org
Confusion about carrying over unused funds from year to year in health care flexible spending accounts (FSAs) has received some clarification under IRS Notice 2015-87, issued in December. The guidance also limits the use of health reimbursement arrangements (HRAs), including by an employee’s family members who are not enrolled in the employer’s group health plan.
RELATED: IRS releases final rule on premium tax credits, notice addressing employer coverage
Flexibility for Flex Plans
Since 2013, there have been two options for health FSA extensions that employers can adopt:
- If a health FSA plan has a carryover feature, participants can roll over up to $500 of unused FSA dollars to the next year but will forfeit any excess over $500 at year-end.
- Alternatively, an optional grace period can give employees an additional two-and-a-half months to incur new expenses using prior-year FSA funds. At the end of the grace period, all unspent funds must be forfeited to the employer.
Plans can offer either the carryover or a grace period, but not both, or they can offer neither. These options apply to FSAs for general purpose health care including prescription drug expenses, and to limited-scope FSAs for dental and vision care. Dependent care FSAs may offer a grace period but not a carryover option.
“One of the key reasons the IRS issued new FSA guidance was to clarify that employers can place some restrictions on the carryover feature,” said Mary V. Bauman, a member of law firm Miller Johnson in Grand Rapids, Mich., and co-author of an analysis of Notice 2015-87.
“Employers were concerned that if they opted to provide the carryover, they might have to maintain small account balances over long periods of time, and that would raise their administrative fees,” added Bill Sweetnam, legislative and technical director at the Washington, D.C.-based Employers Council on Flexible Compensation, which represents employers that sponsor tax-advantaged benefit programs.
Notice 2015-87 gives employers two tools to address concerns over keeping an employee on the FSA plan books when that employee isn’t otherwise an active FSA participant, Bauman explained:
- Employers can limit the carryover feature to only those employees who elect to make their own contributions for the following plan year.
- The employer can limit the carryover to only one plan year. “For example, consider an employee with a carryover of $300 for plan year one who doesn’t elect to contribute for plan year two,” said Bauman. “At the end of plan year two, if the entire $300 isn’t used, the employer’s plan can provide that the balance will be forfeited.”
COBRA and Carryovers
The notice provides that a health FSA that allows employees to carry over amounts from one plan year to the next must also allow those who elect COBRA under the FSA to carry over amounts to the next year. Amounts carried over cannot be used by employers in determining the amount of the FSA plan premium charged to former employees who elect COBRA.
“What to charge former employers for the COBRA premium [on their FSA plan] had been questionable,” Sweetnam said. “The guidance makes clear that you can’t base the premium charge on the amount of funds carried over.”
HSAs and FSAs Can’t Overlap
The notice affirms prior guidance stating that employees are not allowed to contribute to a health savings account (HSA) if they contributed during the same year to a general-purpose health FSA, although they may contribute to both an HSA and a limited-scope FSA covering dental and vision care expenses.
“An employee enrolled in a high-deductible health plan who has a carryover at the beginning of that plan year will be HSA-ineligible for the entire year, even if he or she spends down the balance right away,” said Bauman.
“If you have an HSA, you cannot contribute new funds to a general-purpose health FSA in the same year,” and carrying over funds from the prior year is seen as a contribution, said Sweetnam.
HRA Coverage Restricted
Notice 2015-87 also affirms prior guidance holding that an HRA cannot reimburse active employees for the cost of premiums for nongroup health insurance they might purchase on their own, unless those purchased policies cover only “excepted benefits” (such as dental or vision insurance policies).
“Some third-party administrators were making tortured interpretations of the prior guidance and promoting arrangements that the IRS didn’t think were allowable,” Sweetnam noted. “The IRS here is addressing that and putting a stop to it.”
The guidance reiterates that retiree-only HRAs can still reimburse retirees for the cost of premiums for nongroup health insurance policies, whether bought through the private market or on an Affordable Care Act exchange.
“But there was one new issue [in the notice] that is key,” said Bauman. “If an employer provides an HRA with its group health plan, it can only reimburse the uninsured expenses of an employee’s spouse and children if they also are enrolled in the employer’s group health plan.”
Employers with HRAs in place as of Dec. 16, 2015, when Notice 2015-87 was issued, have until the first day of their 2017 plan year to amend the HRA to address this requirement, Bauman noted.
“Since family members not on the group health plan can’t be covered by the HRA, it will require employers to update their systems,” said Sweetnam. Beginning in 2017, “If a charge is made to the HRA for a prescription, for instance, you have to look to see who the prescription is for. If it’s for the employee’s spouse and the employee has self-only coverage, that’s no longer permitted under these rules. It adds a little bit of administrative complexity.”
The new guidance creates some complexity, while in other areas it gets rid of some complexity, Sweetnam said.
7 questions employees may ask about ACA 1095s
The 1095 forms are ready for employee distribution. While you may feel you've covered every base, youre employees will more than likely still have a few questions.
The International Foundation of Employee Benefit Plans offers a helping hand with 7 questions you're more than likely to hear, and a sample answer for each.
RELATED: IRS extends due dates for ACA information reporting
What is this form I’m receiving?
A 1095 form is a little bit like a W-2 form. Your employer or insurer sends one copy to the Internal Revenue Service (IRS) and one copy to you. A W-2 form reports your annual earnings. A 1095 form reports your health care coverage throughout the year.
Who is sending it to me, when, and how?
Your employer or health insurance company should send one to you either by mail or in person. They may send the form to you electronically if you gave them permission to do so. You should receive it by March 31, 2016. (Starting in 2017, you should receive it each year by January 31, just like your W-2.)
Why are you sending it to me?
The 1095 forms will show that you and your family members either did or did not have health coverage during each month of the past year. Because of the Affordable Care Act, every person must obtain health insurance or pay a penalty to the IRS.
What am I supposed to do with this form?
Keep it for your tax records. You don’t actually need this form in order to file your taxes, but when you do file, you’ll have to tell the IRS whether or not you had health insurance for each month of 2015. The Form 1095-B or 1095-C shows if you had health insurance through your employer. Since you don’t actually need this form to file your taxes, you don’t have to wait to receive it if you already know what months you did or didn’t have health insurance in 2015. When you do get the form, keep it with your other 2015 tax information in case you should need it in the future to help prove you had health insurance.
What if I get more than one 1095 form?
Someone who had health insurance through more than one employer during the year may receive a 1095-B or 1095-C from each employer. Some employees may receive a Form 1095-A and/or 1095-B reporting specific health coverage details. Just keep these—you do not need to send them in with your 2015 taxes.
What if I did not get a Form 1095-B or a 1095-C?
If you believe you should have received one but did not, contact the Benefits Department by phone or e-mail at this number or address.
I have more questions—who do I contact?
Please contact _____ at ____. You can also go to our website and find more detailed questions and answers. An IRS website called Questions and Answers about Health Care Information Forms for Individuals (Forms 1095-A, 1095-B, and 1095-C) covers most of what you need to know.