OFCCP Releases Final Rule on LGBT Non-Discrimination
Originally posted December 4, 2014 by Cara Crotty on ThinkHR.com
The Office of Federal Contract Compliance Programs announced yesterday that it is issuing a Final Rule implementing President Obama’s Executive Order that prohibits federal contractors from discriminating on the bases of sexual orientation and gender identity.
This Final Rule will be effective 120 days after publication in the Federal Register (which has not yet occurred) and will apply to federal contracts entered into or modified on or after that date.
What does the Final Rule change?
The EO Clause has been changed to include “sexual orientation” and “gender identity.” However, those contractors that incorporate the EO clause by reference will not need to physically alter their subcontracts or purchase orders.
Contractors must notify applicants and employees of their non-discrimination policy by posting the “EEO is the Law” poster. Presumably, the government will be updating this poster to include these two new categories.
Contractors are also obligated to expressly state in job advertisements that all qualified candidates will receive consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, or national origin. The Final Rule provides that employers can satisfy this requirement by including that verbiage or simply indicating that the company is an “equal opportunity employer.”
Although employees hired outside of the United States are not covered by the regulations, if a contractor is not able to obtain a visa of entry for an employee or potential employee to a country in which it is doing business, the regulations require the contractor to notify both the OFCCP and the U.S. Department of State if the contractor believes that the refusal of the visa is because of the individual’s protected characteristic. This requirement now applies to sexual orientation and gender identity status.
The section of the regulations regarding Placement Goals in AAPs has also been updated. Contractors are prohibited from extending preferences on the basis of race, color, religion, sex, sexual orientation, gender identity, or national origin due to specific placement goals.
What is not affected by the Final Rule?
The Final Rule does not change contractors’ reporting and information collection requirements, so contractors are not required to survey or report on the number of LGBT applicants or employees. The required components of Affirmative Action Plans are also not affected.
What should contractors do to comply?
The Final Rule simply adds sexual orientation and gender identity to the sections of the regulation where the other protected categories are listed, so the impact on federal contractors is limited. However, contractors should begin the process of determining whether and when they need to do the following:
- Update the EO Clause in subcontracts and purchase orders;
- Amend the EEO and AA policy to include sexual orientation and gender identity;
- Obtain new “EEO is the Law” posters;
- Modify their EEO tagline on job solicitations; and
- Train appropriate personnel on the new protections.
In addition, the OFCCP has issued FAQs regarding its interpretation of the Final Rule. These will probably be updated periodically as contractors pose questions to the OFCCP.
Why no proposed rule?
You may be wondering whether you missed the Notice of Proposed Rulemaking on this issue. Actually, the OFCCP bypassed the notice and comment period, stating that the “Executive Order was very clear about the steps the Department of Labor was required to take, and left no discretion regarding how to proceed. In such cases, principles of administrative law allow an agency to publish final rules without prior notice and comment when the agency only makes a required change to conform a regulation to the enabling authority, and does not have any discretion in doing so.” (The OFCCP must not have seen all the questions I had after reading the Executive Order.)
Federal Employment Law Update – December 2014
Originally posted December 03, 2014 on www.thinkhr.com.
IRS Releases Guidance on Hardship Exemptions from ACA Individual Shared Responsibility Payment and Minimum Essential Coverage
On November 21, 2014, the IRS released final regulations relating to the requirement to maintain minimum essential coverage enacted by the Patient Protection and Affordable Care Act (ACA). Notice 2014-76, released concurrently with the regulations, provides a comprehensive list of all hardship exemptions that may be claimed on a federal income tax return without obtaining a hardship exemption certification.
The final regulations provide individual taxpayers with guidance under I.R.C. § 5000A on the requirement to maintain minimum essential coverage and rules governing certain types of exemptions from that requirement. The regulations address three general areas:
- Employee contributions to a cafeteria plan.
- Health reimbursement arrangements.
- Wellness program incentives.
The final regulations also remove the references to specific hardship circumstances and, instead, provide that a taxpayer may claim a hardship exemption on a federal income tax return without obtaining an exemption certification for any month that includes a day on which the taxpayer satisfies the requirements of a hardship for which the Department of Health and Human Services (HHS), the Treasury Department, and the IRS issue published guidance.
Read Notice 2014-76
Read the Final Regulations
OMB Approves VETS-4212 Reporting Form
On November 19, 2014, the Office of Management and Budget (OMB) approved the new VETS-4212 form for federal contractors and subcontractors to report on their employment of veterans protected under the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA). Under the revised form, set for implementation in 2015, contractors will report the specified information for protected veterans in the aggregate rather than for each of the categories of veterans protected under the statute.
VEVRAA, located at 38 U.S.C. § 4212(d), requires covered federal contractors to report annually to the Secretary of Labor on their employees and new hires who belong to the specific categories of veterans protected under the statute. Under the most recent amendments to the statute, those categories are:
- Disabled veterans.
- Other protected veterans.
- Armed Forces service medal veterans.
- Recently separated veterans.
View Form VETS-4212
Immigration – New Department of Labor Fact Sheets
On November 20, 2014, President Obama announced a series of Immigration Accountability executive actions to help fix the nation’s broken immigration system. Using his authority, the President directed agencies across the federal government to implement specific elements of these executive actions.
The Department of Labor has issued the following fact sheets to explain the department’s role in support of the executive actions:
- Establishment of Interagency Working Group for the Consistent Enforcement of Federal Labor, Employment and Immigration Laws.
- Department of Labor to Pursue Modernized Recruitment and Application Requirements for the PERM Program.
- The Department of Labor’s Wage and Hour Division Will Expand Its Support Of Victims of Human Trafficking and Other Crimes Seeking Immigration Relief from DHS.
Officials Extend Deadline for Submitting Reinsurance Contribution Form
On November 14, 2014, federal officials responded to requests for an extension of the deadline for contributing entities to submit their 2014 enrollment counts in connection with Transitional Reinsurance Program contributions. The deadline has now been extended until 11:59 p.m. on December 5, 2014. The January 15, 2015 and November 15, 2015 payment deadlines remain unchanged.
Read the Announcement
Agencies Release FAQs about Affordable Care Act Implementation (Part XXII)
On November 6, 2014, the Internal Revenue Service (IRS), Department of Health and Human Services, and the Treasury released FAQs about Affordable Care Act Implementation (Part XXII) in an ongoing series of informal guidance regarding the Affordable Care Act (health care reform). This easy-to-read FAQ emphasizes prior technical guidance that prohibits employers from paying or reimbursing individual health policy premiums.
Employers are prohibited from making or offering any form of payment for individual policy premiums, whether through pretax reimbursements, premium reimbursement arrangements (HRAs), after-tax reimbursements, or cash compensation. Further, employers are prohibited from offering incentives to high-claims-risk employees to drop or forego coverage under the employer’s group health plan.
Read the FAQs
Top 10 401(k) compliance mistakes auditors catch
There are a number of emerging Department of Labor issues that employers should be aware of in order to ensure their benefit plans are compliant and being properly administered. Knowing the DOL is going to be vigilant in these areas means that now is a good time to review benefit plan documentation and administrative practices to ensure compliance.
Here are the top-10 mistakes auditors catch:
1. Late or erratic payment of employee deferrals. According to the DOL, contributions must be paid as soon as administratively feasible, but no later than the 15th business day of the following month (when deferrals are withheld). Employee contributions should be within this time frame, but also consistently remitted among all payrolls and pay periods.
2. Oversights in calculating employee contributions. 401(k) contributions should be determined in accordance with the plan document (which should include the definition of compensation) andin accordance with employees’ instructions.
3. Misunderstanding of the vesting period. Each plan defines when employees reach one year of service. HR and other departments may calculate it differently.
4. Disregard for break-in service rules. Usually, plans state that when employees leave and are rehired within a certain time frame, that they're automatically eligible to participate in a 401(k) plan. This rule is sometimes overlooked.
5. A growing number of forfeiture accounts. When employees leave and forfeit their 401(k) balances, those funds aren't always used as outlined in the plan, such as for paying employer-plan fees or in the time frame required by the Internal Revenue Service.
6. Incorrect tax witholdings when employees take distributions. People can take distributions from employer-sponsored plans prior to age 59½, but these early-withdrawals must be made in accordance with IRS rules in terms of penalties and any income taxes due.
7. Mistakes with profit-sharing contributions. Errors occur most often when annual calculations are performed manually vs. being automatically tallied through payroll software.
8. Mishandling employee requests. When employee requests, such as changes in deferral percentages, are handled manually, they are sometimes coded incorrectly or simply not entered at all.
9. Disconnect with service-provider contracts. Sometimes, there’s a disconnect between the company and its service provider. Responsibilities should be crystal clear, especially in the areas of hardship withdrawals and informing employees of eligibility.
10 Overlooking the plan's eligibility requirements. Some employees may be enrolled too early or too late ― or forgotten altogether, which can be the case with employees working at another corporate affiliate or division.
CMS delays enforcement of health plan identifiers in HIPAA transactions
Originally posted by Alden Bianchi on EBN on November 6, 2014.
In a surprise move, the Centers for Medicare & Medicaid Services (CMS) announced an indefinite delay in enforcement of regulations pertaining to “health plan enumeration and use of the Health Plan Identifier (HPID) in HIPAA transactions” that would have otherwise required self-funded employer group health plans (among other “covered entities”) to take action as early as November 5, 2014.
The CMS statement reads as follows:
Statement of Enforcement Discretion regarding 45 CFR 162 Subpart E – Standard Unique Health Identifier for Health Plans
Effective Oct. 31, 2014, the CMS Office of E-Health Standards and Services (OESS), the division of the Department of Health & Human Services that is responsible for enforcement of compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) standard transactions, code sets, unique identifiers and operating rules, announces a delay, until further notice, in enforcement of 45 CFR 162, Subpart E, the regulations pertaining to health plan enumeration and use of the Health Plan Identifier (HPID) in HIPAA transactions adopted in the HPID final rule (CMS-0040-F). This enforcement delay applies to all HIPAA covered entities, including health care providers, health plans, and healthcare clearinghouses.
On Sept. 23, 2014, the National Committee on Vital and Health Statistics (NCVHS), an advisory body to HHS, recommended that HHS rectify in rulemaking that all covered entities (health plans, health care providers and clearinghouses, and their business associates) not use the HPID in the HIPAA transactions. This enforcement discretion will allow HHS to review the NCVHS’s recommendation and consider any appropriate next steps.
The CMS statement followed, but was not anticipated by, a recent series of FAQs that provided some important and welcome clarifications on how employer-sponsored group health plans might comply with the HPID requirements.
Background
Congress enacted the HIPAA administrative simplification provisions to improve the efficiency and effectiveness of the health care system. These provisions required HHS to adopt national standards for electronic health care transactions and code sets, unique health identifiers, and security. As originally enacted, HIPAA directed HHS to establish standards for assigning unique health identifiers for each individual, employer, health plan, and health care provider. The Affordable Care Act modified and expanded these requirements to include an HPID. On Sept. 5, 2012, HHS published final regulations adopting HPID enumeration standards for health plans (“enumeration” is the process of getting an HPID).
For the purposes of HPID enumeration, health plans are divided into controlling health plans (CHPs) and sub-health plans (SHPs). Large CHPs (i.e., those with more than $5 million in annual claims) would have been required to obtain HPIDs by Nov. 5, 2014. Small controlling health plans had an additional year, until November 5, 2015.
The Issue(s)
While we have no idea what led the NCVHS to recommend to CMS that it abruptly suspend the HPID rules, we can make an educated guess—two guesses, actually.
What is it that is being regulated here?
The HIPAA administrative simplification rules apply to “covered entities.” i.e., health care providers, health plans, and health care data clearing houses. Confusingly, the term health plan includes both group health insurance sponsored and sold by state-licensed insurance carriers and employer-sponsored group health plans. Once HHS began issuing regulations, it became apparent that this law was directed principally at health care providers and health insurance issuers or carriers. Employer-sponsored group health plans were an afterthought. The problem for this latter group of covered entities is determining what, exactly, is being regulated. The regulatory scheme treats an employer’s group health plan as a legally distinct entity, separate and apart from the employer/plan sponsor. This approach is, of course, at odds with the experience of most human resource managers, employees and others, who view a company’s group health plan as a product or service that is “outsourced” to a vendor. In the case of an insured plan, the vendor is the carrier; in the case of a self-funded plan, the vendor is a third-party administrator.
The idea that a group health plan may be treated as a separate legal entity is not new. The civil enforcement provisions of the Employee Retirement Income Security Act of 1974 (ERISA) permit an employee benefit plan (which includes most group health plans) to be sued in its own name. (ERISA § 502(d) is captioned, “Status of employee benefit plan as entity.”) The approach taken under HIPAA merely extends this concept. But what exactly is an employee benefit plan? In a case decided in 2000, the Supreme Court gave us an answer, saying:
“One is thus left to the common understanding of the word ‘plan’ as referring to a scheme decided upon in advance . . . Here the scheme comprises a set of rules that define the rights of a beneficiary and provide for their enforcement. Rules governing collection of premiums, definition of benefits, submission of claims, and resolution of disagreements over entitlement to services are the sorts of provisions that constitute a plan.” (Pegram v. Herdrich, 530 U.S. 211, 213 (2000).)
Thus, what HHS has done in the regulations implementing the various HIPAA administrative simplification provisions is to impose rules on a set of promises and an accompanying administrative scheme. (Is there any wonder that these rules have proved difficult to administer?) The ERISA regulatory regime neither recognizes nor easily accommodates controlling health plans (CHPs) and subhealth plans (SHPs). The FAQs referred to above attempted to address this problem by permitting plan sponsors to apply for one HPID for each ERISA plan even if a number of separate benefit plan components (e.g., medical, Rx, dental, and vision) are combined in a wrap plan. It left in place a larger, existential problem, however: It’s one thing to regulate a covered entity that is a large, integrated health care system; it’s quite another to regulate a set of promises. The delay in the HPID enumeration rules announced in the statement set out above appears to us to be a tacit admission of this fact.
Why not permit a TPA to handle the HPID application process?
One of the baffling features of the recently suspended HPID rules is CMS’ rigid insistence on having the employer, in its capacity as group health plan sponsor, file for its own HPID. It was only very recently that CMS relented and allowed the employer to delegate the task of applying for an HPID for a self-funded plan to its third party administrator. By cutting third party administrators out of the HPID enumeration process, the regulators invited confusion. The reticence on CMS’ part to permit assistance by third parties can be traced to another structural anomaly. While HIPAA views TPAs in a supporting role (i.e., business associates), in the real world of self-funded group health plan administration, TPAs function for the most part autonomously. (To be fair to CMS, complexity multiplies quickly when, as is often the case, a TPA is also a licensed carrier that is providing administrative-services-only, begging the question: Are transmissions being made as a carrier or third party administrator?)
HIPAA Compliance
That the HPID enumeration rules have been delayed does not mean that employers which sponsor self-funded plans have nothing to do. The HIPAA privacy rule imposes on covered entities a series of requirements that must be adhered to. These include the following:
Privacy Policies and Procedures: A covered entity must adopt written privacy policies and procedures that are consistent with the privacy rule.
Privacy Personnel: A covered entity must designate a privacy official responsible for developing and implementing its privacy policies and procedures, and a contact person or contact office responsible for receiving complaints and providing individuals with information on the covered entity’s privacy practices.
Workforce Training and Management: Workforce members include employees, volunteers, and trainees, and may also include other persons whose conduct is under the direct control of the covered entity (whether or not they are paid by the entity). A covered entity must train all workforce members on its privacy policies and procedures, as necessary and appropriate for them to carry out their functions. A covered entity must also have and apply appropriate sanctions against workforce members who violate its privacy policies and procedures or the Privacy Rule.
Mitigation: A covered entity must mitigate, to the extent practicable, any harmful effect it learns was caused by use or disclosure of protected health information by its workforce or its business associates in violation of its privacy policies and procedures or the Privacy Rule.
Data Safeguards: A covered entity must maintain reasonable and appropriate administrative, technical, and physical safeguards to prevent intentional or unintentional use or disclosure of protected health information in violation of the Privacy Rule and to limit its incidental use and disclosure pursuant to otherwise permitted or required use or disclosure.
Complaints: A covered entity must have procedures for individuals to complain about its compliance with its privacy policies and procedures and the Privacy Rule. The covered entity must explain those procedures in its privacy practices notice. Among other things, the covered entity must identify to whom individuals at the covered entity may submit complaints and advise that complaints also may be submitted to the Secretary of HHS.
Retaliation and Waiver: A covered entity may not retaliate against a person for exercising rights provided by the Privacy Rule, for assisting in an investigation by HHS or another appropriate authority, or for opposing an act or practice that the person believes in good faith violates the Privacy Rule. A covered entity may not require an individual to waive any right under the Privacy Rule as a condition for obtaining treatment, payment, and enrollment or benefits eligibility.
Documentation and Record Retention: A covered entity must maintain, until six years after the later of the date of their creation or last effective date, its privacy policies and procedures, its privacy practices notices, disposition of complaints, and other actions, activities, and designations that the Privacy Rule requires to be documented.
The HIPAA security rule requires covered entities to conduct a risk assessment, and to adopt policies and procedures governing two dozen or so security parameters.
United States: You've Acquired A New Qualified Retirement Plan? Time For A Compliance Check
Originally posted October 20, 2014 by Nancy Gerrie and Jeffrey M. Holdvogt of Mondaq Business Briefing, on www.ifebp.org.
In connection with a merger or acquisition, an acquiring company may end up assuming sponsorship of a tax-qualified retirement plan that covers employees of the acquired company. Basic due diligence on the plan likely was done during the acquisition. But if the plan will continue to be maintained following the acquisition, this is the perfect time to establish procedures to ensure that the numerous administrative and fiduciary requirements involved in maintaining a qualified retirement plan will continue to be met on an ongoing basis. Following is a brief summary of some key issues that a company should focus on after it assumes a new qualified retirement plan.
Review Compliance with Coverage and Nondiscrimination Testing
In order for the plan to retain its tax-qualified status, the Internal Revenue Code requires that a qualified retirement plan be tested periodically to ensure that it does not discriminate in favor of highly compensated employees. Two of the most important tests to be monitored are: (i) the coverage test, to ensure that the plan covers a stated minimum number of non-highly compensated employees on a controlled group (employer-wide) basis, and (ii) the nondiscrimination test, to ensure that the formula for determining the amount of contributions and benefits a particular participant receives does not discriminate in favor of highly compensated employees. Advance planning should be done to determine the impact of the acquisition on these tests, both for the new plan and any existing plans within the controlled group. Different rules may apply for determining which employees are highly compensated, depending on the type of transaction.
Become Familiar with the Plan's Investments and Investment Policy
The acquiring company, or more typically a committee appointed by the acquiring company, will have fiduciary responsibility for selecting the plan's investments, including the investment funds offered under a 401(k) or other individual account retirement plan. Plan fiduciaries, who likely will be newly appointed following the acquisition, must familiarize themselves with the fund lineup, obtain information to evaluate the funds and document how they monitor and select funds to ensure compliance with U.S. Department of Labor requirements. Plan fiduciaries also should familiarize themselves with the plan's written investment policy or guidelines, refer to the investment policy or guidelines when meeting to discuss changes to plan investments and update the policy or guidelines, as needed.
Understand Plan Fees and Revenue Sharing
New plan fiduciaries should carefully review any revenue-sharing arrangements related to the plan and understand the plan's use of so-called "12b-1 fees" and other revenue-sharing payments. Plan fiduciaries must understand the formula, methodology and assumptions used to determine the respective share of any revenue generated from plan investments by the plan's service provider. Plan fiduciaries also must monitor the arrangement and the service provider's performance to ensure that the revenue owed to the plan is calculated correctly and that the amounts are applied properly (for example, for payment of proper plan expenses or for reallocation to participants' plan accounts).
Review Consultant, Investment Manager and Service Provider Agreements
Qualified retirement plan fiduciaries typically have agreements with various consultants, investment managers and service providers that carry over following an acquisition. This is a good time to review these agreements, both to understand the service providers (and whether they are still needed) and to make sure plan fiduciaries are set up to properly monitor and select new service providers, as needed. In particular, plan fiduciaries should understand whether the consultant or advisor represents itself to be a fiduciary or co-fiduciary of the plan, whether the consultant or advisor maintains adequate insurance coverage, whether fees are reasonable and whether any conflicts of interest exist.
Ensure the Plan's Eligibility Provisions Reflect the New Controlled Group
The plan document will specify precise rules for employee eligibility. Following an acquisition, the acquiring company often must update the plan's eligibility provisions to reflect the new controlled group. In addition, with new administrators and new human resources personnel likely to be looking at the plan, this is an ideal time to make sure the plan is following the eligibility and enrollment rules set forth in the plan document, including: (1) eligibility for or exclusion of part-time employees; (2) proper classification of independent contractors; (3) adherence to hours-of-service counting rules or the elapsed-time alternative; (4) re-enrollment of rehired participants; and (5) for automatic enrollment plans, proper automatic enrollment for eligible employees on a timely basis.
Check the Plan's Definition(s) of Compensation
A plan's definition of compensation is used for a variety of important purposes, including the calculation of an employee's allocation in a defined contribution plan or benefit accruals in a defined benefit plan, adherence to limitations on allowable compensation and performing nondiscrimination testing. The plan document must specify precise definitions for applicable compensation for each purpose. Problems frequently arise following an acquisition because the payroll provider may change or key personnel who understood how compensation was applied under the plan may be gone. Also, the transaction agreement may require the continuation of certain benefit levels for a period of time, which in practice may require that the plan continue to apply the same definition of eligible compensation as before the transaction. Plan administrators should review payroll codes against the plan's definition of compensation and make adjustments to either the plan or the payroll codes, as needed.
Review the Distribution Paperwork
The acquiring company will usually update the plan's summary plan description and employee communications to reflect the new employer. However, distribution paperwork, including benefit election and rollover forms that the employee must complete, as well as descriptions of optional forms of benefits and other required disclosures, is often overlooked in the due diligence and transition process. If election forms are not periodically reviewed and updated, the plan may fail to provide all the correct options (for example, installments, annuities and lump sums, where available) or fail to require spousal consent for distributions, where it is required under plan rules.
Update ERISA Fidelity Bonds and Fiduciary Insurance Coverage
One of the most common failures noted by the Department of Labor during audits is a plan's maintenance of an Employee Retirement Income Security Act (ERISA) fidelity bond. ERISA generally requires that every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan be bonded (for at least 10 percent of the amount of funds he or she handles, subject to a $500,000 maximum per plan for plans that do not hold employer securities) to protect from risk of loss due to fraud or dishonesty on the part of persons who "handle" plan funds or other property. The period after an acquisition is an excellent time to make sure the plan maintains appropriate bonds, as well as to make sure the company is adequately protected with fiduciary insurance coverage, which may be with the same insurer as the fidelity bond.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Deadline Looms to Obtain Group Health Plan Identifiers
Originally posted October 17, 2014 by Stephen Miller on www.shrm.org.
updated 9/19/2014
Self-insured employers should take note of approaching deadlines under a Department of Health and Human Services (HHS) final rule that requires large health plans to obtain health plan identifiers (HPIDs) by Nov. 5, 2014; for small plans, the deadline is Nov. 5, 2015.
An HPID is intended to serves as a unique identifier for health plans involved in transactions subject to the Health Insurance Portability and Accountability Act (HIPAA). HIPAA defines a small health plan as one with annual receipts of $5 million or less.
Employers “are really struggling with the requirements for health plan identifiers,” said Gretchen Young, senior vice president for health policy at the ERISA Industry Committee (ERIC), in a news release. “Regulations issued by HHS were clearly not written with self-insured group health plans in mind.”
Clarification Sought
ERIC recently polled its members, who are large employers that sponsor benefit plans for their workers, and found that the vast majority of these companies had not tried to obtain an HPID as of September 2014. The poll indicated that nearly half of the respondents (45 percent) were still waiting, with hopes that HHS would publish relevant guidance.
For those members who have attempted to obtain an HPID, 100 percent found the process to be “very difficult” or “difficult,” Young said. Common problems included the lack of guidance from HHS regarding the manner in which self-insured plans should calculate the number of plans that need an HPID.
“Many plan sponsors use a single document that includes a variety of different benefit programs and they treat all of the benefit programs as a single plan for reporting purposes under ERISA. It is unclear whether companies would need to treat each type of benefit as a separate [controlling health plan] that needs its own HPID, even if they use a single document and their benefits are treated as a single plan for ERISA purposes,” explained Young.
“It is critical that HHS act quickly to address the deficiencies in the current guidance...given the lack of guidance and difficulties using their system,” she said.
Other Self-Funded Arrangements
“While it is the insurer that is responsible to obtain an HPID on behalf of fully insured health plans, plan sponsors of fully insured health plans should be aware that an HPID may be required for other self-funded arrangements,” cautioned Tripp Vander Wal, an attorney with law firm Miller Johnson, in an online article.
Examples of these self-funded arrangements include health reimbursement arrangements (HRAs) or medical flexible spending accounts (FSAs). “The good news is that HRAs and FSAs are likely to qualify as small health plans and have an additional year to obtain an HPID,” he noted.
Update:
In a subsequently issued set of FAQs, the Centers for Medicaid and Medicare Eligibility stated that neither health FSAs nor HSAs are required to obtain an HPID because they are “individual accounts directed by the consumer to pay health care costs.” In addition, CMS stated that whether an HRA needs an HPID depends on what it reimburses. HRAs that cover only deductibles or out-of-pocket costs do not require HPIDs; however, HRAs that pay for other costs (e.g., health insurance premiums) still need HPIDs.
Commented law firm Alston & Bird LLP in an Advisory Update, “We note that, while this guidance may appear to be welcome news for employers with only fully insured plans and health FSAs or HRAs (whose only potential HPID enumeration responsibility would be because of the health FSA or HRA), it is not consistent with HIPAA’s definition of health plan, under which both health FSAs and HRAs are health plans, as CMS has previously recognized. Employers should be able to rely on CMS’s clear statement in this guidance that FSAs and certain HRAs do not require HPIDs, but we advise caution. Given the inconsistency with previous guidance on FSAs and HRAs and the manner in which CMS has phrased the FAQ, the guidance may not create as broad an exception as it first appears.”
IRS releases draft of employer reporting form for health reform law compliance
Originally post July 25, 2014 by Matt Dunning on www.businessinsurance.com.
The Internal Revenue Service has issued draft versions of the reporting forms most employers will begin using next year to show that their group health insurance plans comply with the health care reform law.
The long-awaited draft forms, posted late Thursday afternoon to the IRS' website, are the first practical application of employers' health care coverage and enrollment reporting obligations under the Patient Protection and Affordable Care Act since the regulations were finalized in March.
The forms are the primary mechanism through which the government intends to enforce the health care reform law's minimum essential coverage and shared responsibility requirements for employers.
Beginning in 2015, employers with at least 100 full-time employees will be required to certify that benefits-eligible employees and their dependents have been offered minimum essential coverage and that their employees' contributions to their premiums comply with cost-sharing limits established under the reform law. Smaller employers with 50-99 full-time employees are required to begin reporting in 2016.
Additionally, self-insured employers will be required to submit documentation to ensure compliance with minimum essential coverage requirements under the reform law's individual coverage mandate.
“In accordance with the IRS' normal process, these draft forms are being provided to help stakeholders, including employers, tax professionals and software providers, prepare for these new reporting provisions and to invite comments from them,” the IRS said in a statement released Thursday.
The IRS said it expects to publish draft instructions for completing the reporting forms by late August and that both the forms and the instructions would be finalized later this year.
Last year, the Obama administration announced it would postpone implementation of employers' minimum essential coverage and shared responsibility obligations under the reform law for one year, largely due to widespread complaints about the complexity of the reporting requirements.
Though several months have passed since the administration issued a simplified set of information reporting rules, many employers have delayed preparations for meeting the requirements until the forms and instructions are available for review, said Richard Stover, a principal with Buck Consultants at Xerox in Secaucus, New Jersey.
“A lot of employers really haven't been doing anything about reporting requirements, even with the final regulations in place, because they were waiting for these forms,” Mr. Stover said. “This is something they've been anxious to see.”
Upcoming PCORI Fee Due July 31
Source: https://www.irs.gov
The Affordable Care Act imposes a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Institute. The fee, required to be reported only once a year on the second quarter Form 720 and paid by its due date, July 31, is based on the average number of lives covered under the policy or plan.
The fee applies to policy or plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2019. The Patient-Centered Outcomes Research Institute fee is filed using Form 720, Quarterly Federal Excise Tax Return. Although Form 720 is a quarterly return, for PCORI, Form 720 is filed annually only, by July 31.
Specified Health Insurance Policies and Applicable Self-Insured Health Plans
The fee is imposed on an issuer of a specified health insurance policy and a plan sponsor of an applicable self-insured health plan. For more information on whether a type of insurance coverage or arrangement is subject to the fee, see this chart.
Calculating the Fee
Specified Health Insurance Policies
For issuers of specified health insurance policies, the fee for a policy year ending before Oct. 1, 2013, is $1, multiplied by the average number of lives covered under the policy for that policy year. Generally, issuers of specified health insurance policies must use one of the following four alternative methods to determine the average number of lives covered under a policy for the policy year.
- Actual Count Method: For policy years that end on or after Oct. 1, 2012, issuers using the actual count method may begin counting lives covered under a policy as May 14, 2012, rather than the first day of the policy year, and divide by the appropriate number of days remaining in the policy year.
- Snapshot Method: For policy years that end on or after Oct. 1, 2013, but began before May 14, 2012, issuers using the snapshot method may use counts from the quarters beginning on or after May 14, 2012, to determine the average number of lives covered under the policy.
- Member Months Method and 4. State Form Method: The member months data and the data reported on state forms are based on the calendar year. To adjust for 2012, issuers will use a pro rata approach for calculating the average number of lives covered using the member months method or the state form method for 2012. For example, the issuers using the member months number for 2012 will divide the member months number by 12 and multiply the resulting number by one quarter to arrive at the average number of lives covered for October through December 2012.
For more information on these methods to determine the average number of lives covered under a policy for the policy year, please see the final regulations (PDF).
Applicable Self-Insured Health Plans
For plan sponsors of applicable self-insured health plans, the fee for a plan year ending before Oct. 1, 2013, is $1, multiplied by the average number of lives covered under the plan for that plan year. Generally, plan sponsors of applicable self-insured health plans must use one of the following three alternative methods to determine the average number of lives covered under a plan for the plan year.
- Actual Count Method: A plan sponsor may determine the average number of lives covered under a plan for a plan year by adding the totals of lives covered for each day of the play year and dividing that total by the total number of days in the plan year.
- Snapshot Method: A plan sponsor may determine the average number of lives covered under an applicable self-insured health plan for a plan year based on the total number of lives covered on one date (or more dates if an equal number of dates is used in each quarter) during the first, second or third month of each quarter, and dividing that total by the number of dates on which a count was made.
- Form 5500 Method: An eligible plan sponsor may determine the average number of lives covered under a plan for a plan year based on the number of participants reported on the Form 5500, Annual Return/Report of Employee Benefit Plan, or the Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan.
However, for plan years beginning before July 11, 2012, and ending on or after Oct. 1, 2012, plan sponsors may determine the average number of lives covered under the plan for the plan year using any reasonable method.
For more information on these methods to determine the average number of lives covered under applicable self-insured health plans for the plan year, please see the final regulations (PDF).
Reporting and Paying the Fee
File the second quarter Form 720 annually to report and pay the fee no later than July 31 of the calendar year immediately following the last day of the policy year or plan year to which the fee applies. Issuers and plan sponsors who are required to pay the fee but are not required to report any other liabilities on a Form 720 will be required to file a Form 720 only once a year. They will not be required to file a Form 720 for the first, third or fourth quarters of the year. Deposits are not required for this fee, so issuers and plans sponsors are not required to pay the fee using EFTPS.
Please see the instructions for Form 720 on how to fill out the form and calculate the fee. If for any reason you need to make corrections after filing your annual Form 720 for PCORI, write “Amended PCORI” at the top of the second filing.
The payment, if paid through the Electronic Federal Tax Payment System, should be applied to the second quarter (in EFTPS, select Q2 for the Quarter under Tax Period on the "Business Tax Payment" page).
Compliance Alert- Self-Funded Health Plans Must Obtain a Health Plan Identifier Number
Beginning November 5, 2014, employers with large self-funded health plans are required by federal government to obtain a national health plan identifier number (HPID). All health plans with more than $5 million in annual receipts must require an HPID, but since health plans don’t have receipts, the Department of Health and Human Services says insured plans should use the premiums from the prior plan year, and self-funded plans should look at claims paid for the prior plan year. Small health plans have an extra year to obtain an HPID with a deadline set for November 5, 2015.
The federal government requires this from all health plans, however, for practical purposes; the insurer will obtain the HPID for those plans that are fully insured. On the other hand, all self-funded plans must obtain an HPID, even if a third party administrator is involved to handle claims.
What exactly, is an HPID?
A health plan identifier number is 10 digits long and consists of only numbers and is used as an identifier for transactions covered by HIPAA.
Why are health plans required to have an HPID?
In an effort to make the claim processing more efficient, the HPID will help with electronic processing and faster automation. HPID’s will be required to be used in HIPPA transactions by November 7, 2016.
How do I know if my health plan is required to have an HPID?
First you must determine which health plan you have. There are two categories of health plans – a Controlling Health Plan (CHP) and a Subhealth Plan (SHP). A Controlling Health Plan is required to obtain an HPID, while a Subhealth Plan is eligible, but not required to get an HPID. To determine whether a Subhealth Plan should get an HPID, the CHP and/or the SHP should consider whether the SHP needs to be identified in the standard transactions. A CHP may get an HPID for its SHP or may direct a SHP to get an HPID. These categories can be confusing, and are intended for insurance companies to determine. If you need help determining which health plan you have, please contact us and we will be happy to help.
If you have a self-funded plan, how does one obtain an HPID?
Employers can apply at the Centers for Medicare and Medicaid Services (CMS) website. It is likely that most employers will be required to register and set up a health insurance oversight system (HIOS) account at https://portal.cms.gov/wps/portal/unauthportal/home/ .
After an account has been established, the employer can register for an HPID. More information on applying can be found here: https://www.cms.gov/Regulations-and-Guidance/HIPAA-Administrative-Simplification/Affordable-Care-Act/Downloads/HPOESTrainingSlidesMarchSlideDeck.pdf
We are always happy to help, so please contact us if you have any questions or need help obtaining an HPID.
Bill bumping ACA to 40-hour work week passes House
Originally posted April 4, 2014 by Melissa A. Winn on https://eba.benefitnews.com
The U.S. House of Representatives on Thursday passed legislation that would modify the Affordable Care Act’s definition of a full-time employee from one who works 30-hours a week to one who works 40-hours a week.
The 248 to 179 vote was largely along party lines, with 18 Democrats joining a unanimous block of 230 Republicans to support the bill, H.R. 2575, also known as the Save American Workers Act of 2013.
The Big “I” applauded the bill’s passage, calling it a “common-sense fix.”
“Independent agencies serve many clients who have struggled with the prospect of complying with the employer mandate, and in particular the 30 hour per week definition of a full-time employee,” says Robert Rusbuldt, president and CEO of the Big “I.”
The law’s opponents argue the ACA’s current definition encourages employers to limit employees’ work hours to less than 30 a week to avoid the employer mandate requiring employers with 50 or more full-time workers to provide affordable health care coverage to their employees.
“Implementation of the employer mandate has caused many businesses to undergo the prospect of great financial strain or to contemplate dropping their health care plan altogether,” says Charles Symington, Big “I” senior vice president for external and governmental affairs.
The Big “I” believes this new legislation “would provide much-needed relief for job creators,” he says.
The White House on Tuesday threatened to veto the bill, citing a Congressional Budget Office analysis released in Feb. that found the legislation would increase the deficit by $74 billion and reduce the number of people receiving employment-based health coverage by about one million people. The vote is largely symbolic as it is not expected to make headway in the Democratic-controlled Senate.