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.
IRS releases final rule on premium tax credits, notice addressing employer coverage
Original post by Timothy Jost, healthaffairs.org
Implementing Health Reform. On December 16, 2015, the Internal Revenue Service (IRS) released a final regulation containing a number of premium tax credit eligibility provisions. Several of these concern the question of when an employer-sponsored health benefit plan offers affordable coverage that meets the minimum value requirement, but the rule also addresses other miscellaneous issues.
At the same time the IRS released a long and complicated notice addressing various issues that have arisen under the Affordable Care Act (ACA) with respect to employer-sponsored coverage, focusing particularly on account-based employee benefits such as section 125 cafeteria plans and health reimbursement arrangements.
Premium Tax Credit Final Rule
The rule finalizes a minimum value rule proposed over two years ago in May of 2013. The IRS had also recently proposed additional regulatory provisions relating to minimum value, while Department of Health and Human Services regulations address other issues related to minimum value. Parts of the earlier proposed rules are finalized in this rule, and other parts remain to be finalized later.
Premium Tax Credit Eligibility
The final rule begins by cleaning up one premium tax credit eligibility issue that has nothing to do with minimum value of employer-sponsored coverage. Eligibility for premium tax credits is based on household income, including the income of children or other members of the family who are required to file tax returns. Under certain circumstances parents are allowed to include their children’s income in their tax returns.
The regulatory language clarifies that when a parent does this, the household’s income includes the child’s gross income included on the parent’s return. The amount included for determining tax credit eligibility, however, is the child’s modified adjusted gross income (MAGI), which is not necessarily the amount reported as gross income on the tax return. MAGI would also include, for example, the child’s tax exempt interest and nontaxable Social Security income. The final rule clarifies how this is to be handled.
The rule next clarifies how wellness incentives are handled for determining the affordability of coverage for purposes of premium tax credit eligibility. Premium tax credits are not normally available to individuals who are offered health insurance coverage by their employer. Employees may, however, be eligible for premium tax credits if the employer coverage does not provide “minimum value” (MV) or if the employer coverage is “unaffordable.” Generally, a minimum value plan must have an actuarial value of at least 60 percent and cover substantial hospital and physician services. To be “affordable” a plan must cost no more than 9.56 percent (for 2015) of an employee’s MAGI. An employer that offers a health plan that fails to provide MV or that is unaffordable may also be assessed a penalty if one or more of its employees turns to the exchange for premium tax credits.
Under the ACA, employers can offer wellness incentives that reduce the cost of the employee contribution or cost-sharing for program participants. The question arises, therefore, whether affordability and minimum value should be determined with or without the application of wellness incentive premium and cost-sharing reductions. The final regulations provide that affordability and minimum value should be determined by assuming that employees fail to qualify for the wellness incentive premium or cost-sharing reductions with one exception — if the wellness incentive relates to tobacco use affordability will be determined based on the assumption that the employee qualifies for the incentive and is thus not subject to the tobacco use surcharge.
Extension Of The ‘Family Glitch’
The final regulation proceeds, however, to extend the “family glitch.” One of the most criticized IRS rules implementing the ACA provides that if an employer offers an employee affordable sole-employee coverage, the employee’s entire family is ineligible for premium tax credits even though employer-sponsored family coverage is unaffordable.
Under the minimum value final rule, if an employee uses tobacco and does not join a tobacco cessation program, and thus coverage is in fact unaffordable with the tobacco surcharge or does not offer minimum value, not only the employee, but also the employee’s entire family, is ineligible for premium tax credits as long as coverage would have been affordable or offer minimum value had the employee complied with the smoking cessation program. This is true even if no one else in the family smokes.
Health Reimbursement Arrangements
The final regulation next addresses the effect of health reimbursement arrangements (HRAs) on affordability. Amounts newly made available to an employee through an HRA that is integrated with ACA-compliant employer-sponsored health coverage when the employee may use the HRA to pay premiums are counted toward an employee’s required contribution to determine affordability. Amounts newly made available to an employee through an HRA that is integrated into with eligible employer-sponsored coverage that an employee may only use to reduce cost-sharing is counted toward determining minimum value. If HRA contributions may be used either to cover premiums or reduce cost-sharing, they are considered for determining affordability and not minimum value.
HRA contributions, however, are only taken into account if the HRA and the primary employer-sponsored coverage are offered by the same employer. They are also taken into account for determining affordability or minimum value if the amount of the annual contribution is determinable within a reasonable time before an employee must decide whether or not to enroll.
Cafeteria Plans
The final rule also provides that employer contributions to flex arrangements under section 125 cafeteria plans are considered for determining affordability and minimum value if 1) the employer contribution cannot be taken as a taxable benefit, 2) it may be used to pay for minimum essential employer coverage, and 3) it may only be used to pay for medical care, as opposed to other benefits like dependent care that can be paid for under a section 125 plan. The guidance also released on December 16 discusses HRAs and 125 plans in much greater detail, and is examined below.
Continuation Coverage Eligibility And Tax Credits
The rules next address the effect on eligibility of former employees and retirees for continuation coverage under federal or state law, such as Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage, on eligibility for premium tax credits. The rule provides that eligibility for continuation coverage does not disqualify former employees or retirees, or their dependents, from premium tax credit eligibility unless the individual actually enrolls in the coverage. If continuation coverage is offered to current employees because of a reduction in hours, however, it will disqualify the employee from premium tax credits if it is affordable and offers minimum value. Of course, continuation coverage offered current part-time employees will often not be affordable.
Tax Credits And Coverage For Partial Months
The final rule concludes by addressing premium tax credit issues that arise when an individual is enrolled in coverage for a partial month. When a child is born, adopted, or placed with a family for adoption or foster care, or placed by court order, that child can be covered as of the date of birth, adoption, placement, or the order. The rule clarifies that when this happens, the child is treated as enrolled from the first day of the month for purposes of determining premium tax credit eligibility, even though the child is enrolled during the middle of the month. The adjusted monthly premium is determined as if all members of the coverage family were enrolled as of the first of the month in this situation.
The rule next addresses how premium tax credits are calculated where there is a partial months of coverage, which can occur when a child joins the plan mid-month by birth, adoption, placement or court order or when coverage is terminated mid-month, for example by a death. In this situation, the premium tax credit covers the lesser of the actual amount of the pro-rated premium charged for the month (taking into account any premium refunds) or the excess of the benchmark plan premium for a full month of coverage over the full amount that the eligible household would be required to contribute for coverage given its income level.
Thus if a taxpayer has a $500 premium and would normally be entitled to a premium tax credit of $300 based on a $450 benchmark premium and a $150 contribution amount, and the taxpayer dies mid-month and is refunded $250, the taxpayer would be entitled to a $250 premium tax credit based on his or her actual expenditure, but if the taxpayer is refunded $150, the taxpayer would be entitled to a $300 tax credit based on the benchmark plan cost.
The final rule provides that if family members live in different states the benchmark plan premium is determined by summing the benchmark premiums for the different states as they apply to the family members in each state. The rule updates the table of percentages, which determines how much individuals must contribute of their own income toward the cost of premiums to be eligible for premium tax credits given their income. And, finally, the rule analyzes how qualified health plan premiums and benchmark plan premiums should be allocated for determining premium tax credit eligibility when either the premiums of a plan in which an individual is enrolled or a state’s benchmark plan covers services that are not essential health benefits and thus not eligible for premium tax credit payments.
IRS Notice 2015-87
The notice (IRS Notice 2015-87) addresses a range of issues relating to the ACA and employer coverage, elaborating on some issues addressed by the final rule. Many of the questions it raises elaborate on IRS Notice 2013-54, issued in 2013. The notice states that a number of these issues will be addressed by future rulemaking and requests comments. It clarifies existing requirements as to some issues and allows plans a grace period before employers must come into compliance. The notice also, however, allows employees to claim the benefit of some of the requirements even though employers have not yet come into compliance.
Health Reimbursement Arrangements
The notice begins by addressing a series of issues raised by health reimbursement arrangements (HRAs). It first clarifies that an HRA that covers only former employees or retirees is not required to be integrated with an employee-sponsored plan that meets ACA requirements. A former employee covered by such an HRA, however, is ineligible for premium tax credits as long as funds remain available in the HRA.
If an HRA covers current employees, a former employee who is no longer covered by the group health coverage that must be integrated with an HRA for the HRA to comply with ACA requirements may not use funds remaining in his or her HRA to purchase individual coverage. Amounts credited to an HRA prior to January 1, 2013, or during 2013 under terms in effect prior to January 1, 2013, may, however, be used for medical expenses under the terms then in effect even though those terms do not comply with ACA requirements that went into effect in 2014.
The notice provides that HRAs available to cover medical expenses of an employee’s spouse or children (family HRAs) may not be integrated with employee-only coverage but must be integrated with coverage in which the dependents are enrolled to comply with ACA requirements. Recognizing that many employer plans do not conform to this requirement, the IRS is allowing plans a grace period to come into compliance with this requirement.
Under earlier guidance, the IRS had made it clear that HRAs could not be used to purchase individual health insurance coverage. This guidance clarifies that HRAs can be used to pay the premiums for excepted benefit coverage, such as dental or vision plans. The notice further clarifies that section 125 cafeteria plans cannot be used to purchase individual coverage, even if the 125 plan is funded fully by employee contributions.
The Notice explains at great length and in detail how HRAs and flex contributions to a section 125 cafeteria plan are treated for determining affordability and minimum value of employer-sponsored coverage. This issue is also addressed by the rule and discussed above. The notice offers several examples of how these rules are applied.
Flex Plans And Opt-Out Payments
One of the requirements of the rule and notice is that employer contributions to flex plans will only be considered for determining affordability or minimum value of employer coverage if the flex plan can only be used for health spending. Solely for purposes of determining affordability for application of the employer mandate (which imposes a penalty of employers who do not offer affordable, minimum value coverage if their employees receive premium tax credits) and for employer reporting requirements, contributions to flex accounts that can be used for non-health as well as health purposes will be considered to reduce employee contributions for plan years beginning before January 1, 2017 for arrangements adopted on or before December 16, 2015. However, they will not be considered for determining affordability of employer coverage for an employee either for determining liability under the individual responsibility provision or eligibility for premium tax credits.
If an employer offers an employee payments that are available only to an employee if the employee declines health insurance coverage (an opt-out payment), the IRS will consider the opt-out payment as an additional charge for the coverage for determining its affordability for application of the employer mandate penalty. The employee has the option of receiving additional salary for foregoing coverage, and thus is being charged the amount of the additional salary if he or she accepts coverage.
The IRS intends to issue a rule on this issue, and might treat opt-out payments differently if they are subject to additional requirements, such as proof of coverage under a spouse’s plan. The IRS will offer a transitional period for plan years beginning before January 1, 2017 based on arrangements established on or before December 16, 2015, for purposes of the employer mandate penalty and employer reporting, but individual taxpayers may consider opt-out payments as increasing the cost of coverage for application of the individual mandate or premium tax credit eligibility requirements.
Complex issues are presented by the McNamara-O’Hara Service Contract Act and the Davis-Bacon and related acts, which require federal contractors to pay prevailing wages and fringe benefits or cash out fringe benefits for workers. Until these issues are resolved employers may for purposes of the employer mandate and reporting requirements consider cash payments in lieu of fringe benefits as increasing the affordability of coverage, although employees are not required to consider the payments as making coverage more affordable for purposes of the individual mandate affordability exemption or premium tax credit eligibility. Recognizing that the disconnect between employer reporting requirements and employee premium tax credit eligibility requirements during transitional periods for this and other requirements may cause difficulties for employees in establishing tax credit eligibility, the notice urges employers to work with employees to provide necessary information.
Affordability Under The Employer Mandate
For purposes of the employer mandate affordability requirement and related regulatory requirements, including affordability safe harbors, affordability of coverage is defined as costing no more than 9.5 percent of household income (or for safe harbors, 9.5 percent of W-2 or hourly wages or the poverty level). The 9.5 standard is adjusted annually and is set at 9.56 percent for 2015 and 9.66 percent for 2016. The notice makes clear that this adjustment applies to all provisions that use the 9.5 percent standard.
The notice also provides the inflation updates for the statutory penalties under the employer mandate. The $2,000 per full-time employee penalty that applies when an employer fails to offer minimum essential coverage and an employee receives premium tax credit will increase to $2,080 for 2015 and $2,160 for 2016; while the $3,000 penalty that applies on a per-employee basis for employees who receive premium tax credits when coverage does not meet affordability or minimum value standards will increase to $3,120 for 2015 and $3,240 for 2016.
The notice provides a complex analysis of when “hours of service” that would count for crediting hours for Department of Labor regulations do or do not count as “hours of service” for calculating whether an employee is a full-time employee for purposes of the employer mandate. This analysis is beyond the scope of this post.
Service Breaks
A number of ACA rules that apply to full-time employees assume that employees are continuously employed without long breaks in service. Special rules apply for employees of educational institutions who routinely have long breaks in service between school years. Under IRS rules, employees of educational institutions cannot be treated as having terminated employment and then been rehired unless they have a break in service of at least 26 consecutive weeks.
Some educational institutions have been attempting to get around this rule by claiming that their employees are actually employed by staffing agencies with which they contract, and thus, for example, terminated at the end of the school year and rehired in the fall. The IRS is considering a rule that would provide that the educational institution exception would also apply to employees who provide services primarily to educational institutions and are not offered a meaningful opportunity to provide service during the entire year. An individual who worked in a school cafeteria nominally employed by a staffing agency rather than the school, for example, would be protected by the break in service exception unless the staffing agency offered employment in another position throughout the summer.
The notice clarifies that AmeriCorps members are not employees for purposes of the employer mandate, but that individuals offered TRICARE coverage by virtue of their employment are offered minimum essential coverage. The notice discusses how employer aggregation rules apply to government employers. It requires each separate government employer entity to have an employer identification number. The notice also discusses special rules that apply to health savings accounts contributions for individuals eligible for VA coverage and the application of COBRA continuation coverage to flexible spending account carryovers, both topics beyond the scope of this post.
Finally, the notice reiterates that the IRS will not impose penalties on employers that provide incorrect or incomplete 1094-C and 1095-C reports to employees in 2016 for 2015 coverage if they can demonstrate good faith efforts to comply with requirements. Employers who fail to file reports on a timely basis will also be provided relief from penalties if they can show reasonable cause for their failing to do so.
5 signs the Cadillac tax may be repealed
Original post benefitspro.com
The Cadillac tax — a 40 percent excise tax on the health benefits companies provide their workers above a certain threshold — has certainly been one of the most interesting components of the Patient Protection and Affordable Care Act, despite the fact that it hasn't yet gone into effect.
The tax applies to benefits worth more than $10,200 for individuals and $27,500 for families beginning in 2018. Now, as 2018 nears and as employers take steps to avoid the tax, repeal cries become louder and the PPACA provision is under more scrutiny than ever before.
Here are five signs that the Cadillac tax may never be implemented.
1. Public opinion
The Cadillac tax has officially become the new PPACA provision that everyone loves to hate.
A survey out last month by Morning Consult found that 76 percent of Americans are concerned about the Cadillac tax, saying they’d like to see the provision be either repealed or delayed. Similarly, a poll from the Kaiser Family Foundation found a similar statistic. But that poll found that it’s easier to sway public opinion against the tax than to get them to support it.
After hearing positive effects of the tax — that it “could help lower health care costs” — opposition dropped to 55 percent. But after hearing negative facts, like how some people would need to pay more out of pocket, opposition rose to 75 percent.
2. Employer concern
This one is big: The Cadillac tax does not have the support from the people it most directly affects.
A mix of employers, business groups and labor unions all have spoken out against the tax, fighting for the PPACA provision to be killed. They argue that the Cadillac tax forces them to reduce benefits for workers and miss out on attracting and retaining good employees. While businesses don’t want to pay more taxes, unions worry that such a policy will discourage employers from negotiating generous health benefits for workers.
The National Association of Health Underwriters (NAHU), one of many industry groups opposing the tax, said repealing the tax would “protect employer-sponsored health coverage.”
3. Bipartisanship support of repeal
It wasn’t shocking that most Republicans weren’t in favor of PPACA’s excise tax. But it was a little shocking when key Democrats, including Sen. Chris Murphy of Connecticut, head of the Senate Patient Protection and Affordable Care Act Works campaign, also came out against it. Though PPACA has divided the parties, there appears to be bipartisanship against the law’s Cadillac tax. Bills from both parties have been introduced to repeal the tax.
Now, reports are surfacing that Senate and House minority leaders are working behind the scenes to plot the repeal of the unpopular excise tax — orchestrated by Democratic leaders.
Sen. Harry Reid (D-Nev.) and U.S. Rep. Nancy Pelosi (D-Calif.), plan to land the coupe de grace on the tax after the first of the year, according to Washington, D.C.-based news source The Hill.
The Hill reports the two leaders have been in discussions with the White House since spring over ways to repeal the tax and replace the revenue from it.
4. The 2016 presidential election
If killing the Cadillac tax doesn’t happen when Barack Obama is still in office, it may certainly happen after he’s out.
2016 presidential frontrunners have targeted the Cadillac tax — and not just the Republicans. Senator Bernie Sanders has opposed the tax since 2009, when he proposed an amendment to PPACA to remove it from the bill.
And, in late September, after saying she would examine her position on the Cadillac tax, Hillary Clinton came out against the Cadillac tax, calling for Congress to scrap it.
“I encourage Congress to repeal the so-called Cadillac tax,” she said in a statement. “My proposed reforms to our health care system would more than cover the cost of repealing the Cadillac tax, while also reining in skyrocketing prescription drug costs and out-of-pocket expenses for hard-working families. As president, I will continue to fight to make our health care system more value-driven and cost-efficient, and to drive down costs for patients and families.”
5. Threats to FSAs/HSAs
Not only does the tax threaten employer-sponsored health coverage, but it also threatens health savings and flexible spending accounts, money workers now sock away tax-free for medical expenses, analysis says.
Health care actuaries argue that FSAs may vanish in coming years as companies scramble to avoid the Cadillac tax. According to Kaiser Family Foundation, companies offering FSAs are far more likely to pay the Cadillac tax than those that don’t. Twenty-six percent of employers with FSAs will face the tax in 2018, Kaiser predicts, compared with just 16 percent of companies that don’t offer them.
Meanwhile, research by the American Bankers’ Association finds that nearly a quarter of existing health savings account plans would trigger the tax as it currently is written.
“We initially set out to prove that HSA plans would steer clear of the tax, but were dismayed to find some plans will be hit right away if payroll contributions are counted,” said Todd Berkley, president of HSA Consulting Services, the author of the study. “While many HSA plans will likely be a safe haven for now, like the AMT, this tax will eventually affect every plan in America, including HSA plans.”
Birth Control Coverage Rules Announced by Obama Administration
Originally posted by Louise Radnofsky on July 10, 2015 on wsj.com.
WASHINGTON—The Obama administration on Friday set final rules for contraception coverage in workers’ health insurance plans, putting in place rules that are unlikely to satisfy some religious employers who object to birth control.
The rules reaffirmed that most health plans have to include birth control with no out-of-pocket costs as part of the 2010 Affordable Care Act. The regulations include alternative arrangements for employers such as Catholic universities that have moral objections to most forms of contraception, and other Christian institutions that object specifically to forms of emergency contraception such as the “morning-after pill.”
Under the rules, employers with such objections must tell their insurance company or the federal government. The insurance company then takes over responsibility for providing the coverage to employees who want it.
Federal officials said the arrangements also would be available to closely held for-profit companies such as Hobby Lobby Stores Inc. that last year won a Supreme Court case against the coverage requirement under the Affordable Care Act.
The high court said the Obama administration hadn’t done enough to take into account the religious objections of the owners of companies such as the arts-and-crafts chain. The justices didn’t specify what the federal government should do to address those concerns.
The White House and Christian leaders have tussled for years over the health law’s requirement that most insurance plans cover preventive services without charging co-pays or deductibles, and that prescription methods of contraception such as the pill and intrauterine device be counted among them.
Churches are excluded from the requirement, but Catholic bishops, in particular, have argued that religiously affiliated hospitals, universities and charities should be given the same exemption so they do not have to violate Catholic teachings by paying for something they believe to be immoral.
Women’s health advocates, for their part, have pushed the White House to hold firm and ensure that the provision of the 2010 health law is widely available.
To qualify for the alternative system outlined by the government, companies must be privately held and controlled by five or fewer individuals, federal officials said Friday. The company’s board must adopt a resolution stating the company’s objection to covering some or all forms of contraception.
Catholic bishops and other religious leaders have said the revised system is inadequate because it still uses the insurance plan they set up to provide something they believe to be wrong.
They have challenged the alternative system in the courts. Many of those challenges are working their way through the legal system, and the federal government has prevailed in several cases so far.
Attorneys representing many of the religiously affiliated litigants in those cases derided the final rules.
“The government keeps digging the hole deeper,” said Adèle Auxier Keim, legal counsel at the Becket Fund for Religious Liberty, adding that “there is no reason at all the government needs religious employers to help it distribute these products.”
A spokeswoman for the Department of Health and Human Services said she couldn’t comment on continuing litigation.
In a statement, HHS Secretary Sylvia Mathews Burwell said the regulations were intended to balance the religious objections with the government’s desire to guarantee access to no-cost contraception for women, regardless of where they worked.
“Women across the country should have access to preventive services, including contraception,” Ms. Burwell said.
“At the same time, we recognize the deeply held views on these issues, and we are committed to securing women’s access to important preventive services at no additional cost under the Affordable Care Act, while respecting religious beliefs,” she said.
IRS Confirms W-2 Safe Harbor to Determine Plan Affordability
Originally posted by assuredskcg.com.
The employer mandate, effective beginning in 2014, requires employers with 50 or more employees to pay a penalty if certain conditions are not met. One of these conditions is to provide affordable coverage. Coverage is considered to be affordable if an employee’s required contribution does not exceed 9.5% of the employee’s household income – something that is not readily accessible by employers. As previously reported, the IRS proposed a safe harbor that would allow employers to use the W-2 wages of an employee to determine whether coverage is affordable for purposes of the employer mandate, instead of using household income. In Notice 2012-58, The IRS confirms that the Form W-2 safe harbor will be available to employers to determine affordability with respect to the employer penalty provisions, at least through 2014. To take advantage of the safe harbor, employers must offer full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an employer-sponsored plan, and ensure that the employee portion of the self-only premium for the employer’s lowest cost coverage that provides minimum value does not exceed 9.5% for the employee’s W-2 wages. Application of the safe harbor would be determined after the end of the calendar year and on an employee-byemployee basis, taking into account the employee’s particular W-2 wages and contribution. The safe harbor can also be used prospectively, at the beginning of the year, by structuring the plan to set the employee contribution at a level that would not exceed 9.5% of the employee’s W-2 wages. It is important to note the safe harbor only applies for purposes of determining whether an employer’s coverage satisfies the affordability test for purposes of the employer mandate – it would not affect an employee’s eligibility for a premium tax credit, which continues to be based on the affordability of employer-sponsored coverage relative to an employee’s household income. Thus, in some cases, this means that an employer’s offer of coverage to an employee could be considered affordable based on W-2 wages for purposes of determining whether the employer is subject to a penalty under the employer mandate, and the same offer could be treated as unaffordable based on household income for purposes of determining whether the employee is eligible for a premium tax credit (i.e., no penalty even though the employee receives subsidized coverage in the Exchange). Although the guidance is helpful to employers and will make it easier to look at contribution structures for benefit programs in 2014, further guidance is still needed in several areas, including what constitutes a “minimum value” plan, and what constitutes providing coverage to “substantially all” full-time employees in order to avoid the application of the penalty that applies with respect to not offering coverage.
Final Rule to Revise the Definition of “Spouse” Under the FMLA
Originally posted on www.dol.gov.
The Family and Medical Leave Act (FMLA) entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons. The FMLA also includes certain military family leave provisions.
The Department of Labor issued a Final Rule on February 25, 2015 revising the regulatory definition of spouse under the Family and Medical Leave Act of 1993 (FMLA). The FMLA entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons.
The Final Rule amends the regulatory definition of spouse under the FMLA so that eligible employees in legal same-sex marriages will be able to take FMLA leave to care for their spouse or family member, regardless of where they live. This will ensure that the FMLA will give spouses in same-sex marriages the same ability as all spouses to fully exercise their FMLA rights.
The effective date for the final rule is March 27, 2015.
On March 26, 2015, the United States District Court for the Northern District of Texas, in Texas v. United States, Civil Action No. 7:15-cv-00056 (N.D. Tex.), granted a request made by the states of Texas, Arkansas, Louisiana, and Nebraska for a preliminary injunction with respect to the Department's Final Rule revising the regulatory definition of spouse under the Family and Medical Leave Act (FMLA). The Government informed the Court of how the Government is complying with the injunction and the Government’s understanding of the scope of the injunction in a March 31 filing. A hearing date has been set for April 10th.
Major features of the Final Rule
- The Department has moved from a “state of residence” rule to a “place of celebration” rule for the definition of spouse under the FMLA regulations. The Final Rule changes the regulatory definition of spouse in 29 CFR §§ 825.102 and 825.122(b) to look to the law of the place in which the marriage was entered into, as opposed to the law of the state in which the employee resides. A place of celebration rule allows all legally married couples, whether opposite-sex or same-sex, or married under common law, to have consistent federal family leave rights regardless of where they live.
- The Final Rule’s definition of spouse expressly includes individuals in lawfully recognized same-sex and common law marriages and marriages that were validly entered into outside of the United States if they could have been entered into in at least one state.
Additional Information on the Final Rule.
Download the "Final Rule to Revise the Definition of 'Spouse' Under the FMLA" article here.
Download the Department of Labor - Wage and Hour Division's updated "Fact Sheet On The Final Rule" here.
Download the full text of the Final Rule here.
Download the FMLA Final Rule FAQs here.
Download the Press Release - "US Labor Dept. updates Family and Medical Leave Act's definition of spouse" here.
Download the FMLA - An Overview and News Updates here.
HHS Formally Moves To Close Loophole Allowing Plans Without Hospital Benefits
The Obama administration took another step to close what many see as a health-law loophole that allows large employers to offer medical plans without hospital coverage and bars their workers from subsidies to buy their own insurance.
“It has come to our attention that certain group health plan designs that provide no coverage of inpatient hospital services are being promoted,” the Department of Health and Human Services said in proposed rules issued late Friday.
Under the new standard, companies with at least 50 workers “must provide substantial coverage of both inpatient hospital services and physician services” to meet the Affordable Care Act’s threshold for a “minimum value” of coverage, the agency said .
As reported previously by Kaiser Health News, insurance analysts were surprised this summer to learn that HHS’ online calculator for determining minimum value approved plans without inpatient benefits.
Responding to aggressive marketing by consultants, numerous lower-wage employers had already agreed to offer the low-cost plans for 2015 or were considering them.
Because a calculator-approved plan at work makes employees ineligible for tax credits to buy more comprehensive insurance in the law’s online marketplaces, consumer advocates feared the problem would trap workers in substandard coverage.
Large employers aren’t required to offer the “essential health benefits” such as hospitalization, physician care and prescriptions that the law orders for plans sold to individuals and smaller employers.
But few expected the official calculator to approve insurance without inpatient benefits. Meeting the minimum-value standard spares employers from penalties of up to $3,120 per worker next year.
HHS also proposed granting temporary relief to employers that have already committed to calculator-approved plans without hospital coverage for 2015. It also would allow workers at those companies to receive tax credits in the marketplaces if they choose to buy insurance there instead.
For 2016, no large-employer plan will meet the minimum-value test without inpatient benefits, HHS proposes.
“A plan that excludes substantial coverage for inpatient hospital and physician services is not a health plan in any meaningful sense and is contrary to the purpose” of the minimum-value standard, the agency said.
“Minimum value is minimum value,” said Timothy Jost, a consumer advocate and Washington and Lee University law professor who welcomed the change. “Nobody ever imagined that minimum value would not include hospitalization services.”
Calculator-tested plans lacking inpatient coverage, designed by Key Benefit Administrators and others, have drawn strong interest from large retailers, restaurant chains, staffing companies and other lower-wage employers seeking to control costs, benefits consultants say. Typically the coverage costs half as much as major-medical insurance including hospital benefits.
The American Worker Plans, an Illinois-based benefits consultant, helped dozens of staffing firms with a total of about 20,000 employees to provide such plans for 2015, said Jon Duczak, the company’s senior vice president. Almost all of them have already signed deals to offer the coverage, he said.
HHS’ move to disallow the insurance “is something I do applaud,” he said. “We were offering a product like this [only] because our clients were asking for it. We needed not only to satisfy our clients but to retain our business.”
Edward Lenz, senior counsel for the American Staffing Association, said the trade group has no problem with requiring hospitalization to meet the minimum-value standard for 2016. But it will seek more leeway for employers that had moved to implement plans without inpatient benefits for 2015.
“Many employers were well along the road” to committing to such plans but delayed signing contracts after Kaiser Health News reported that the administration might move against them, he said. Rather than punishing such companies for their caution, HHS should allow them to temporarily offer such coverage next year, he said.
Federal Employment Law Update – October 2014
Source: ThinkHR.com
FAQs about Affordable Care Act Implementation Part XXI
On October 10, 2014, the Departments of Labor, Health and Human Services (HHS), and the Treasury jointly released FAQs about Affordable Care Implementation (Part XXI). The FAQS update prior guidance on cost-sharing limitations for plans using “reference-based pricing.”
The new FAQS set forth specific factors the departments will consider when evaluating whether a non-grandfathered plan that utilizes reference-based pricing (or similar network design) is using a reasonable method to ensure that it provides adequate access to quality providers at the reference-based price.
IRS – 2015 Per Diem Rates for Travel Expense Reimbursements
On October 6, 2014, the IRS released Notice 2014-57. This annual notice provides the 2014-2015 special per diem rates for taxpayers to use to substantiate ordinary and necessary business expenses incurred while traveling away from home, specifically:
- The special transportation industry meal and incidental expenses rates (M&IE).
- The rate for the incidental expenses only deduction.
- The rates and list of high-cost localities for purposes of the high-low substantiation method. Taxpayers using the rates and list of high-cost localities provided must comply with Rev. Proc. 2011-47, I.R.B. 2011-42, 520.
Transportation industry rates
The special M&IE rates for taxpayers in the transportation industry are $59 for any locality of travel in the continental United States (CONUS) and $65 for any locality of travel outside the continental United States (OCONUS).
Incidental expense only rate
The rate for any CONUS or OCONUS locality of travel for the incidental expenses only deduction is $5 per day.
High-low substantiation method
For purposes of the high-low substantiation method, the per diem rates are $259 for travel to any high-cost locality and $172 for travel to any other locality within CONUS. The amount of the $259 high rate and $172 low rate that is treated as paid for meals is $65 for travel to any high-cost locality and $52 for travel to any other locality within CONUS. The per diem rates in lieu of the meal and incidental expenses only substantiation method are $65 for travel to any high-cost locality and $52 for travel to any other locality within CONUS.
High-cost localities changes
San Mateo, Foster City, Belmont, Sunnyvale, Palo Alto and San Jose, California; Glendive and Sidney, Montana; and Williston, North Dakota, have been added to the list of high-cost localities appearing in Notice 2013-65, I.R.B. 2013-44, 440. The portion of the year in which they are high-cost localities has changed for Sedona, Arizona; Napa, California; Vail, Colorado; Fort Lauderdale, Florida; Miami, Florida; and Philadelphia, Pennsylvania. The following localities have been removed from the list of high-cost localities: Yosemite National Park, California; San Diego, California; and Floral Park, Garden City, and Great Neck, New York.
Effective date
The guidance is effective for per diem allowances for lodging, meal and incidental expenses, or for meal and incidental expenses only that are paid to any employee on or after October 1, 2014, for travel away from home on or after October 1, 2014. For purposes of computing the amount allowable as a deduction for travel away from home, this guidance is effective for meal and incidental expenses or for incidental expenses only paid or incurred on or after October 1, 2014.
Read IRS Notice 2014-57
Executive Order 13658 – Final Rule
On February 12, 2014, President Obama signed Executive Order 13658, Establishing a Minimum Wage for Contractors, to raise the minimum wage to $10.10 for all workers on federal construction and service contracts. The Executive Order directed the Department of Labor to issue regulations to implement the new federal contractor minimum wage.
On October 1, 2014, the department announced a Final Rule implementing the provisions of Executive Order 13658. Key provisions of the final rule include:
- It defines key terms used in the Executive Order, including contracts, contract-like instruments, and concessions contracts.
- It provides guidance for contractors on their obligations under the Executive Order.
- It establishes an enforcement process that should be familiar to most government contractors and will protect the right of workers to receive the new $10.10 minimum wage.
- It confirms that approximately 200,000 workers will benefit from the Executive Order.
Executive Order 13658 applies to new contracts and replacements for expiring contracts with the federal government that result from solicitations issued on or after January 1, 2015, or to contracts that are awarded outside the solicitation process on or after January 1, 2015.
The Final Rule will be published in the October 7, 2014 Federal Register.
Read the Final Rule
Read the Fact Sheet on the Final Rule
Read the FAQS on the Final Rule
IRS Expands Midyear Election Change Rules for Section 125 Plans
Originally posted October 1, 2014 on https://blog.thinkhr.com.
On September 18, 2014, the Internal Revenue Service (IRS) issued Notice 2014-55, Additional Permitted Election Changes for Health Coverage under § 125 Cafeteria Plan, which allows employers to make specific changes to their plans. These changes will make it easier for employees to change their group plan elections and take advantage of individual health plans available to them through the Marketplace exchanges created by the Affordable Care Act (ACA).
Section 125 cafeteria plans generally require participants to make binding elections for an entire plan year, with employers being able to allow employees to make changes only in limited cases (e.g., marriage, birth, or adoption of child). With the issuance of Notice 2014-55, the list of possible exceptions expands somewhat, making it possible for the employer to amend its plan design to allow an employee to drop employer-sponsored group coverage in order to enroll in a state or federally-facilitated Health Insurance Marketplace.
This guidance applies only to health coverage offered through a cafeteria plan that is minimum essential coverage. Thus, it does not apply to stand-alone dental and/or vision coverage or to health flexible spending accounts (FSAs). Further, an employer’s choice to amend its plan to adopt any of these exceptions is voluntary.
Reduction in Hours
Under the new exceptions, if an employee experiences a reduction in work hours to less than 30 hours per week, the employee may revoke coverage in the cafeteria plan if he or she plans to enroll in coverage through the Marketplace or another health plan.
This new opportunity for exemption could allow an employee who is changing to part-time status to benefit from subsidies available through the Marketplace. This is likely to be the case if an employee expects to experience lower household income after a change in status.
Previously, participant elections were irrevocable during the plan year unless the employee experienced certain family status changes, or unless the plan sponsor made significant changes to coverage or cost. For instance, under the ACA’s employer shared responsibility (play or pay) rules, a variable-hours employee may be covered for an entire “stability period” although the employee’s work schedule and earnings may change dramatically. The existing cafeteria plan rules would not allow the employee to revoke coverage in that case. The new exceptions, however, permit the employer to amend the cafeteria plan so an employee in that circumstance would be able to drop the coverage before the end of the stability period.
If a plan intends to adopt this exception, the following requirements must be met:
An employee must have been expected to average at least 30 hours per week prior to an actual change in the employee’s status that results in the expectation that the employee will average less than 30 hours per week. It does not matter if the employee will actually lose health plan eligibility due to hours — the expectation of averaging 30 hours per week is the test.
The change must correspond to the employee — including dependents experiencing a resulting change in coverage — intending to enroll in another plan providing minimum essential coverage.
The new coverage must be effective by the first day of the second month following the month in which the original coverage is revoked.
“Intending to enroll” in other coverage is determined by the statement of the employee experiencing a change in status. The employer may rely on such an employee’s reasonable representation of intentions. This reasonable representation applies to the employee and any related individuals impacted by the change.
Changes in Connection with Marketplace Enrollment
The IRS Notice also provides for another exception so employees can make midyear election changes. This new exception may be beneficial to employees who are covered by non-calendar year cafeteria plans, or who are finding Marketplace plans more attractive after a change in family status, to resolve the gap between an employer’s cafeteria plan year and the Marketplace open enrollment January 1st effective date. The current cafeteria plan rules do not allow employees to drop coverage at work midyear in order to enroll in a Marketplace plan. The Marketplace offers open enrollment for new policies starting January 1; however, many employer plans do not operate on a calendar-year basis.
Employers are now able to adopt provisions allowing an employee to revoke an enrollment election in order to obtain coverage through the Marketplace. The following conditions must be met for this exception to be allowed:
The employee must be seeking to enroll in the Marketplace during annual open enrollment or during a special enrollment period.
Enrollment in the Marketplace plan must be effective immediately following loss of coverage from the employer-sponsored plan.
Any related individuals who were dependent on the employee’s previous enrollment must also be enrolled in the new plan.
In this case, the employer is not required to prove that other coverage is actually elected. Rather, the employer is allowed to rely on the reasonable representation of an employee that he or she is intending to enroll in Marketplace coverage immediately after the change to enrollment in the employer’s plan is effective. Thus, there should be no gap in coverage if an employee is allowed to exercise this option.
Adopting the New Optional Provisions
Employers may adopt one or both of the new exceptions for midyear election changes by amending the cafeteria plan. For convenience, the IRS is allowing employers to amend their plans for the 2014 plan year by adopting the amendment at any time on or before the last day of the plan year that begins in 2015. Although the employer has extra time to adopt the formal amendment, the employer must take the following steps before allowing the exceptions:
Operate the cafeteria plan in accordance with the guidance outlined in IRS Notice 20144-55; and Notify all plan participants of the changes.
For complete details, read IRS Notice 2014-55.
Avoiding PPACA excise tax a priority
Originally posted August 20, 2014 by Dan Cook on www.benefitspro.com.
Despite foreseeing record-breaking employee health care costs in the near term, major employers will continue to offer coverage to full and part-time workers. However, coverage for spouses and dependents could be targeted for cutbacks.
That’s the latest from a Towers Watson survey that found employers generally anticipate a 5.2 percent increase next year in health plan costs, which would put coverage cost per employee at an all-time high, Towers Watson said.
However, many employers are planning to make design changes to their plans. Should they occur, employers then project a 4 percent plan increase.
“Despite this cost trend, most (83 percent) employers consider health benefits an important element of their employee value proposition, and plan to continue subsidizing and managing them for both full-time and part-time active employees,” Towers Watson said. Virtually all of these large employers surveyed said they will continue to offer health benefits to employees, with few indicating they were ready to move coverage to a private exchange.
The results were gleaned from the company’s 2014 Health Care Changes Ahead Survey.
Large employers were asked about their health care-related cost concerns for the future. A major one is the excise tax that goes into effect in 2018 as part of the full rollout of the Patient Protection and Affordable Care Act.
“Nearly three-quarters (73 percent) of employers said they are somewhat or very concerned they will trigger the tax based on their current plans and cost trajectory,” Towers Watson said. “More than four in 10 (43 percent) said avoiding the tax is the top priority for their health care strategies in 2015. As a result of the excise tax and other provisions of the health care reform law, CEOs and CFOs are more actively engaged in strategy discussions.”
The objective is not to eliminate or even substantially reduce employee coverage, Towers Watson said, but to continue to manage costs as finely as possible without gutting coverage.
“The emphasis is on achieving or maintaining a high-performance health plan,” said Randall Abbott, senior consultant at Towers Watson. “And CFOs are now focused on a new gold standard: managing health cost increases to the Consumer Price Index. This requires acute attention to improving program performance."
Other key findings from the study:
- 81 percent of employers plan moderate to significant changes to their health care plans over the next three years, up from 72 percent a year ago;
- 48 percent are considering tying incentives to reaching a specified health outcome such as biometric targets, compared with just 10 percent that intend to adopt it in 2015;
- 37 percent are considering offering plans with a higher level of benefit based on the use of high-performance or narrow networks of medical providers, compared with just 7 percent in 2015;
- 34 percent are considering telemedicine, compared with 15 percent in 2015, as employers encourage employees to use such telemedicine strategies as virtual physician office visits to improve access and efficiency of care delivery;
- 33 percent are considering significantly reducing company subsidies for spouses and dependents (10 percent have already implemented such reductions, and 9 percent intend to do so in 2015);
- 26 percent said they are considering spouse exclusions or surcharges if coverage is available elsewhere (30 percent have that tactic in place now, and another 7 percent expect to add it in 2015);
- 30 percent of employers considering caps on health care coverage subsidies for active employees, using defined contribution approaches (13 percent have them in place today and another 3 percent planning them for 2015).
Employers continue to study private exchanges, although 77 percent “are not at all confident public exchanges will provide a viable alternative for their active full-time employees in 2015 or 2016.”
Still, 24 percent said private exchanges could provide a viable alternative for their active full-time employees in 2016. They are looking at three key factors to emerge that would push them in that direction:
- Evidence they can deliver greater value than their current self-managed model (64 percent);
- Adoption of private exchanges by other large companies in their industry (34 percent);
- An inability to stay below the excise tax ceiling as 2018 approaches (26 percent).
“The most effective employers are continually evaluating new strategies for improving health plan performance,” Abbott said. “Examples include a steady migration to account-based health plans, action-based incentives, adoption of value-based payment methods with health plan partners and plan designs that drive efficiencies. Other options are technology-based solutions such as telemedicine, fitness devices or trackers, and social media to encourage employees to take a more active role in both their personal health status and how they use health care goods and services.”