Compliance Check - April 2021

OVERVIEW

March 2021 was an eventful month with regard to new guidance on recently passed legislation and expanded provisions from the IRS to provide relief to individuals and businesses impacted by the continuing COVID-19 pandemic. Most significantly, on March 11, 2021, the American Rescue Plan Act of 2021 (overview) was enacted into law which, in part, mandates that eligible individuals receive a six-month 100% COBRA.

Below is a summary of the many changes and updates for review.

IRS Notice 2021-21

Due to the COVID-19 national emergency, the Internal Revenue Service (IRS) released Notice 2021-21 (Notice) that extends the deadline for filing income returns on Form 1040, Form 1040-SR, Form 1040-NR, Form 1040-PR, Form 1040-SS, or Form 1040 (SP). The Notice extends the general April 15, 2021, deadline to May 17, 2021. The Notice provides that individuals with a deadline to file a claim for credit or refund of federal income tax filed on the Form 1040 series or on a Form 1040-X that falls on or after April 15, 2021, and before May 17,
2021, have until May 17, 2021, to file the claims for credit or refund.

The Notice also extends the deadline to file and furnish Form 5498 (individual retirement account (IRA) Contribution Information), Form 5498-ESA (Coverdell education savings account (ESA) Contribution Information), and Form 5498-SA (health savings account (HSA), Archer Medical Savings Account (Archer MSA), or Medicare Advantage Medical Savings Accounts (Medicare Advantage MSA) Information). The Notice extends the general June 1, 2021, deadline to June 30, 2021. The deadline for making contributions to IRAs, Roth IRAs, HSAs, Archer MSAs, and Coverdell ESAs has also been extended from April 15, 2021, to May 17, 2021.

 

PPE as Section 213(d) Qualified Medical Expenses

The Internal Revenue Service (IRS) released Announcement 2021-7 providing that amounts paid for personal protective equipment (PPE) such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of COVID-19, are qualified medical expenses under Internal Revenue Code Section 213(d). Therefore, these expenses are eligible for reimbursement from account-based plans, including health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), and health savings accounts (HSAs). Note that if the expense is reimbursed under an account-based plan, it is not deductible for the taxpayer under Section 213 (no double benefit).

The IRS provides that group health plans, including health FSAs and HRAs, will need to be amended if the plans prohibit reimbursement of PPE. Group health plans may be amended to provide for such reimbursement of PPE expenses incurred for any period beginning on or after
January 1, 2020. Such an amendment must be adopted no later than the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective. The amendment can have a retroactive effective date (unless it is adopted after December 31, 2022) if the plan is operated consistent with the terms of the amendment beginning on the effective date of the amendment. The IRS provides that the amendment will not cause plans to fail the Section 125 cafeteria plan requirements.

 

Executive Order on Strengthening Medicaid and the Affordable Care Act

3/24/2021 Update: CMS has extended the new special enrollment period for marketplaces using the Heathcare.gov platform until August 15, 2021. See the updated CMS FAQs for more information. On January 28, 2021, President Biden signed an Executive Order on Strengthening Medicaid and the Affordable Care Act. The Executive Order instructs the Department of Health and Human Services (HHS) to consider establishing a special open enrollment period (SEP) for individuals to enroll in or change their current coverage under federally facilitated health insurance marketplaces. The Centers for Medicare and Medicaid Services (CMS) initially established that the special enrollment period would begin on February 15, 2021, and would continue through May 15, 2021. CMS extended the SEP to apply from February 15, 2021, through August 15, 2021. This SEP will be available to individuals in the 36 states with marketplaces using the Healthcare.gov platform. Individuals can check their eligibility for this SEP on Healthcare.gov.

The Executive Order instructs HHS, the Department of Labor (DOL), the Department of the Treasury (Treasury), and all other executive departments and agencies with authorities and responsibilities related to Medicaid and the ACA (Agencies) to review all existing  regulations and other guidelines or policies (agency actions) as soon as possible to examine:

  • policies or practices that may undermine protections for people with pre-existing conditions, including complications related to COVID-19, under the ACA;
  • demonstrations and waivers, as well as demonstration and waiver policies, that may reduce coverage under or otherwise undermine Medicaid or the ACA;
  • policies or practices that may undermine the Health Insurance Marketplace or the individual, small group, or large group markets for health insurance in the United States;
  • policies or practices that may present unnecessary barriers to individuals and families attempting to access Medicaid or ACA coverage, including for mid-year enrollment; and
  • policies or practices that may reduce the affordability of coverage or financial assistance for coverage, including for dependents.

The Executive Order instructs the Agencies to suspend, revise, or revoke, as soon as possible, agency actions that are inconsistent with the policy of the Biden Administration to protect and strengthen Medicaid and the ACA and to make high-quality healthcare accessible and affordable for every American. The Executive Order also instructs the Agencies to consider whether to issue additional agency actions to more fully enforce this policy.

Finally, the Executive Order revokes Executive Order 13765 Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal issued on January 20, 2017, and Executive Order 13813 Promoting Healthcare Choice and Competition Across the United States issued on October 12, 2017. As part of the review of agency actions, the Executive Order instructs the Agencies to consider, as soon as possible, whether to suspend, revise, or rescind agency actions related to these executive orders.

 

American Rescue Plan Act of 2021 – COBRA Premium Assistance

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (Act). The Act is a $1.9 trillion legislative package that includes pandemic relief for individuals and families. The Act contains several provisions including funding to the Centers for Disease Control and Prevention, stimulus checks, unemployment benefits, the child tax credit, tax credits for paid sick leave and family and medical leave, the Paycheck Protection Program, grants to state educational agencies, and low-income family assistance. The Act also contains several provisions affecting group health plans. This series of Advisors will focus on the provisions affecting group health plans. Below is an overview of the Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage premium assistance provisions contained in the Act.

The Act provides COBRA relief for assistance-eligible individuals. An assistance-eligible individual is an individual who is eligible for COBRA due to the COBRA qualifying event of termination of employment or reduction in hours, except for an individual’s voluntary termination of employment, and if he or she elects coverage during the period beginning April 1, 20201, and ending on September 30, 2021.

COBRA Premium Assistance

COBRA premiums for any period of coverage for an assistance-eligible individual covered under COBRA in the period of time beginning April 1, 2021, and ending on September 30, 2021, will be considered paid (that is, assistance-eligible individuals will not be required to pay the COBRA premiums). If an assistance-eligible individual pays any portion of the COBRA premiums, the amount must be reimbursed within 60 days of the date on which the individual made the premium payment.

Permitted Alternative (Different) COBRA Coverage

If an assistance-eligible individual enrolled in a group health plan experiences the COBRA qualifying event of termination of employment or reduction in hours, other than voluntary employment termination, an employer may choose to offer the COBRA-qualified individual different coverage (in addition to the offer of normal COBRA coverage) that is not the same plan as the plan the individual was covered under at the time the COBRA qualifying event. The individual must elect this coverage no later than 90 days after receiving notice of the option. The premium for this different coverage must not exceed the premium for coverage in which the individual was enrolled in at the time the qualifying event occurred. The different coverage in which the individual elects to enroll in must be coverage that is also offered to similarly situated active employees of the employer at the time the individual elects the different coverage. The different coverage cannot be a) coverage that only provides excepted benefits, b) a qualified small employer health reimbursement arrangement (QSEHRA), or c) a flexible spending arrangement (FSA). This coverage will be treated as COBRA coverage.

Extension of COBRA Election Period

An individual who a) does not have a COBRA election in effect on April 1, 2021, but who would otherwise be an assistance-eligible individual if an election were in effect; or b) elected COBRA continuation coverage, but discontinued the coverage before April 1, 2021, may elect COBRA continuation coverage during the period beginning April 1, 2021, and ending 60 days after the date on which the administrator of the applicable group health plan (or other entity) provides the additional notification, described below, to the individual.

Any COBRA continuation coverage elected by a qualified beneficiary during an extended election period noted above must begin on or after April 1, 2021, and will not extend beyond the maximum period of COBRA coverage that would have applied had the coverage had been elected and maintained without the extension.

Limitation of the COBRA Premium Subsidy

This COBRA premium subsidy will expire upon the earlier of:

    • The first date that the individual is eligible for benefits under Medicare or eligible for coverage under any other group health plan (not including coverage that a) only provides excepted benefits, b) is a QSEHRA, or c) is an FSA); or
    • The earlier of:
      • the date following the expiration of the applicable maximum COBRA coverage period due to the qualifying event, or
      • The end of the COBRA period that would have applied had the coverage had been elected and maintained without the extension.

An assistance-eligible individual must notify the group health plan when his or her premium subsidy period has expired as noted above. The Act provides that the Department of Labor (DOL) will determine the way the notice must be provided and the deadline by which the notice must be provided.

Notices to Individuals

The required COBRA election notice provided by the plan administrator to individuals that become eligible to elect COBRA continuation coverage during the period of time beginning April 1, 2021, and ending on September 30, 2021, must include an additional written notification (included in the election notice or by a separate document) to the recipient in clear language of the availability of the premium assistance and the option to enroll in different coverage if the employer permits assistance-eligible individuals to elect enrollment in different coverage as described above. In a situation in which the election notice is not required to be provided by the plan administrator, the DOL and Department of Health and Human Services (HHS) will provide rules requiring the provision of such notice.

The additional notice must include:

    • the forms necessary for establishing eligibility for premium assistance;
    • the name, address, and telephone number necessary to contact the plan administrator and any other person maintaining relevant information in connection with such premium assistance;
    • a description of the extended election period noted above;
    • a description of the obligation of the qualified beneficiary to notify the group health plan when his or her premium subsidy period has expired and the penalty provided under section 6720C of the Internal Revenue Code of 1986 for failure to carry out this obligation;
    • a description, displayed in a prominent manner, of the qualified beneficiary’s right to a subsidized premium and any conditions on entitlement to the subsidized premium; and
    • a description of the option of the qualified beneficiary to enroll in different coverage if the employer permits the beneficiary to elect to enroll in different coverage.

In the case of any assistance-eligible individual (or any individual who qualifies for an extended election period noted above who became eligible to elect COBRA continuation coverage before April 1, 2021) the administrator of the applicable group health plan (or other entity) must provide, within 60 days after April 1, 2021, the additional notification required above. Failure to provide the additional notice will be treated as a failure to meet the election notice requirement under COBRA.

The Act instructs the DOL, HHS, and the Department of the Treasury to issue models for the additional notification described above no later than 30 days after the enactment of this Act.

The administrator of the applicable group health plan (or other entity) also must provide an assistance-eligible individual a written notice in clear language that the premium assistance will expire soon and must prominently identify the date the assistance will expire and that the individual may be eligible for COBRA or coverage under a group health plan without premium assistance. This notice must be provided no earlier than 45 days before the expiration date of the assistance and no later than 15 days before the expiration date. Notice is not required to be provided if an individual’s premium assistance expires due to expiration of the COBRA coverage period or the date that the individual is eligible for benefits under Medicare or eligible for coverage under any other group health plan (not including coverage that a) only provides excepted benefits, b) is a QSEHRA, or c) is an FSA).

The Act instructs the DOL, HHS, and the Treasury to issue models for the premium assistance expiration notification described above no later than 45 days after the enactment of this Act.

Premium Assistance Credit

The employer maintaining the plan that is subject to COBRA (or the plan in the case of a multiple employer plan under Section 3(37) of ERISA; in all other cases, the issuer providing coverage) is entitled to a premium assistance credit against the FICA Medicare tax imposed on it. The amount of the premium assistance credit for each calendar quarter is equal to the amount of premiums not paid by assistance-eligible individuals. The credit allowed for each calendar quarter cannot exceed the tax imposed by Internal Revenue Code (IRC) Section 3111(b), or so much of the taxes imposed under section 3221(a) as are attributable to the rate in effect under Section 3111(b), for such calendar quarter (reduced by any credits allowed against such taxes under Sections 3131, 3132, and 3134) on the wages paid with respect to the employment of all employees of the employer. If the premium assistance credit that an employer is entitled to exceed this limitation, the excess amount must be treated as an overpayment by the employer and refunded to the employer. The premium assistance credit may be advanced according to forms and instructions provided by the IRS. Note that the IRS will waive penalties for failure to pay the FICA Medicare tax up to the premium assistance credit amount if the IRS determines that the failure was due to the anticipation of the credit. If an entity overstates the amount of credit it is entitled to, this will be treated as an underpayment of the FICA Medicare tax.

No premium assistance credit will be allowed for any amount that is taken into account as qualified wages under the employee retention credit or qualified health plan expenses under the federal paid sick leave and paid family and medical leave credit.

The premium assistance credit applies to premiums and wages paid on or after April 1, 2021.

 

American Rescue Plan Act of 2021 – DCAPs and Exchange Health Insurance

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021. The Act is a $1.9 trillion legislative package, which contains several provisions intended to relieve employers and families from some of the economic burdens associated with COVID-19. The Act contains funding for the Centers for Disease Control and Prevention, stimulus checks, unemployment benefits, a child tax credit, tax credits for paid sick leave and family and medical leave, the paycheck protection program, grants to state educational agencies, and low-income family assistance. The Act also contains several provisions affecting group health plans.

Increase in the Maximum Exclusion Under DCAPs

The Act increases the maximum amount that can be excluded from an employee’s income under a dependent care flexible spending arrangement (DCAP) from $5,000 to $10,500 if the employee is married and filing a joint return or if the employee is a single parent ($2,500 to $5,250 for individuals who are married but filing separately) for any taxable year beginning after December 31, 2020, and before January 1, 2022. An employer may amend a DCAP to apply this increased limit retroactively to January 1, 2021, if the amendment is adopted no later than the last day of the plan year in which the amendment is effective and the plan is operated consistent with the terms of the amendment during the period beginning on the effective date of the amendment and ending on the date the amendment is adopted.

Expanded Premium Tax Credit Eligibility and Lower Required Contribution Percentages on the Health Insurance Marketplace/Exchange

For the taxable years of 2021 and 2022, the Act has expanded eligibility for the premium tax credit for individuals who purchase health insurance on an Exchange. Under the Act, there is no upper-income limit on individuals who are eligible for a premium tax credit for 2021 and 2022 (under the existing Patient Protection and Affordable Care Act (ACA) rules, the premium tax credit is limited to individuals with household income between 100% and 400% of the federal poverty level (FPL)). The Act also lowers the percentage of household income that individuals must contribute for health insurance coverage purchased on an Exchange.

In the case of an individual who has received, or has been approved to receive, unemployment compensation for any week beginning during 2021, for that taxable year an Exchange must not take into account any household income of the individual in excess of 133 percent of the poverty limit for a family of the size involved.

 

Mandatory Coverage of COVID-19 Vaccines Under Group Health Plans

3/5/2021 Update: ACIP recommended the Janssen (Johnson & Johnson) vaccine.

On December 11, 2020, the Food and Drug Administration (FDA) issued an Emergency Use Authorization for the Pfizer-BioNTech COVID-19 vaccine (Pfizer vaccine). The following day, December 12, 2020, the Centers for Disease Control Advisory Committee on Immunization
Practices (ACIP) issued an interim recommendation for use of the Pfizer vaccine in persons aged 16 years or older for the prevention of COVID-19.

On December 18, 2020, the FDA issued an Emergency Use Authorization for the Moderna COVID-19 (mRNA-1273) vaccine (Moderna vaccine). The following day, December 19, 2020, ACIP issued an interim recommendation for use of the Moderna vaccine in persons aged 18 or older for the prevention of COVID-19.

On February 27, 2021, the FDA issued an Emergency Use Authorization for the Johnson & Johnson COVID-19 vaccine. The following day, February 28, 2021, ACIP issued an interim recommendation for use of the Johnson & Johnson vaccine in persons aged 18 or older for the prevention of COVID-19.

Alternative COVID-19 vaccines are likely to be approved by the FDA under emergency authority in the coming weeks. Group health plans are encouraged to prepare to cover the cost of the Pfizer, Moderna, Johnson & Johnson, and other approved COVID-19 vaccines.

Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), non-grandfathered individual and employer-sponsored group health plans are required to cover the entire cost of preventative services by not imposing cost-sharing in the form of deductibles, copays, coinsurance or other amounts on the following:

  • An item, service, or immunization that is intended to prevent or mitigate the coronavirus disease and is an evidence-based item or service that has a rating of “A” or “B” in the current recommendations of the United States Preventive Services Task Force (USPSTF); and
  • An immunization that is intended to prevent or mitigate the coronavirus disease that has a recommendation from ACIP with respect to the individual involved.

The CARES Act requires that the above services be covered as preventive care 15 business days after the date on which a recommendation is made by the USPSTF or ACIP relating to the service. Accordingly, non-grandfathered individual and group health plans must cover the Pfizer vaccine as preventive care no later than January 5, 2021 (based on the December 12, 2020, recommendation from ACIP), the Moderna vaccine as preventive care no later than January 12, 2021 (based on the December 19, 2020, recommendation from ACIP), and the Johnson & Johnson vaccine as preventive care no later than March 19, 2021 (based on February 28, 2021 recommendation from ACIP).

ACIP has recommended that only health care personnel and residents of long-term care facilities receive the vaccine in the initial phase (Phase 1a) of the COVID-19 vaccination program. ACIP previously recommended that during Phase 1b, the vaccine should be distributed to essential workers such as members of the education sector, food and agriculture, utilities, police, firefighters, corrections officers, and transportation. ACIP has revised this recommendation so that during Phase 1b the vaccine should be offered to persons aged 75 years or older and frontline essential workers (non–health care workers).

ACIP previously recommended that during Phase 1c, the vaccine should be distributed to adults with high-risk medical conditions and adults aged 65 years or older. ACIP has revised this recommendation so that during Phase 1c, the vaccine should be offered to persons aged 65 to 74 years old, persons aged 16 to 64 years old with high-risk medical conditions, and essential workers not recommended for vaccination in Phase 1b.

Phase 2 includes all other persons aged 16 years or older that are not included in Phases 1a, 1b, or 1c.

Employers should ensure that their non-grandfathered group health plans, whether self-insured, or fully insured through carriers, are prepared to cover COVID-19 vaccines as provided under the CARES Act and that the plan documents reflect such coverage. Further, participant communications should be distributed that provide information regarding the availability of COVID-19 vaccinations with no cost-sharing. Grandfathered plans are not required to cover COVID-19 vaccines under the CARES Act. However, employers with such plans should review their plan documents to determine whether COVID-19 vaccines are or should be covered.

 

EBSA Disaster Relief Notice 2021-01

3/2/2021 Update: The DOL issued EBSA Disaster Relief Notice 2021-01 providing that the outbreak period relief noted below ends on the earlier of one year from the date an individual or plan was first eligible for relief (extension period) or the original outbreak period of 60 days after the announced end of the COVID-19 National Emergency. As of the date of this writing, the COVID-19 National Emergency has not ended.

On March 13, 2020, former President Trump issued the Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak and by a separate writing made a determination, under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, that a national emergency exists nationwide beginning March 1, 2020, as the result of the COVID-19 outbreak.

The Department of Labor (DOL) recognizes that the COVID-19 outbreak may impede efforts to comply with various requirements and deadlines under the Employee Retirement Income Security Act (ERISA). As a result, the DOL’s Employee Benefits Security Administration (EBSA) issued Disaster Relief Notice 2020-01 (Notice 2020-01) that applies to employee benefit plans, employers, labor organizations, and other plan sponsors, plan fiduciaries, participants, beneficiaries, and covered service providers. Notice 2020-01 supplements the extended timeframes final rule issued by the DOL and the Department of the Treasury.

ERISA Notice and Disclosure Relief

In addition to the final rule, Notice 2020-01 provides an extension on deadlines for furnishing other required notices or disclosures to plan participants, beneficiaries, and other persons to grant plan fiduciaries and plan sponsors additional time to meet their obligations under Title I of ERISA during the COVID-19 outbreak. This extension applies to the furnishing of notices, disclosures, and other documents required by provisions of Title I of ERISA over which the DOL has authority, except for those notices and disclosures addressed in the final rule. See the DOL Reporting and Disclosure Guide for Employee Benefit Plans for an overview of the various notice and disclosure requirements under Title I of ERISA.

Under the EBSA Disaster Relief Notice 2021-01, an employee benefit plan and the responsible plan fiduciary may disregard the period from March 1, 2020, and ending on the earlier of one year from the date the plan was first eligible for relief (extension period) or the original outbreak period of 60 days after the announced end of the COVID-19 National Emergency when determining the date that a notice or disclosure must be provided under Title I of ERISA. This relief will only apply if the plan and responsible fiduciary act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances. Good faith acts include use of electronic alternative means of communicating with plan participants and beneficiaries whom the plan fiduciary reasonably believes have effective access to electronic means of communication, including email, text messages, and continuous access websites.

Plan Loans and Distributions

The DOL has taken a temporary non-enforcement position on retirement plan loan and distribution procedural deficiencies. Under Notice 2020-01, retirement plans that do not follow procedural requirements for plan loans or distributions imposed by the terms of the plan, will not be treated as in violation of Title I of ERISA if: 1) the failure is solely attributable to the COVID19 outbreak; 2) the plan administrator makes a good-faith diligent effort under the circumstances to comply with those requirements; and 3) the plan administrator makes a reasonable attempt to correct any procedural deficiencies, such as assembling any missing documentation, as soon as administratively practicable. The relief is limited to the DOL’s authority under Title I of ERISA and does not extend to Title II of ERISA, which contains provisions analogous to those under the Internal Revenue Code and subject to the jurisdiction of the IRS, such as the spousal consent rules for distributions.

Under Notice 2020-01, the DOL will not consider any person to have violated Title I of ERISA, including the requirement that the loan be adequately secured by the account balance, solely because: 1) the person made a plan loan to a qualified individual during the loan relief period in compliance with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the provisions of any related IRS notice or other published guidance; or 2) a qualified individual delayed making a plan loan repayment in compliance with the CARES Act and the provisions of any related IRS notice or other published guidance.

Notice 2020-01 provides that an employee pension benefit plan may be amended to provide the relief for plan loans and distributions described in section 2202 of the CARES Act and the DOL will treat the plan as being operated in accordance with the terms of the amendment prior to its adoption if: 1) the amendment is made on or before the last day of the first plan year beginning on or after January 1, 2022, or such later date prescribed by the Secretary of the Treasury, and 2) the amendment meets the conditions of section 2202(c)(2)(B) of the CARES Act.

Participant Contributions and Loan Repayments

Under Notice 2020-01, as amended by Notice 2021-01, the DOL will not take enforcement action with respect to a temporary delay in forwarding participant payments and withholdings to employee pension benefit plans during the period from March 1, 2020, and ending on the earlier of one year from the date the plan was first eligible for relief (extension period) or the original outbreak period of 60 days after the announced end of the COVID-19 National Emergency if the delay is solely attributable to the COVID-19 outbreak. However,  employers and service providers must act reasonably, prudently, and in the interest of employees to comply as soon as administratively practicable under the circumstances.

Blackout Notices

Notice 2020-01 provides individual account plan administrators with relief from the requirement that 30 days’ advance written notice be provided to participants before implementing a blackout period that restricts participants’ ability to direct investments and to obtain loans and other distributions from the plan. The relief is available when a plan administrator is unable to comply with the advance notice requirement due to events beyond the reasonable control of the plan administrator. The DOL will not require plan administrators to make a written determination when seeking relief from the 30 days’ advance notice requirement due to a pandemic, such as COVID-19.

General ERISA Fiduciary Compliance

Notice 2020-01 provides that plan fiduciaries should make reasonable accommodations to prevent the loss of benefits or undue delay in benefits payments and should attempt to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established timeframes. The DOL recognizes that there may be instances when plans and service providers may be unable to achieve full and timely compliance with claims processing and other ERISA requirements. The DOL notes that it will implement grace periods and other relief where appropriate, including when physical disruption to a plan or service provider’s principal place of business makes compliance with pre-established timeframes for certain claims’ decisions or disclosures impossible.

The DOL will continue to monitor the effects of the COVID-19 outbreak and may provide additional relief when necessary.

 

Final Rule on the Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Due to COVID-19

3/2/2021 Update: The DOL issued EBSA Disaster Relief Notice 2021-01 providing that the outbreak period relief noted below ends on the earlier of one year from the date an individual or plan was first eligible for relief (extension period) or the original outbreak period of 60 days after the announced end of the COVID-19 National Emergency. As of the date of this writing, the COVID-19 National Emergency has not ended. If a deadline noted below fell on March 1, 2020, it would be extended until February 28, 2021 (one year from March 1, 2020). However, if a deadline fell after March 1, 2020, the deadline would be extended to a date after February 28, 2021 because the extension is up to one year following the deadline or 60 days after the announced end of the COVID-19 National Emergency, if earlier.

On March 13, 2020, former President Trump issued the Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak and by separate letter made a determination, under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, that a national emergency exists nationwide beginning March 1, 2020, as the result of the COVID-19 outbreak.

The Department of Labor (DOL) and the Department of the Treasury (Treasury) issued a final rule that extends certain timeframes under the Employee Retirement Income Security Act (ERISA) and Internal Revenue Code (IRC) for group health plans, disability, and other welfare plans, pension plans, and participants and beneficiaries of these plans during the COVID-19 national emergency. The timing extensions are issued to help alleviate problems faced by health plans to comply with strict ERISA and IRC timeframes and problems faced by participants and beneficiaries in exercising their rights under health plans during the COVID-19 national emergency. The final rule provides the timeframe extensions based on the end date of the “national emergency” (as of the date of this publication, the national emergency end date has not been announced) and the end date of the “outbreak period” which is the 60th day after the end of the national emergency. Under EBSA Disaster Relief Notice 2021-01, the end of the outbreak period relief is the earlier of one year from the date they were first eligible for relief (extension period), or the original outbreak period of 60 days after the announced end of the national emergency. Under the final rule the outbreak period will be disregarded, meaning the timeframes for the group health plan requirements noted below will be paused until after the outbreak period has ended.

HIPAA Special Enrollment Periods

Under HIPAA, group health plans must provide special enrollment periods in certain circumstances, including when an employee or dependent loses eligibility for any group health plan or other health insurance coverage in which the employee or the employee’s dependents were previously enrolled (including coverage under Medicaid and the Children’s Health Insurance Program), and when a person becomes a dependent of an eligible employee by birth, marriage, adoption, or placement for adoption. Generally, group health plans must allow such individuals to enroll in the group health plan if they are otherwise eligible and if enrollment is requested within 30 days of the occurrence of the event (or within 60 days, in the case of loss of Medicaid or state Children’s Health Insurance Program (CHIP) coverage or eligibility for state premium assistance subsidy from Medicaid or CHIP).

Under the final rule and EBSA Disaster Relief Notice 2021-01, the one-year extension period or original outbreak period, if earlier, must be disregarded when determining if a participant timely requested HIPAA special enrollment (i.e., the 30-day or 60-day period will begin to run the day after the outbreak period). See the Appendix for examples.

COBRA

The COBRA continuation coverage provisions generally provide a qualified beneficiary a period of at least 60 days to elect COBRA continuation coverage under a group health plan. Plans are required to allow payment of premiums in monthly installments, and plans cannot require payment of premiums before 45 days after the day of the initial COBRA election. COBRA continuation coverage may be terminated for failure to pay premiums on time. Under the COBRA rules, a premium is considered paid on time if it is made no later than 30 days after the first day of the period for which payment is being made. Notice requirements prescribe time periods for employers to notify the plan of certain qualifying events and for individuals to notify the plan of certain qualifying events or a determination of disability. Notice requirements also prescribe a time period for plans to notify qualified beneficiaries of their rights to elect COBRA continuation coverage.

Under the final rule and EBSA Disaster Relief Notice 2021-01, the one-year extension period or original outbreak period, if earlier, must be disregarded when determining the 60-day COBRA election period, the date for making COBRA premium payments, and the date for qualified beneficiaries to notify the plan of a qualifying event or determination of disability. The outbreak period must also be disregarded when determining the date by which a COBRA election notice must be provided to a qualified beneficiary. See the Appendix for examples.

Claims Procedure

ERISA-covered employee benefit plans and non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual health insurance coverage are required to establish and maintain a procedure governing the filing and initial disposition of benefit claims, and to provide participants with a reasonable opportunity to appeal an adverse benefit determination to an appropriate named fiduciary. Plans may not have provisions that unduly inhibit or hamper the initiation or processing of claims for benefits. Further, group health plans and disability plans must provide participants at least 180 days following receipt of an adverse benefit determination to appeal (60 days in the case of pension plans and other welfare benefit plans).

Under the final rule and EBSA Disaster Relief Notice 2021-01, the one-year extension period or original outbreak period, if earlier, must be disregarded when determining the date for participants to file a benefit claim under the plan’s claims procedures and the date by which a participant may file an appeal of an adverse benefit determination under the plan’s claims procedure.

External Review Process

ERISA sets forth standards for external review that apply to non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual health insurance coverage and provides for either a state external review process or a federal external review process. Standards for external review processes and timeframes for submitting claims to the independent reviewer for group health plans or health insurance issuers may vary depending on whether a plan uses a state or federal external review process. For plans or issuers that use the federal external review process, the process must allow at least four months after the receipt of a notice of an adverse benefit determination or final internal adverse benefit determination for a request for an external review to be filed. The federal external review process also provides for a preliminary review of a request for external review. The regulation provides that if such request is not complete, the federal external review process must provide for a notification that describes the information or materials needed to make the request complete, and the plan or issuer must allow a claimant to perfect the request for external review within the four-month filing period or within the 48-hour period following the receipt of the notification, whichever is later.

Under the final rule and EBSA Disaster Relief Notice 2021-01, the one-year extension period or original outbreak period, if earlier, must be disregarded when determining the date by which a participant may file a request for an external review after receiving an adverse benefit determination or final internal adverse benefit determination and the date by which a participant must file a corrected request for external review upon a finding that the request was not complete.

Plan Administrator/Fiduciary Obligations Regarding the End of the Outbreak Period

The DOL instructs that if the plan administrator or other responsible plan fiduciary knows, or should reasonably know, that the end of the outbreak period for an individual action is exposing a participant or beneficiary to a risk of losing protections, benefits, or rights under the plan, the administrator or other fiduciary should consider sending a notice regarding the end of the outbreak period. The DOL also notes that plan disclosures issued prior to or during the pandemic may need to be reissued or amended if such disclosures failed to provide accurate information regarding the time in which participants and beneficiaries were required to take action (e.g., COBRA election notices and claims procedure notices). The DOL provides that group health plans should consider ways to ensure that participants and beneficiaries who are losing coverage are made aware of other coverage options that may be available to them, including the opportunity to obtain coverage through the Health Insurance Marketplace in their state.

The DOL acknowledges that there may be instances when full and timely compliance with ERISA’s disclosure and claims processing requirements by plans and service providers may not be possible, such as when pandemic or natural disaster-related disruption to a plan or service provider’s principal place of business makes compliance with pre-established time frames for certain claims’ decisions or disclosures impossible. The DOL will take into account fiduciaries that have acted in good faith and with reasonable diligence under the circumstances when enforcing ERISA requirements.


3 alternative ways clients can use an HSA

HSAs get hailed as a boon to retirement savers, offering rare triple-tax advantage status to dollars deposited within. But these accounts, offered in tandem with high-deductible health insurance coverage, are far more versatile than they get credit for.

Typically thought of and discussed primarily as a way to help clients meet medical bills today or in their future retirement, HSAs can provide assistance beyond this narrow scope, with funds eligible for use to pay Medicare or COBRA premiums, long-term care, and non-medical expenses — all without jeopardizing that special tax treatment.

Medicare and COBRA premiums

Once clients enroll in Medicare they can no longer contribute to their HSA, but they can do something they could never do on a high-deductible plan: use the money they’ve already stashed in it to cover their premiums.

HSA funds can pay for Medicare Parts A, B and D as well as copays for Part D. Medicare HMO, Medicare Advantage, and MAPD plan premiums are also eligible expenses for reimbursement. However, HSAs cannot help with Medicare Supplement Plan or Medigap premiums, says Paul Fronstin, director of the Employee Benefit Research Institute's health research and education program.

Married couples may run into trouble when they go to reimburse themselves for such premium expenses if the account owner isn’t also the spouse who is going onto Medicare or they are not yet 65, warns Roy Ramthun, founder and president of HSA Consulting Services and a former health care policy advisor for President George W. Bush. That’s because, while HSA’s can normally be used to pay expenses incurred by the account owner’s spouse or dependent, Medicare premiums aren’t considered an eligible expense unless the account holder is 65. This means couples with any age gap need to consider whose name the HSA should be under or each open their own HSA so that the older partner doesn’t have to wait until the younger turns 65 to take advantage of this rule. (Opening two separate HSAs will also allow clients age 55 or older to make duel $1,000 catch-up contributions on top of the usual annual limits.)

Clients who reach Medicare age but opt to delay enrolling because they’re still working can also use their HSA money to pay for their employer-sponsored health care as well as continue funding an HSA. They can do this even if their spouse is on Medicare, as long as they’re on a HDHP.

And finally, clients who lost their jobs this year will likely be relieved by another HSA premium exception. If a person has health care continuation coverage, such as with COBRA, or is collecting unemployment compensation under federal or state law then they can use their HSA to pay the premiums for their health insurance, says Fronstin.

“HSA funds will frequently be used by clients to pay premiums in situations where there are little or no alternatives,” says Justin Rucci, a financial planner at Tustin, California-based Warren Street Wealth Advisors. “In a situation where a client was laid off from work, has a hefty HSA balance, and has expensive COBRA premiums, this could be a prime candidate. Alternatively, a wealthy client with a large HSA balance beyond what they would use for out of pocket medical expenses can be a good candidate for this.”

Long-term care

Like with Medicare and COBRA, HSA funds can be used to cover premiums for purchasing long-term care insurance — if it’s the right policy.

To qualify, a policy must provide coverage for only long-term care services and kick in if you need assistance with at least two daily living activities or if you suffer cognitive impairment.

“Honestly, I don’t know how many policies do not meet these requirements,” says Ramthun. “But there may be some out there and clients will want to make sure it is the right kind or else they’re going to have a bad day when they find out it isn’t.”

If your client is unsure, have them verify with their insurer that their policy is tax-qualified before considering such a move or else they could be on the hook for income tax and a penalty.

The amount a client can take from the HSA to pay the premium depends on their age. For 2019, clients 40 or younger can withdraw $420 annually to pay this expense, but those between 41 and 50 can direct almost double, $790, to their long-term care insurance policy. Those between 51 and 60 can withdraw $1,580; 61 to 70 year-olds can take out $4,220 and people 71 and older can withdraw $5,270. (The IRS has not released the limits for 2020, but they usually rise slightly each year. Ramthun expects the new figures will be out in January.)

Alternatively, clients who do purchase long-term care insurance but pay premiums out of their own pocket each year can save those receipts and then withdraw a sum equal to that annual permitted outlay at any time in the future.

Those who would prefer to go without insurance and self-fund possible long-term care costs can tap HSA assets to pay for such expenses as they occur, allowing them to better take advantage of the potential tax-free growth that comes with saving in an HSA. However, not all long-term care costs are reimbursable, warns Ramthun.

Typically long-term services that are needed to handle daily functions if you’re chronically ill or disabled count, as do those required by a plan of care prescribed by a doctor. But those who require help with more maintenance tasks like laundry or cleaning to stay in their home can’t usually use HSA funds as they aren’t considered a medical service. Nursing home costs can also be tricky for this reason as certain medical care or assistance provided at the facility may be eligible for reimbursement but other associated expenses, like room and board or meals, often are not, even at the highest level of dependent care, says Ramthun.

Non-medical expenses

While clients may have the best intentions to save their HSA funds for future medical expenses in retirement, a year like 2020 can derail such plans. If someone needs additional funds, for, say, living expenses after a job loss or an unexpected car repair, they can withdraw funds from their HSA without triggering taxes or a penalty. The catch? They must have unreimbursed past healthcare expenses.

As long as the client had an open HSA when they incurred the medical expense and hasn’t yet tapped it to cover that cost, an amount equal to that bill can be withdrawn at any time and used for any purpose they want. Clients can claim back funds for expenses dating all the way back to 2004, when HSAs were first introduced, provided they had an account. Receipts should be on hand to prove their story in case the IRS comes checking.

One thing that can trip up clients planning to use this feature is a low or empty current HSA balance. That’s because if the account balance remains at zero for 18 months, the IRS considers the HSA closed and any medical expenses you incurred before that time will no longer be reimbursable, even if you open and fund a new HSA. “

“They essentially lose that original HSA establishment date,” says Ramthun.

Financial institutions may also act before the IRS rule kicks in, closing zero balance accounts after 15 months or earlier, again negating the ability to claim back any previous medical expenses.

Clients who move off high-deductible health plans or change employers and can no longer fund an HSA are most likely to fall victim, Ramthun adds, as a withdrawal for a medical cost or fees may empty the account without them being able to do anything to rectify it.

In desperation, clients may opt to pull more from their HSA than they have in past medical bills, but this move will cost them dearly, triggering income tax and a 20% penalty on the amount unmatched to those unreimbursed health care expenses.

Turning age 65, however, lessens this pain, as withdrawals no longer need to be paired with a medical expense to avoid that 20% tax penalty. Income tax, however, will still be owed on any funds removed for non-healthcare expenses, similar to how distributions from a traditional IRA or 401(k) are treated.

SOURCE: Renzulli, K. (04 December 2020) "3 alternative ways clients can use an HSA" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/news/3-alternative-uses-for-an-hsa-include-cobra-premiums-long-term-care-non-medical-expenses


Medicare 101: A Quick Guide For Employers

Medicare is a governmentfunded health insurance program for those aged 65 and above, those under 65 with certain disabilities, and those with End State Renal Disease (ESRD) or Amyotrophic Lateral Sclerosis (ALS). Employers that offer group health insurance plans to their employees have an interest in learning how employees’ entitlement to Medicare benefits can affect the administration of those plans. We sat down to speak with Olivia Childs, a Senior Solutions Licensed Agent at Saxon Financial Services, to get some more information on Medicare for beginners.

When asked about the number one thing to keep in mind when trying to figure out your first steps with Medicare, Olivia commented, “Ask a licensed agent for assistance. Advertisements can be confusing, and everyone wants to make the right choice. Using my expertise, I take the fear out of the decision making, so my clients can make an informed decision concerning their healthcare.”

What are the different parts of Medicare?

  • Part A is hospital insurance that helps cover inpatient care in a hospital, skilled nursing facility care, inpatient care in a skilled nursing facility (not custodial or long-term care), hospice care, and home health care. Most U.S. citizens qualify for zero premium Medicare Part A upon attainment of age 65.
  • Part B is the actual ‘health’ coverage under Medicare. It helps cover physician visits, screenings and other aspects of out-patient medical care. Medicare Part B has a monthly premium to cover outpatient care which increases annually.
  • Part C is a Medicare Advantage Plan. This is a plan that offers all of the benefits of Parts A and B, sometimes with Part D, through a private health insurer.
  • Part D was established in 2003. Part D of the Medicare Program provides prescription drug coverage to Medicare beneficiaries. This drug coverage may be available in a standalone Prescription Drug Plan (PDP) or integrated with a Medicare Advantage Plan.

What is Original Medicare?

With original Medicare, your coverage is through Parts A and B. Part A includes inpatient and/or hospital coverage, while Part B includes outpatient and/or medical coverage. Through this type of Medicare, you are provided a red, white and blue card to show your providers when receiving treatment. While most doctors take Original Medicare coverage, it is important to check whether your provider participates. If you visit one that does,
then your Medicare card will limit how much you can be charged.

Through Original Medicare, you are responsible for a 20% coinsurance if you see a participating provider and after meeting your deductible. Some basic, key things to know about Original Medicare include that:

  • For Medicare Supplement Insurance, you have the choice to pay an additional premium for a Medigap to cover Medicare cost-sharing.
  • You do not need referrals to see a specialist.
  • For drug coverage, you must sign up for a standalone prescription drug plan.
  • It does not cover vision, hearing, or dental services.

What is Medicare Advantage?

Unlike Original Medicare, Medicare Advantage are private plans that contract with the federal government to provide Medicare benefits. These plans are also known as Medicare private health plans or Part C. Some of the most common types of plans are:

  • Health maintenance Organizations (HMOs)
  • Preferred provider Organizations (PPOs)
  • Private Fee-For-Service (PFFS)

If you join a Medicare Advantage Plan, you will not use the red, white, and blue card when you go to the doctor or hospital. Instead, you will use the membership card your plan sends you to get health services covered. Plans must provide the same benefits offered by Original Medicare, but they may apply different rules, costs, and restrictions. They also may offer certain benefits that Medicare does not cover. Just like Original Medicare, there are some key items to be aware of:

  • Your cost-sharing varies depending on plan. Usually pay a copayment for in-network care. Plans may charge a monthly premium in addition to Part B premium.
  • You cannot enroll in a Medigap plan.
  • You can typically only see in-network providers.
  • You will also typically need a referral to see a specialist.
  • For drug coverage, in most cases, the plan provides prescription drug coverage (you may be required to pay higher premium).
  • It may cover additional services, including vision, hearing, and/or dental (additional benefits may increase your premium and/or other out-of-pocket costs).
  • You will have an annual out-of-pocket limit. Plan pays the full cost of your care after you reach the limit.

If you sign up for Original Medicare and later decide you would like to try a Medicare Advantage Plan–or vice versa–be aware that there are certain enrollment periods when you are allowed to make changes.

Employer Requirements

Employers are required to file annual Centers for Medicare and Medicaid Reporting and Employee-Notice Distribution letters even if one employee has coverage under Medicare Parts A, B, or C. Usually companies receive letters from their insurance companies asking for a Federal Tax Identification number and the group size of employees each year.

If your company has 19 or fewer full- and part-time employees, Medicare is almost always primary. Here, it is essential that employees turning 65 enroll in Medicare Parts A and B. If they do not, generally they will have to pay anything that Medicare would have covered. If your company is larger, various rules determine whether your group plan is the primary or secondary payer. MSP requirements also apply for Medicare-eligible employees who are disabled or have end-stage renal disease.

Once per year, written notice distribution is required to all Medicare-eligible employees. This must inform the employee whether the employer’s prescription drug coverage is ‘creditable’ or ‘noncreditable.’ Notice can be sent electronically, but it is often easier to distribute in written format. These need to be sent before October 31.

It is a good idea for employers to provide employees with written details about their employer-provided coverage, which will help them decide how to handle their Medicare choices.

How does it work with COBRA?

COBRA coverage is usually offered when leaving employment; if the employee has COBRA and Medicare coverage, Medicare is the primary payor. If an employee has Medicare Part A only, signs up for COBRA coverage and waits until the COBRA coverage ends to enroll in Medicare Part B, he or she will have to pay a Part B premium penalty.

Employees should be disenrolled in COBRA once they turn 65. A number of Medicare beneficiaries have delayed enrolling in Medicare Part B, thinking that because they are paying for continued health coverage under COBRA, they do not have to enroll in Medicare Part B. COBRA-qualified beneficiaries who have delayed enrollment in Medicare Part B do not qualify for a special enrollment period to enroll in Part B after COBRA coverage ends.

According to the Department of Labor Bureau of Labor and Statistics, the number of workers age 65 and older has increased dramatically since the late 1990s. With that trend expected to continue, companies have an excellent opportunity to assist employees in their health insurance decisions. Navigating the ever-changing Medicare rules can be tricky.

However, with the help of a qualified Medicare specialist, the process can be rewarding for the employer and employees.

Positioning for Long-Term Success

Offering Medicare coverage to your employees can be a daunting, confusing, and tiring task – especially when you go about it alone. While articles like this one can be helpful in understanding what Medicare is, the logistics of actually implementing it as a solution for your employees is a whole other story.

Saxon Financial Advisors creates strategies that are built around you and your vision for the future. The key is to take the first step of reaching out to a professional and then letting us guide you along the path to a confident future. We don’t stop at just a plan. We take the journey with you, reassessing your life situation, changing needs and goals and ensuring that your plan continues to meet your future needs in an ever-changing world. We offer several helpful services to businesses, just like yours, including:

  • Risk Management
  • Tax Planning
  • Education Planning
  • Retirement Planning
  • Estate Planning
  • Business Planning

People are your most valued asset and our greatest reward. Our compassion for people drives us to operate differently, assessing the needs of the population alongside the vision and goals of your organization. At Saxon, we truly listen, engage, understand and advise solutions to help meet your overall company goals. Employee Benefits will have an impact on your organization from recruitment, retention and population wellness to productivity and your bottom line. To us, it isn’t the size of your organization that matters most, but rather the needs of the people within it.

For more information, contact Olivia Childs, a Senior Solutions Licensed Agent, at (513)904-5955 or ochilds@gosaxon.com.

About Your Advisor

Olivia Childs is a Senior Solutions Advisor at Saxon Financial. She graduated from the University of Cincinnati with a degree in Organizational Leadership. She was involved in the Human Resources department and a member of HR Succeeds, a mentor program with professionals and students. In her free time, Olivia volunteers at the Cincinnati Epilepsy Foundation. When it comes to helping her clients with Medicare, Olivia pointed out, “Healthcare is personal. I love being a resource for my clients to use to help them make the best decision concerning a Medicare plan.”

 

Not Connected with or endorsed by the U.S. government or the federal Medicare program.


The demand for data transparency is mounting

Interesting thoughts on transparency data from Employee Benefit Adviser, by Suzy K. Johnson

December 2003 was a great time for health plans in America. This was when high deductible health plans and the underlying health savings accounts were enacted into law by the federal government.

With this law, we were provided the ability to engage employees more directly in the cost of their care with the elimination of copays and Rx cards under these plans.

What many brokers don’t realize is that the law allows anyone to fund the underlying health savings accounts. This means that employers can and should be shown how to use the savings in premiums created by moving to these types of plans to “fund” employees’ health savings accounts. This can result in a win/win for all.

When employers fund the employee’s HSA, they provide the employee the ability to direct additional money into a flex spending type of plan (HSA) that has much higher limits for funding, and allows the same expenses to be reimbursed along with long-term care premiums, COBRA premiums and Medicare Part B expenses. These accounts don’t have the “use it lose it” risk that flex medical reimbursement plans have always included.

A top priority
Now what we need is transparency data from the hospitals and providers. It is my belief that if every American was required to have a high deductible health plan paired with a health savings account only, the demand for transparency data would be palpable and the pressure forced on providers and hospitals to comply would amplify.

Right now the transparency data is not available and this needs to change. If the only plans employers could offer were HDHP plans with HSA accounts and if employers provided funding to help their employees to be able to afford the additional exposure shifted to them, the demand for transparency data would suddenly become top priority and the government would demand it of providers.

Yes, they are more complicated to understand, and yes, the programs require more employee education and hand holding. Nothing good happens when we sit on the sidelines. Let’s commit to becoming part of the solution!

See the original article Here.

Source:

Johnson, S. K. (2016 October 4). The demand for data transparency is mounting. [Web blog post]. Retrieved from address http://www.employeebenefitadviser.com/opinion/the-demand-for-data-transparency-is-mounting


2016 Draft Forms & Instructions Released: Affordable Care Act Reporting Update

Great feature from The National Law Review by Damian A. Myers,

Since our last ACA Reporting Update, the extended deadlines to distribute Forms 1095-B and 1095-C to covered individuals and employees and to file the forms with the IRS have passed.  The IRS has stated, however, that late forms can still be submitted via electronic filing and the forms that received an error message should be corrected.  By many accounts, the first ACA reporting season presented numerous challenges.  From collecting large amounts of data to compiling the forms, to working with service providers that faced their own unique challenges, to facing form rejections and error notifications from an inadequate IRS electronic filing system, employers and coverage providers faced obstacles nearly every step of the way.  Nevertheless, most employers and coverage providers were able to get the forms filed and put the 2015 ACA reporting season behind them.

But, alas, there is no rest for the weary. In late-July, the IRS released new draft 2016 Forms 1094-B and 1095-B (the “B-Series” Forms) and Forms 1094-C and 1095-C (the “C-Series” Forms).  Additionally, on August 1, the IRS released draft instructions to the C-Series Forms (as of the date of this blog, draft instructions for the B-Series Forms have not been released).  For the most part, the 2016 ACA reporting requirements are similar to the 2015 requirements, subject to various revisions described below.

  • Various changes have been made to the forms and instructions to reflect that certain forms of transition relief are no longer applicable. For example, the non-calendar year transition relief (for plan years starting in 2014) that applied in 2015 does not apply in 2016. Similarly, changes have been made to reflect that the “Section 4980H Transition Relief” is still relevant only for non-calendar year plans though the end of the plan year ending in 2016.  The Section 4980H Transition Relief exempts applicable large employers (“ALEs”) with 50-99 full-time employees from penalties under Section 4980H of the Internal Revenue Code (the “Code”) and reduces the 95% threshold to 70% for other ALEs.  The relief also exempts ALEs from having to offer coverage to dependents if certain requirements are met. For calendar year plans, the threshold is at 95% throughout 2016 and dependent coverage must be offered during each month of the year.

  • The draft instructions to the C-Series Forms provide more detail and examples on how ALEs should prepare the forms. Instead of referring to “employers” throughout the instructions, the IRS has replaced that term in most cases with “ALE Member.”  The reason for this change is to highlight the fact that each separate ALE Member must file its own forms. Examples related to completing the authoritative Form 1094-C highlight that each separate entity (determined based on employer identification number) is required to file its own authoritative Form 1094-C.

  • As promised by the IRS last year, there are two new indicator codes for Line 14 of Form 1095-C. These new codes ask employers to indicate whether a conditional offer was made to a spouse. An offer of coverage to a spouse is conditional if it is subject to one or more reasonable, objective conditions. For example, if a spouse must certify that he or she is not eligible for group health coverage through his or her employer, or is not eligible for Medicare, in order to receive an offer of coverage, the offer is considered conditional.

  • The draft instructions to the C-Series Forms reflect that the good faith compliance standard applicable to 2015 forms (under which filers could avoid reporting penalties upon a showing of good faith) no longer applies for 2016 ACA reporting. Going forward, reporting penalties may be waived only upon the standard showing of reasonable cause.

  • The draft instructions to the C-Series Forms include new information related to coding for COBRA continuation coverage. There has been some uncertainty regarding how to treat offers of COBRA continuation coverage since the IRS removed relevant guidance from its Frequently Asked Questions website in February 2016. Similar to the 2015 instructions, the draft 2016 instructions provide that offers of COBRA coverage after termination from employment should be coded with 1H (Line 14) and 2A (Line 16) whether or not the COBRA coverage is elected. The new instructions now state that this coding sequence also applies for other, non-COBRA post-employment coverage, such as retiree coverage, when the former employee was a full-time employee for at least one month of the year.

In the case of an offer of COBRA coverage following a reduction in hours, the basic coding requirement is the same as in 2015 – the offer of COBRA coverage is treated as an offer of coverage on Line 14 of the Form 1095-C. The draft instructions expand on this basic requirement to explain how to code Lines 14 and 16 when the offer of COBRA coverage is not made to a spouse or dependent.  In general, for purposes of Code Section 4980H, an offer of coverage made once per year to an employee and his or her spouse and dependents is treated as an offer for each month of the year even if the coverage is declined for the employee, spouse, and/or dependents.  Under general COBRA rules, only those individuals enrolled in coverage immediately prior to the qualifying event receive an offer of COBRA coverage.

So how does this play out when an employee with a spouse and dependents elects self-only coverage during open enrollment and later loses that coverage due to a reduction in hours? The draft instructions treat the initial offer of coverage at open enrollment and the offer of COBRA coverage as two separate offers of coverage.  To determine the proper coding, the employer must look at who had the opportunity to enroll at each offer.  During open enrollment, the employee, spouse and dependent had the opportunity to enroll.  Thus, until the reduction in hours and loss of coverage, the coding should be 1E (offer to employee, spouse and dependent) in Line 14 and 2C (enrolled in coverage) in Line 15.

In contrast, the offer of COBRA coverage was only available to the employee and, therefore, after the reduction in hours, the coding should be 1B (offer to employee only) in Line 14. If the employee does not elect the COBRA coverage, code 2B (part-time employee) could be inserted in Line 16.  If, however, the employee does elect COBRA coverage, it appears that code 2C (enrolled in coverage) should still be inserted in Line 16.  Although this latter coding sequence is likely intended to protect the spouse and dependents from being “firewalled” from a premium credit, there appears to be nothing to indicate that the employer should not be assessed a penalty for failing to make an offer to the employee’s dependents.

  • The draft instructions for the C-Series Forms provide additional insight into how to calculate the number of full-time employees for purposes of column (b) in Part III of the Form 1094-C. The draft instructions clarify that the determination of full-time employee status is based on rules under Code Section 4980H and related regulations and not on other criteria established by an employer. Note that, currently, the draft instructions state that the monthly measurement period must be used for this purpose, but it appears that this is a mistake and that it should reference both the monthly measurement and look-back measurement methods. The IRS may clarify this in the final instructions.

  • One important non-change in the draft instructions is that the specialized coding for employees subject to the multiemployer plan interim guidance remains in effect for 2016 reporting. The interim guidance provides that an employee is treated as having received an offer of coverage if his or her employer is obligated pursuant to a collective bargaining agreement to contribute to a multiemployer plan on the employee’s behalf, provided that the multiemployer plan coverage is affordable and has minimum value and the plan offers dependent coverage to the eligible employee. The coding for such as employee is 1H (no offer of coverage) for Line 14 and 2E (multiemployer plan interim guidance) for Line 16.

There will undoubtedly be tweaks to the draft instructions to the C-Series forms, but significant changes appear unlikely. Given that only five months remain in 2016, employers should start planning now for 2016 ACA reporting based on the draft instructions and make alterations as necessary when final instructions and other guidance is released.

See the original article Here.

Source:

Myers, D. A. (2016 August 4). 2016 draft forms & instructions released: affordable care act reporting update. [Web blog post]. Retrieved from address http://www.natlawreview.com/article/2016-draft-forms-instructions-released-affordable-care-act-reporting-update


What is the real cost of COBRA?

Original post by Chini Krishnan, eba.benefitnews.com

Whether you’re a benefit adviser, HR consultant or a broker, it’s important to understand the financial implications of COBRA and alternative solutions. By taking the right approach, you can become a cost-savings hero for both the employer and insured individuals. Here’s what you need to know to help educate your clients about COBRA alternatives that will put money back in everyone’s wallet next year.

While most individuals enrolled in a COBRA plan are keenly aware of the notoriously high expense, most companies don’t realize how much COBRA enrollees actually cost them – roughly 54% more in claims costs than active employees, according to Spencer’s Benefits Report. Here’s the breakdown:

  • The average COBRA enrollee costs employers $11,000 in annual costs (versus $7,204 for the average active worker)
  • Average rate of COBRA uptake by terminated employees: 10%
  • Average recipient stays on COBRA 7.4 months

Why does COBRA cost employers so much? In part because former employees who opt in to COBRA generally do so because they have a pre-existing condition or other health issues, which drives the claims rates and costs up. Self-insured employers are most at risk for high COBRA costs because they cover the entire cost of their employees’ health insurance claims, including COBRA enrollees’ claims.

And, there’s more to consider when looking at COBRA’s bottom line. Having former employees on COBRA leads a company to be considered more of a risk when it comes time for annual renewals, or when shopping around for new plans. In fact, if a company chooses look for a new plan, it will start getting declined by carriers if it has more than 10% of its population on COBRA — the exact percentage of average uptake. So, in the end, having too many people on COBRA can hike up the premiums for active employees, too.

A better bet

Leveraging new opportunities available under the Affordable Care Act, employers and brokers can transition COBRA enrollees to a marketplace plan. This move is a huge win-win for both companies and their former employees. Employers save on the cost of claims, while former employees can save literally thousands of dollars a year compared to the cost of COBRA. Let’s look at the numbers from an enrollee’s perspective based on Kaiser Family Foundation’s 2015 Employer Health Benefits Survey:

  • The average COBRA premium for a family in 2015 is $17,895.90 per year or $1,491.33/month
  • Average individual premium (HHS/healthcare.gov states) before the Advanced Premium Tax Credit (APTC) is $374
  • Average individual premium (HHS/healthcare.gov states) after the APTC is $105
  • Average COBRA premium of $531.33/month

Considering these statistics, marketplace plans have the potential to be 80% less than COBRA.Plus,Centers for Medicare and Medicaid Services recently cited an HHS analysis stating “about eight out of 10 returning consumers will be able to buy a plan with premiums less than $100 dollars a month after tax credits; and about seven out of 10 will have a plan available for less than $75 a month.”

One of the common misconceptions is that marketplace plans don’t hold their own when compared to group insurance. But that’s hardly the case, especially when you consider that, after tax credits, enrollees could even upgrade their plans for the same price as COBRA. With such significant savings possible, it pays to be educated. In this case, what employers don’t know will hurt their bottom line. Don’t miss the window of opportunity to transition COBRA enrollees to the public marketplace.

Chini Krishnan is co-founder & CEO, GetInsured.


How to Avoid ACA Filing Penalties

Originally posted by Michael Weiskirch on August 21, 2015 on eba.benefitnews.com.

The 6055 and 6056 tax filing has many employers and their advisers up in arms for the upcoming tax filing. The increased penalty amounts announced in July are alarming. A single 1095-C form violation could result in a penalty of $500 per form, with no cap if the employer shows intentional disregard — basically skipping out on the filing for 2015. A 500-person firm in this case would pay $250,000 in penalties. The good news is many employers can get a break of some sort for 2015. These are listed below:

Good faith effort

For 2015, employers who file will have protection even if their filing is incorrect or incomplete, as long as they show they made good faith efforts to comply with the ACA reporting requirements. A “good-faith effort” is defined as employer simply attempting to complete the forms. Keep in mind that the good-faith effort for 2015 tax year will disappear in 2016, thus penalties will apply for incorrect information in subsequent years.

Transition relief

Transition relief is designed to shield employers from shared responsibility penalties for all or part of 2015, reducing the exposure of the (A) $2,000 or (B) $3,000 penalties. This relief is not granted automatically and only applies for the 2015 tax year. To take advantage of this relief, the employer needs to complete line 22 of the 1094-C form or line 16 of the 1095-C for non-calendar year plans. With HCM File, we advise our clients to incorporate transition relief into their filing where appropriate. There are four flavors of transition relief, each essentially providing a bye for the months the relief is designated.

1)      Qualifying offer method: Employer who offers MEC which does not exceed 9.5% of the federal poverty level to at least 95% of full-time employees.
2)      4980H  for Employers with 50-99 Employees: Employer averaged between 50-99 employees
3)      4980H  for 100+ Employers: Employer offered coverage to at least 70% of full-time employees
4)      Non-Calendar Year Relief: Employers with plans that renew February-December in 2015.

30-day extension mirroring

The extension process for W2s and 1099s, the IRS will allow a 30-day extension as long as you can demonstrate certain hardship conditions and file Form 8809 by Jan. 31, 2016. Getting the final health plan participation and completing 1095-C forms for each health eligible employees, COBRA and retirees (if self-funded) is a lot to accomplish in a short window. As many employers scramble to complete their end of year payroll and compile the information for 6055/56, a good number of employers are looking to take advantage of the extension especially in the first year. Unlike the good faith effort and transition relief, the 30-day extension can be utilized in any tax year assuming the employer qualifies.

Also see: "Why get involved in ACA reporting?"

While good faith effort, transition relief and 30-day extensions are tools that employers may take advantage of to shield them from potential penalties, they should not be viewed as a method to evade penalties in all situations. Employers should strive for compliant, accurate and penalty-free filing without the support of any safety nets.


PPACA hasn’t killed COBRA – yet

Originally posted by Gina Binole on http://www.benefitspro.com

With full implementation of the Affordable Care Act looming – delays in the employer mandate aside – many in the HR world have been wondering whether health care reform will render COBRA obsolete.

The short answer: yes – and no.

While the new law has no direct impact to the Consolidated Omnibus Budget Reconciliation Act, the indirect effects of the Patient Protection and Affordable Care Act could eventually render COBRA meaningless.

COBRA was designed to bridge coverage for employees who lose their job, or lose health coverage through their job. This was deemed necessary because individual policies can be expensive and quite often imposed pre-existing condition exclusions.

The PPACA, however, seeks to sever the link between employment and health care. It does this by prohibiting pre-existing condition exclusions and creating state exchanges where individual coverage is supposed to be available at affordable rates.

Beginning Jan. 1, individuals who lose employer-provided coverage will have the choice of either purchasing COBRA coverage, or purchasing coverage through the exchanges. While COBRA only allows people to elect the coverage in which they were enrolled on the date they lost their job, the exchanges are meant to offer a range of options and coverage levels.

The premium subsidies that will be available to individuals with household incomes up to 400 percent of the federal poverty level also are expected to make purchasing coverage through an exchange more attractive than paying for insurance through COBRA.

But COBRA isn’t going to disappear overnight, if ever.

“Heath care reform is being marketed as a mechanism for enhancing choice in health care options. (Once Obamacare goes into full effect), the option to remain on an employer’s plan is likely to remain a choice, in addition to plans available through the exchanges,” said Iris Tilley, an Oregon-based benefits attorney. “In addition, while COBRA coverage is typically expensive, for some individuals it may remain less expensive than exchange coverage because the cost of exchange coverage correlates directly to an individual’s age, while employer coverage (and in turn COBRA coverage) reflects a broader range of ages.”

Tilley said individuals who suffer a loss of coverage are likely to weigh the plans available through the exchanges against their employer’s plan. For some, COBRA will make sense.

Moreover, employers with a qualified health plan still will be required to provide the opportunity for a person to elect COBRA coverage. Its rules will remain in force. Tilley also noted that the PPACA does not cover dental, vision, Medical Flexible Spending Accounts, Health Reimbursement Accounts or Employee Assistance Plans, which are subject to COBRA regulations.

“There is certainly a perception that the health care exchanges eliminate the need for COBRA since with the health exchanges, individuals will have access to insurance in ways they don’t today. But employers subject to COBRA today will remain subject to COBRA until such time as Congress decided to potentially do away with COBRA,” Mary Jo Davis, Ceridian’s vice president of product management said during a recent podcast.

Davis sought to clear up what she described as a few myths surrounding COBRA and PPACA. First, she said individuals assume health exchanges will be consistent across every state. But the reality is that states will have latitude to design their own coverage. Secondly, she said people are counting on the exchange premiums to be much cheaper than employer-sponsored health care coverage.

“We don’t know that. It could be more expensive,” she said.

Finally, she said people also assume that health care exchanges will be an option for all employees and consumers in 2014. But that is true only for small employers. Depending on the state, that means those with 100 employees or fewer or 50 and fewer.

Individuals also might have met their out-of-pocket deductible costs with their employer, and it would be costly for them to switch to an exchange. Another reason for COBRA to stay relevant might be that people want to stick with existing health care providers.

Other points to consider:

  • One of the qualified events that trigger the need for a COBRA notice is a dependent losing eligibility under the health plan. Now that the age for dependents to lose coverage has been extended to age 26 under PPACA, it is possible that an adult dependent can continue for an additional 36 months under COBRA or until age 29 on the employer’s health plan.
  • Under PPACA, waiting periods for coverage will be no more than 90 days. This means former employees may not need COBRA coverage for as long as in the past. However, depending on the viability and quality of health plans offered through the state exchanges, it might make more sense for a former employee to elect COBRA coverage if it looks like they will have more than a three-month gap in coverage during the year that could result in a penalty under the individual mandate.

 

 


Benefit Aspects of Employee Leaves of Absence

Employee leaves of absence raise a number of difficult questions under federal employment laws.  Must a requested leave be granted?  Under what conditions?  Must the employee's position be held open so that the employee may return to it after the leave?

In addition to those questions, employers often must address the benefits-related aspects of any leave of absence. Complicating a benefits manager's task are a host of federal laws, including the Family and Medical Leave Act, COBRA and more.

Learn what you need to know to cope with leave-related challenges from your workforce. Please contact us for more information.