IRS Updates Q&As on Sections 6055 and 6056 Reporting

On March 2, 2019, the IRS updated their questions and answers (Q&As) providing additional guidance on employer compliance with PPACA reporting requirements under IRC Sections 6055 and 6056. The only updates to the Q&As appear to be updated links to the required forms to route the user to the 2018 versions (instead of the 2017 versions).

As background, Section 6055 requires every provider of minimum essential coverage to report coverage information by filing an information return with the IRS and furnishing a statement to individuals. Section 6056 is meant to allow employers to report on their compliance with the employer mandate. Those reports also allow the government to determine whether a specific individual was offered minimum value, affordable employer-sponsored coverage for each month, which affects that individual’s ability to qualify for an premium tax credit.

The Section 6055 Q&As address the basics of employer reporting, including which entities are required to report, what information must be reported and how and when reporting entities must report required information, as follows:

•Basics of Provider Reporting: Questions 1-3
•Who is Required to Report: Questions 4-14
•What Information Must Providers Report: Questions 15-18
•How and When to Report the Required Information: Questions 19-28
•Extended Due Dates and Transition Relief: Questions 19-35

The Section 6056 Q&As cover the same topics and also address questions related to the methods of reporting, as follows:

•Basics of Employer Reporting: Questions 1-3
•Who is Required to Report: Questions 4-11
•Methods of Reporting: Questions 12-16
•How and When to Report the Required Information: Questions 17-24
•Designated Government Entity: Questions 25-28
•Other Third Party Service Providers: Questions 29
•Extended Due Dates and Transition Relief for 2015 and 2016 Reporting: Questions 30-34
•Additional Information

Overall, the Sections 6055 and 6056 Q&As appear to have remained the same and haven’t been revised. Still, employers should ensure that they have followed this guidance in preparing their 2018 forms. NFP has resources to assist. Ask your advisor for more information.

Q&As on Section 6055 Reporting »

IRS Q&As on Section 6056 Reporting »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

Agencies Request Public Comment on Grandfathered Status

On Feb. 25, 2019, the DOL, IRS and HHS (the “agencies”) jointly issued a request for information regarding grandfathered health plans. As background, grandfathered plans are group health plans or health insurance coverage that have continuously provided coverage and have not made certain prohibited design changes since March 23, 2010. Grandfathered plans are exempt from some requirements under the ACA, including coverage of preventive services with no cost-sharing and the expanded appeals process and external review, but are still subject to other ACA provisions. Grandfathered status can be maintained indefinitely as long as the plan continues to cover at least one person, no prohibited plan design changes are made, and the required disclosure and recordkeeping obligations are met.

Consistent with Pres. Trump’s Executive Order issued on Jan. 20, 2017, the purpose of this request is to better understand challenges that group health plans and issuers face in avoiding loss of grandfathered status. The agencies aim to determine how they can help to preserve grandfathered status in ways that benefit employers, employee organizations, plan participants and other stakeholders. The agencies also seek to understand why plans have chosen to maintain grandfathered status (including costs, benefits and other factors) and why participants continue to enroll in grandfathered coverage. Finally, the agencies ask how many plan sponsors and carriers anticipate changes that would cause a loss of grandfathered status.

The request explains that the number of grandfathered plans has decreased each year since the ACA was enacted. However, despite those declining numbers, the agencies note that some employers, insurers and participants continue to find value in keeping grandfathered status. Importantly, no changes to the grandfathered rules have been made as of yet, but our team will continue to stay abreast of any modifications. Comments are due by March 27, 2019.

Proposed Rule »

Source: NFP BenefitPartners

Filed under: Abentras Blog

Agencies Request Public Comment on Grandfathered Status

On Feb. 25, 2019, the DOL, IRS and HHS (the “agencies”) jointly issued a request for information regarding grandfathered health plans. As background, grandfathered plans are group health plans or health insurance coverage that have continuously provided coverage and have not made certain prohibited design changes since March 23, 2010. Grandfathered plans are exempt from some requirements under the ACA, including coverage of preventive services with no cost-sharing and the expanded appeals process and external review, but are still subject to other ACA provisions. Grandfathered status can be maintained indefinitely as long as the plan continues to cover at least one person, no prohibited plan design changes are made, and the required disclosure and recordkeeping obligations are met.

Consistent with Pres. Trump’s Executive Order issued on Jan. 20, 2017, the purpose of this request is to better understand challenges that group health plans and issuers face in avoiding loss of grandfathered status. The agencies aim to determine how they can help to preserve grandfathered status in ways that benefit employers, employee organizations, plan participants and other stakeholders. The agencies also seek to understand why plans have chosen to maintain grandfathered status (including costs, benefits and other factors) and why participants continue to enroll in grandfathered coverage. Finally, the agencies ask how many plan sponsors and carriers anticipate changes that would cause a loss of grandfathered status.

The request explains that the number of grandfathered plans has decreased each year since the ACA was enacted. However, despite those declining numbers, the agencies note that some employers, insurers and participants continue to find value in keeping grandfathered status. Importantly, no changes to the grandfathered rules have been made as of yet, but our team will continue to stay abreast of any modifications. Comments are due by March 27, 2019.

Proposed Rule »

Source: NFP BenefitPartners

Filed under: Abentras Blog

2019 Federal Poverty Levels Announced

Earlier this month, HHS announced the 2019 federal poverty levels (FPL). The guidelines for the 48 contiguous states is $12,490 for a single person household and $25,750 for a four person household. The guidelines are different for Alaska ($15,600 and $32,190, respectively) and Hawaii ($14,380 and $29,620, respectively).

The FPL plays an important role under the ACA. Individuals who purchase coverage through the exchange may qualify for a premium tax credit if their household earnings are within 100 percent to 400 percent of the FPL. Employers wishing to avoid a penalty under the employer mandate may use the FPL affordability safe harbor, which means the cost of an employee’s required contribution for employer sponsored coverage does not exceed 9.86 percent (for 2019), up from 9.56 percent (for 2018), of the single person FPL. This means that the FPL affordability safe harbor threshold in the 48 contiguous states for 2019 would be $102.62 per month, which is $12,490 divided by twelve and times 9.86 percent. As a reminder, the FPL safe harbor is only one of the affordability safe harbors; the other two are the rate of pay and Form W-2 safe harbors.

Employers should consider this adjustment to the FPL when determining whether their coverage is affordable, especially if they’re using the FPL affordability safe harbor. The 2019 FPL is applicable beginning Jan. 11, 2019.

FPL Announcement »

Source: NFP BenefitPartners

Filed under: Abentras Blog

IRS Issues Form 8994, Employer Credit for Paid Family Leave

The IRS recently issued 2018 Form 8994 and the corresponding instructions intended for employers to determine the tax credit available to them for providing paid family and medical leave.

As background, the Tax Cut and Jobs Act of 2017 created a new employer credit available for those that offer qualifying paid family and medical leave for tax years beginning after 2017 and before 2020. To claim the credit, eligible employers must have a written program that pays at least 50 percent of wages paid for up to 12 weeks of family and medical leave a year, with the credit ranging from 12.5 to 25 percent.

Form 8994 requires employers to confirm four statements:

1.That there is a written policy providing for at least two weeks of annual paid family and medical leave for qualifying employees.

2.That the written policy provides paid family and medical leave of at least 50 percent of the wages normally paid to a qualifying employee.

3.That the family and medical leave was paid to at least one qualifying employee during the tax year.

4.That if at least one qualifying employee that was not covered by the FMLA was employed during the year, that the written paid family and medical leave policy complies with FMLA’s “non-interference” language.

Form 8994 also provides the lines to calculate the appropriate credit amount.

Employers that provided qualifying paid family and medical leave during the 2018 tax year should work with their tax advisers to properly complete this form. If an employer didn’t offer paid family and medical leave during 2018, but is considering the opportunity for 2019, then this Form can be used as a guide. The IRS has indicated that it intends to issue proposed regulations on this tax credit, so we will continue to monitor and update as needed.

Form 8994 »

Form 8994 Instructions »

Source: NFP BenefitPartners

Filed under: Abentras Blog

Federal District Courts Enjoin Final Rules on Contraceptive Mandate Exemptions

Two federal district courts recently issued injunctions on the final rules providing exemptions from the ACA’s contraceptive mandate. As background, the ACA requires most employers to provide certain preventive services, including contraceptive services and items, without cost-sharing. Under the ACA, certain qualifying religious employers were already exempt from the contraceptive coverage requirement, and other employers that held religious objections could also request an exemption via an accommodation process.

However, in October 2017, HHS published two interim final rules that significantly expanded the religious exemption (as outlined in our Oct. 17, 2017, article here) by allowing any employer (including non-closely held companies and publicly traded companies) to claim a religious or moral objection to offering certain contraceptive items and services. The government went on to issue final versions of the rules (as outlined in our Nov. 13, 2018, article here).

Following the publication of the interim final rules, a number of states filed lawsuits, challenging the new exemptions. They argued that the DOL had failed to follow the Administrative Procedures Act (APA) and that the new exemptions would harm their state residents and run afoul of the ACA. The federal district courts in Pennsylvania and California initially issued injunctions blocking enforcement of the interim final rules.

After government appeals, the courts again chose to enjoin the enforcement of the final rules. Specifically, on Jan. 13, 2019, the U.S. District Court for the Northern District of California enjoined the implementation of the final rules in the states of California, Connecticut, Delaware, Hawaii, Illinois, Maryland, Minnesota, New York, North Carolina, Rhode Island, Vermont, Virginia, and Washington and the District of Columbia. In its decision, the court agreed that the states could succeed on their claims that the final rules violated the ACA and APA.

On Jan. 14, 2019, the U.S. District Court for the Eastern District of Pennsylvania issued an injunction that blocks implementation of the final rules nationwide. The Pennsylvania court also found that the states that filed (Pennsylvania and New Jersey) are likely to prevail on their claim that the final rules violate the APA.

We expect the government to continue to appeal these decisions, and it is also likely that the filing states will do the same should an appeals court rule in the government’s favor. Ultimately this means that the future of these exemptions remains uncertain. For employers, neither the court decisions nor the final rules settle the issue. As such, employers wishing to claim any expanded religious exemptions to the ACA’s contraceptive mandate should work with outside counsel to better understand the risks inherent in going forward with doing so.

California v. HHS »

Pennsylvania v. Trump »

Source: NFP BenefitPartners

Filed under: Abentras Blog

DOL Announces Annual Inflation Adjustments to ERISA Penalties

On Jan. 15, 2019, the DOL published a pre-publication version of the final rule adjusting for inflation of civil monetary penalties under ERISA. (They were unable to publish an official version due to the lapse in funding for certain government agencies.) The pre-published version of the final rule is for informational purposes only until the official rule is published in the Federal Register. Thus, until the official version is published in the Federal Register, the effective date of the 2019 final rule is delayed.

As background, federal law requires agencies to adjust their civil monetary penalties for inflation on an annual basis. The DOL last adjusted certain penalties under ERISA in January 2018 (as discussed in the Jan. 9, 2018, article here).

Among other changes, the EBSA is increasing the following penalties that may be levied against sponsors of ERISA-covered plans:

•The penalty for a failure to file Form 5500 will increase from a maximum of $2,140 per day to a maximum of $2,194 per day.

•The penalty for a failure to furnish information requested by the DOL will increase from a maximum of $152 per day to a maximum of $156 per day.

•The penalty for a failure to provide CHIP notices will increase from a maximum of $114 per day to a maximum of $117 per day.

•The penalty for a failure to comply with GINA will increase from $114 per day to $117 per day.

•The penalty for a failure to furnish SBCs will increase from a maximum of $1,128 per failure to a maximum of $1,156 per failure.

•The penalty for a failure to file Form M-1 (for MEWAs) will increase from $1,558 to $1,597.

•The regulations also increased penalties resulting from other reporting and disclosure failures.

These new amounts will go into effect following official publication in the Federal Register. Until then, employers should familiarize themselves with these unofficial penalty amounts for 2019.

For more information on the new penalties, including the complete listing of changed penalties, please review the pre-publication version of the final rule below. Additionally, consult with your advisor if you have questions about the imposition of these penalties.

News Release »

Pre-Published Version of Final Rule »

Filed under: Abentras Blog

Federal District Court Invalidates the ACA

On Dec. 14, 2018, a federal judge in the U.S. District Court for the Northern District of Texas held, in Texas v. U.S., that the ACA’s individual mandate is unconstitutional and therefore the entire ACA is invalid. The ruling is a result of a challenge to the ACA brought by a coalition of Republican-led states, including Texas. Because the current administration refused to defend the ACA, several Democratic-led states intervened to defend the law. The challenge is focused on the ACA’s individual mandate — the requirement for all US citizens to purchase health insurance or pay a penalty tax.

As background, in 2012, the U.S. Supreme Court held the individual mandate (and thereby the ACA) constitutional, stating that the individual mandate was actually a tax, and that imposing a tax is a valid exercise of Congress’s authority. The coalition of states in Texas v. U.S. argued that Congress erased that constitutional basis for the individual mandate when it reduced the tax penalty to $0 under the Tax Cuts and Jobs Act of 2017. The district court agreed, stating that because the penalty tax is now gone, there’s no constitutional justification for the individual mandate; and because the individual mandate is “essential to” and “inseverable from” the other provisions of the ACA, the entire ACA falls.

On Dec. 30, 2018, Judge O’Connor granted the intervenor states’ request for final judgement based on the Dec. 14 decision and a stay of that judgement. This means that the coalition of intervening states can now appeal the law. An appeal would likely go to the U.S. Court of Appeals for the Fifth Circuit. Many legal experts believe the case is headed to the U.S. Supreme Court, meaning the ACA’s future could once again be in the hands of the highest court in the land. There is also a chance Congress could revisit health care as an issue in 2019, although with Democrats taking control of the House, any legislative changes would require bipartisan support.

If the district court’s ruling is ultimately upheld, the ACA would be deemed invalid. That would have far-reaching consequences, as the ACA goes beyond just the exchanges, premium tax credits and employer obligations most people are familiar with. For employers, though, while the employer mandate, reporting and other obligations would disappear, so would some of the more popular provisions. For example, plans could once again exclude adult children, impose cost-sharing for preventive services and annual exams, and exclude or impose surcharges for individuals with pre-existing conditions. While there does appear to be bipartisan congressional support for those more popular provisions of the ACA, it remains to be seen whether Congress would enact new legislation that would maintain those protections.

As for impact on employers, because the ACA remains the law for now, employer-related requirements remain in place. This includes the employer mandate, employer reporting (Forms 1094/95-C), Summary of Benefits and Coverage, W-2 reporting of employer-sponsored coverage, and all insurance mandates: coverage of dependents up to age 26, coverage of preventive services without cost-sharing, and the prohibitions on annual limits for essential health benefits and pre-existing condition exclusions. In addition, the exchanges remain open for business for individuals; people who enrolled by the Dec. 15, 2018, deadline received coverage effective Jan. 1, 2019. Employers should continue to monitor their compliance obligations.

As always, NFP’s Benefits Compliance team will continue to track and report on future developments on this issue.

Texas v. U.S. »

Partial Final Judgement »

Order Granting Stay »

Filed under: Abentras Blog

IRS Releases 2019 HSA Reporting Forms 1099-SA and 5498-SA and Instructions

The IRS recently published updated versions of Forms 5498-SA and 1099-SA and combined instructions for 2019. As background, the IRS requires HSA trustees and custodians to report certain information to the IRS and to the HSA holder regarding contributions, distributions, the return of excess contributions and other matters the IRS deems appropriate. Form 5498-SA is used by trustees and custodians of HSAs and Archer MSAs to report contributions and any administration or account maintenance fees. Form 1099-SA is used to report distributions, including any curative distributions in the event of excess contributions. HSA account holders report contributions and distributions on Form 8889.

Other than updated filing and delivery deadlines, the 2019 forms and related instructions are largely unchanged from the 2018 versions.

Forms 1099-SA and 5498-SA generally apply only to HSA trustees and custodians. However, employers that offer an HSA may want to familiarize themselves with these forms, particularly in the event of any excess contributions.

Form 1099-SA »

Form 5498-SA »

Form 1099-SA and 5498-SA Instructions »

Filed under: Abentras Blog

IRS Published Guidance for Tax-Exempt Organizations on Nondeductible Parking Benefits, Including Limited UBTI Relief

On Dec. 10, 2018, the IRS published two notices (2018-99 and 2018-100) and a news release relating to tax-exempt organizations, nondeductible parking expenses and limited unrelated business taxable income (UBTI) relief. As background, the Tax Cuts and Jobs Act of 2017, enacted in December 2017, makes qualified transportation benefit expenses nondeductible (for 2018 and beyond). If such expenses are incurred by a tax-exempt organization, those expenses are treated as UBTI. The two 2018 notices provide guidance on nondeductible parking expenses and UBTI.

On nondeductible parking expenses (under Notice 2018-99), the amount of parking expenses that will be treated as nondeductible business expenses (and therefore UBTI for a tax-exempt organization) depends on how those parking expenses are provided — as payments to a third party or through employer-owned or leased parking facilities. On payments to a third party, the process is straightforward: the nondeductible expense is the amount paid to the third party (up to the monthly limit for qualified parking benefits (which was $260 for 2018). Since payments above the monthly limit are not excludable from an employee’s income, those payments are unaffected by the rule that disallows deductions for qualified transportation fringe benefits. Instead, they are treated as employee compensation (subject to employment and income tax withholding, the same as any other taxable compensation).

On employer-owned or leased facilities, the process is less clear: the employer should use any reasonable method to determine the nondeductible expense. The notice outlines a four-step process that would be deemed reasonable; the process looks at several factors relating to the employee’s use of the employer-owned parking facility, and whether that use is a primary use for employees versus the general public.

Notice 2018-99 also addresses UBTI. Specifically, the notice confirms the general notion that rules for determining UBTI attributable to qualified transportation fringe benefits provided by a tax-exempt organization mirror the rules for other taxpayers. In addition, though, the notice clarifies that tax-exempt organizations that have only one unrelated business or trade may reduce UBTI by the amount of any unused deductions that exceed the gross income of that trade or business. The notice also explains that tax-exempt organizations with less than $1,000 in UBTI do not need to file Form 990-T (Exempt Organization Business Income Tax Return) or pay UBTI tax.

Lastly, Notice 2018-100 provides a waiver for certain tax-exempt organizations. As background, tax-exempt organizations that underpay their estimated taxes are normally assessed a penalty. The notice provides a waiver from that penalty if the underpayment results from changes to the tax treatment of qualified transportation fringe benefits. In other words, if the employer otherwise reported and paid UBTI for all unrelated business income except that relating to qualified transportation fringe benefits, the underpayment penalty will be waived. The notice provides details on how tax-exempt organizations would claim that waiver.

Overall, because tax-exempt organizations face many challenges with regard to federal taxation and filings, and because UBTI is really outside the scope of employee benefits, employers should work with their accountant or tax counsel in understanding and applying the above IRS guidance.

Notice 2018-99 »
Notice 2018-100 »
IRS News Release »

Filed under: Abentras Blog