Author: Kelly Kenne

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

IRS Clarifies “Once In, Always In” Rule for 403(b) Plans

On Dec. 4, 2018, the IRS released Notice 2018-95, clarifying 403(b) plan eligibility requirements. As background, 403(b) plans are subject to a universal availability rule which requires employers to offer the 403(b) plan to all their employees. There is an exception that allows employers to exclude part-time employees who are expected to work less than 20 hours per week if they work less than 1,000 in their first year and in any year that the person worked less than 1,000 hours per week in the immediately preceding plan year.

Many employers read those rules to allow for an employer to potentially stop 403(b) plan deferrals for a part-time employee that might have been in the plan before, but later had a year where they worked less than 1,000 hours. However, the IRS released model 403(b) plan language in 2013 and 2015 that made it clear that they don’t acknowledge that reading of the rule. Instead, the IRS recognizes a “once in, always in” rule that mandates that a part-time employee that gains eligibility cannot lose it later, even if they work less than 1,000 hours in a subsequent year.

Notice 2018-95 provides relief to employers that subscribe to the incorrect reading of the rule. Specifically, as long as those employers correct their practice by Jan. 1, 2019, they will not be held accountable for failing to comply with the universal availability rule for the years preceding 2018. Keep in mind, though, that they will need to offer any part-time employees that were improperly excluded the opportunity to contribute to the plan in 2019.

403(b) plan sponsors that have improperly excluded part-time employees should work with their TPA or other service provider to come into compliance, including amending plan documents if necessary.

Notice 2018-95 »

Filed under: Abentras Blog

IRS Issues 2018 Form 8941, Credit for Small Employer Health Insurance Premiums

The IRS recently issued the 2018 version of the Form 8941, Credit for Small Employer Health Insurance Premiums, and the related instructions. Form 8941 is used by small employers to calculate and claim the small business health care tax credit. As background, this tax credit benefits employers that do all of the following:

  • Offer coverage through the small business health options program, also known as the SHOP Marketplace
  • Have fewer than 25 full-time equivalent employees
  • Pay an average wage of less than $50,000 a year (indexed annually)
  • Pay at least half of employee health insurance premiums

An employer may only claim the credit for a two-consecutive-year period.

The 2018 instructions include three important information items.

First, the average annual wage for 2018 is increased from $53,000 (in 2017) to $54,000.

Second, the IRS states that employers located in Hawaii cannot claim this credit for insurance premiums paid for health plans beginning after 2016. This is because Hawaii’s Section 1332 Innovation Waiver related to the SHOP was approved by HHS. Thus, effective 2017, the state of Hawaii is no longer required to maintain a SHOP because of the state’s Prepaid Health Care Act, which requires employers of all sizes to offer affordable coverage to employees. The state also provides premium assistance to small employers.

Lastly, for calendar year 2018, some SHOP Marketplaces in certain counties didn’t have qualified health plans available for employers to offer to employees. However, relief is available which allows eligible small employers with a principal business address in those counties to claim the credit for 2018, including coverage through a SHOP or coverage that met the requirements for relief under IRS Notice 2016-75 (if applicable), for all or part of 2017.

If a small employer qualifies for the health care tax credit, they should work with their accountant to properly claim the credit with the IRS.

Form 8941 »
Form 8941 Instructions »

 

Source: NFP BenefitPartners

Filed under: Abentras Blog

DOL Issues 2018 Form M-1 and New Filing Tips

The DOL recently issued the 2018 version of Form M-1. As background, Form M-1 must be filed by multiple employer welfare arrangements (MEWAs) and certain entities claiming exception (ECEs). The Form M-1 allows those entities to report that they complied with ERISA’s group health plan mandates.

While minimal changes to the Form M-1 have been made, this year’s Form M-1 instructions have been updated to reflect changes brought about by the final regulations on association health plans (AHPs). As a reminder, AHPs are MEWAs and, as a result, must file Form M-1 annually and following certain events. Thus, in an effort to provide additional guidance, the DOL has issued a list of Form M-1 filing tips for MEWA administrators. Here are some highlights:

  • Who Must File. The revised instructions define which entities are required to file in certain situations. Under both the instructions and the filing tips, filers are reminded that a MEWA that is an ERISA employee welfare benefit plan must also file Form 5500, and it must use the same name, EIN and other identifying information on both forms. Further, the instructions now describe the special filing rules for group insurance arrangements.
  • Date and Type of Filing. Item 4 of Form M-1, which identifies the type of filing, now requires filers to enter the event date for a registration, origination or special filing. The filing tips explain that only MEWAs should check “annual” or “registration,” and only ECEs will check “origination” or “special.” The instructions now emphasize that “operating” for this purpose means “any activity including but not limited to marketing, soliciting, providing, or offering to provide benefits consisting of medical care.”
  • Additional Details. The instructions for item 13 (actuarial soundness) emphasize the DOL’s power to issue a cease and desist order if it appears a MEWA “is fraudulent, or creates an immediate danger to the public safety or welfare.” The instructions for item 17 include a new note about completing this line for all applicable states in which the MEWA operates. Also, clarifications have been added to the instructions for item 21 regarding whether the MEWA is subject to Part 7 of ERISA.
  • Annually Adjusted Penalties. The instructions specify that the maximum penalty for Form M-1 filing failures is currently $1,558 per day, but they remind filers to check for increases, since required annual adjustments take place after the Form M-1 has been published.
  • Self-Compliance Tool. The self-compliance tool is no longer included on the informational Form M-1, but the form describes where to locate the tool online.
  • Filing Tips. The filing tips state that insurance information for every state in which the MEWA operates must be provided, and that the information must be correct. Another tip explains that only medical insurance must be reported — not, for example, dental or vision insurance. Another reminds MEWAs that are also employee benefit plans to retain the M-1 filing confirmation number because this will be needed for the Form 5500 filing. The tips also explain that more than one Form M-1 filing requirement could apply for a year: a registration filing and an annual filing.

The filing tips and additions to the instructions appear to indicate the DOL’s expectation of an increase in Form M-1 filings due to the final AHP regulations (see June 26, 2018 edition of Compliance Corner). Therefore, MEWAs (AHPs are MEWAs) should work with their advisor and service vendors to ensure compliance with ERISA and Form M-1 filing obligations.

2018 Form M-1 »
M-1 Filing Tips for AHPs and Other MEWAs »

 

Source: NFP BenefitPartners

Filed under: Abentras Blog

IRS Extends Forms 1095-B/C Reporting Deadline and Good Faith Effort Relief

On Nov. 28, 2018, the IRS published Notice 2018-94, which delays the date by which informational statements must be provided to individuals. The notice also provides transitional good faith relief for reasonable mistakes made in reporting Sections 6055 and 6056 information about 2018.

Specifically, the due date for providing individuals with Form 1095-B (by a carrier or self-insured employer) and Form 1095-C (by an applicable large employer) has been extended from Jan. 31, 2019, to March 4, 2019. The deadline for filing these forms with the IRS hasn’t changed. That date remains April 1, 2019, if filing electronically, or Feb. 28, 2019, if not filing electronically. If an employer doesn’t comply with the deadlines, the employer could be subject to penalties. The notice also states that because the automatic extension of the due date to furnish is as generous as the permissive 30-day extension to provide notices to individuals/employees, the IRS will not formally respond to any request for such an extension.

Despite the extended due date, employers and other coverage providers are encouraged to furnish 2018 statements as soon as they’re able. But if individuals haven’t received these forms by the time they file their individual tax returns, they may rely upon other information received from employers or coverage providers to attest that they had minimum essential coverage as required by the individual mandate. Individuals need not amend their returns once they receive the forms, but they should keep them with their tax records.

In addition, Notice 2018-94 extends good faith effort relief to employers for incorrect or incomplete returns filed in 2019 (as to 2018 information). The IRS previously provided relief for penalties stemming from 2018 reporting failures (as to 2017 information). Accordingly, for 2018 and prior filings, relief is available to entities that could show that they made good faith efforts to comply with the information reporting requirements, even if they reported incorrect or incomplete information. In determining what constitutes a good faith effort, the IRS will take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting, such as gathering and transmitting the necessary data to a reporting service provider or testing its ability to use the Affordable Care Act Information Return Program (AIR) electronic submission process. This relief doesn’t apply to a failure to timely furnish or file a statement or return, and it doesn’t extend to employer mandate penalties (for large employers that didn’t offer affordable, minimum value coverage to full-time employees pursuant to the ACA’s employer mandate).

Lastly, the notice states that the IRS is reviewing whether the repeal of the individual mandate tax penalty (which takes effect in 2019) will change the reporting requirements under IRC Section 6055 for self-insured employers and other coverage providers (such as an insurer of a fully insured plan) to report on all covered individuals under the plan on either Form 1095-B or 1095-C. NFP’s Benefits Compliance division will continue to monitor any developments that might impact employer reporting obligations in future years.

IRS Notice 2018-94 »

Filed under: Abentras Blog