Author: Kelly Kenne

IRS Revises Resources Related to 401(k) Hardship Distributions

The IRS has updated their web page related to hardship distributions from a 401(k) based on changes made by the Bipartisan Budget Act of 2018.

Beginning in 2019, hardship distributions may be made from elective deferrals, qualified nonelective contributions (QNECs), qualified matching contributions (QMACs), and earnings attributable to any of those.

Also effective in 2019, a participant is no longer prohibited from making elective deferrals in the six month period following the receipt of a hardship distribution. Additionally, the participant is not required to take all available plan loans prior to requesting the hardship distribution.

These changes are already in effect. Thus, plan sponsors should already be in compliance. Please contact your NFP advisor with any questions.

IRS Issue Snapshot – Hardship Distributions from 401(k) Plans »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

Executive Order on Health Care Transparency also Asks for Guidance on Expanding HDHPs, Health FSA Carryovers and Medical Expenses

On June 24, 2019, the White House published Executive Order 13877, Improving Price and Quality Transparency in American Healthcare To Put Patients First. The executive order directs the Treasury, HHS, and DOL to adopt guidance and rules that will help improve price and quality transparency in health care generally. While the primary purpose of the order is geared toward price and quality transparency, the order also addresses HDHPs, health FSA carryovers, and medical expenses.

On transparency, the order directs the regulatory agencies to, within 90 days, request comments on a proposal to require providers, insurers, and self-insured health plans to provide information to patients (prior to receiving care) on expected out-of-pocket expenses. The order also directs the agencies to, within 180 days, adopt rules directed at increasing access for researchers, innovators, and others to de-identified claims data from group health plans. The rules must do so in a way that complies with HIPAA and other laws that ensure patient privacy and security.

On HDHPs, the order directs the Treasury to, within 120 days, publish guidance that allows HDHPs to be more compatible with HSAs. Specifically, the order asks for a rule that makes HDHPs compatible with HSAs, even where the HDHP covers medical care for chronic conditions before the statutory deductible has been met.

On health FSA carryovers, the order directs the Treasury to, within 180 days, propose regulations that would increase the amount that an employee can carryover from one health FSA plan year to the next.

On medical expenses, the order directs the Treasury to, within 180 days, propose regulations that would treat certain arrangements as eligible expenses under IRC Section 213(d). Those arrangements could potentially include direct primary care arrangements and health care sharing ministries.

The order is not a change in law — so employers do not have to do anything with regard to immediate changes on compliance efforts. The order is an indication that some of the above changes could be coming, depending on how the agencies respond and develop their guidance. The regulatory agencies must first publish proposed rules and go through a comment period, so any changes would not likely take effect until late 2020 at the earliest (and even then, there would likely be a grace period for plan years that have already begun). NFP Benefits Compliance will continue to monitor developments on this and report in future editions of Compliance Corner.

Executive Order 13877 »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

US House of Representatives Passes SECURE Act

On May 23, 2019, the US House of Representatives passed the Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act”) by a vote of 417-3. While the Benefits Compliance team doesn’t normally report on bills that haven’t yet been written into law, we chose to provide this information as the SECURE Act. If passed, the SECURE Act would result in major changes to retirement regulations. In fact, the act would provide the most sweeping changes to retirement legislation that we’ve seen in over a decade. We provided more detail on this act in an article in our April 16, 2019 edition of Compliance Corner.

The act is now expected to be voted on in the Senate, where the Senate could vote on it as-is or could reconcile the act with the Retirement Enhancement and Savings Act (RESA), which is currently in the Senate Finance Committee. Either way, given the bipartisan support for the legislation, it seems very likely that some version of the act will be passed in the Senate and sent on to the president.

We will continue to report on any developments with this act.

SECURE Act »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

Departments Finalize Rules Expanding HRAs

On June 13, 2019, the Treasury Department, DOL, and HHS finalized rules to allow employees to use their employers’ HRA to pay for individual health coverage. The rules also create a new excepted benefit HRA. The rules, which are effective for plan years starting on or after January 1, 2020, follow through on Pres. Trump’s 2017 executive order directing the DOL and HHS to implement rules that would allow for the expanded use of HRAs. The final rules largely follow the October 2018 proposed rules with some clarifying changes (see our previous Compliance Corner article)

As background, the ACA previously required that HRAs be integrated with group health coverage; this is the only way the HRA could be deemed to meet many of the ACA’s market reforms, such as the prohibition on annual and lifetime limits. As such, employers could not reimburse employees for individual coverage.

These new HRA rules significantly change that requirement by allowing employees to be reimbursed for the cost of individual coverage through what is known as an individual coverage HRA (ICHRA). The employee and any dependent for which the HRA would reimburse must actually be enrolled in individual coverage. That individual coverage can be offered on or off the exchange and includes fully insured student health coverage, catastrophic policies, grandmothered plans, and plans offered in states with a Section 1332 waiver. It does not include self-insured student health coverage, short-term limited duration insurance, a spouse’s group health coverage, health care sharing ministries, multiple employer welfare arrangements, or TRICARE.

An ICHRA may also be integrated with Medicare. The participant must be enrolled in Parts A and B or C. The arrangement may reimburse premiums for Parts A, B, C, or D as well as for Medigap policies. Reimbursement cannot be limited only to out-of-pocket expenses not covered by Medicare. The employer must substantiate the participant’s enrollment in individual coverage or Medicare annually prior to the coverage effective date and before each reimbursement. Sample attestation language is provided in the Fact Sheet (link provided below).

Generally, an employer cannot offer a traditional health plan and ICHRA to the same class of employees. However, an employer may choose to offer the traditional plan to current employees and offer an ICHRA to new employees hired on or after a certain date (which must be on or after January 1, 2020). Additionally, the HRA must be offered on the same terms to each participant in the class (with limited exceptions). Additional reimbursement may be provided to older participants, but no more than three times the funds available to younger participants.

The rules allow the following classes of employees:

Full-time
Part-time
Seasonal
Hourly (was not previously included in proposed rules)
Salaried (was not previously included in proposed rules)
Employees whose primary site of employment is in the same rating area
Employees covered under a collective bargaining agreement
Employees who have not yet satisfied an ACA-compliant waiting period
Non-resident aliens with no US-based income

(The proposed rules included an additional classification of employees under age 25, which was eliminated from the final rules.)
There are minimum class size rules based on the employer’s size that apply to the first five classifications listed above. The applicable class size minimum is: 1) ten, for an employer with fewer than 100 employees; 2) 10% of the total number of employees, for an employer with 100 to 200 employees; and 3) 20, for an employer that has more than 200 employees.

Employers sponsoring an ICHRA must distribute a notice to eligible employees 90 days before the start of the HRA plan year (or by the date of eligibility if someone becomes eligible for the HRA after the start of the plan year). The notice must describe the terms of the HRA, discuss the HRA’s interaction with premium tax credits, describe the substantiation requirements, and notify the person that the individual health coverage integrated with the HRA isn’t subject to ERISA. There is model language included in the Fact Sheet.

Further, the final rules also allow employers to offer an excepted benefit HRA that isn’t integrated with any health coverage, as long as certain conditions are met. Specifically, the employer must ensure that they offer other traditional coverage, limit the benefit to $1,800 per plan year (indexed for inflation), only reimburse for premiums of excepted benefit plans, and make the HRA uniformly available. These rules are largely the same as the proposed rules.

As it pertains to ERISA, the rule clarifies that individual coverage paid for through the HRA would not be subject to ERISA as long as the employer doesn’t take an active role in endorsing or choosing the individual coverage. In this way, the rules for having individual coverage avoid being subject to ERISA are similar to the safe harbor for voluntary plans. However, the HRA itself is generally considered a health plan and must comply with the Summary of Benefits and Coverage notice requirement and ERISA requirements.

As it pertains to the ACA, individuals who are covered by an HRA that’s integrated with affordable, minimum value individual health insurance coverage are ineligible for a premium tax credit. However, employees can waive the ICHRA so that they can retain their premium tax credit eligibility.
Employers that are subject to the employer mandate (or applicable large employers) may use an ICHRA to satisfy their obligation to offer coverage under the mandate. However, the HRA amount offered must be an amount that would be considered affordable. Notably, though, these final regulations don’t describe how employers will go about determining if their individual coverage HRA is affordable. The Treasury has been tasked with identifying this guidance in a later proposed rule.

Employers with questions on how these rules will impact health coverage options available to them are encouraged to contact their consultant.

Final Rules »

Fact Sheet (including ICHRA Model Attestation and Notice) »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

Ninth Circuit Awards Surviving Spouse Benefits to Domestic Partner

On May 16, 2019, in Reed v. KRON/IBEW Local 45 Pension Plan, the U.S. Court of Appeals for the Ninth Circuit reversed a district court decision to deny a domestic partner from receiving the pension benefits upon an employee’s death. The court ruled that the pension plan committee abused its discretion in the denial and remanded with instructions to determine the payments owed to the plaintiff.

In this case, the plaintiff (Reed) registered as a domestic partner with the (now deceased) Gardner in 2004. At that time, Gardner worked for a television station and was a participant in the company’s pension benefit plan. Gardner retired in April 2009 and began receiving pension benefits. Gardner and Reed married in May, 2014, and Gardner passed away five days later. The pension payments ceased upon Gardner’s death.

Reed submitted a claim for a survivor-spousal benefit, but it was denied, because the plan terms had “consistently interpreted the term spouse to exclude domestic partners.” Reed sued the plan committee that made the decision. The plan argued that the Defense of Marriage Act (DOMA), which was in place at the time of Gardner’s retirement, prohibited the plan from recognizing Reed as Gardner’s spouse. The district court found in favor of the plan committee stating that it did not abuse its discretion in denying Reed’s claim for benefits.

In considering the appeal, the ninth circuit focused on the plan document’s choice-of-law provision that stated the plan was to be “administered and its provisions interpreted in accordance with California law.” The ninth circuit determined that the plan committee should have awarded spousal benefits to Reed, because in either time the committee reviewed the case, in 2009 (at the time of Gardner’s retirement) and 2016 (at the time of Gardner’s death), California law afforded domestic partners the same rights, protections, and benefits as those granted to spouses. The fact that DOMA was law at the time of Gardner’s retirement did not supersede the plan’s terms.

This case serves as a good reminder of the protections extended to domestic partners in certain states, including CA. Plan administrators should know and understand the implications of applicable state laws when interpreting a plan’s terms.

Reed v. KRON/IBEW Local 45 Pension Plan

Source: NFP BenefitsPartners

Filed under: Abentras Blog

HHS Proposes Revisions to ACA Section 1557

On May 24, 2019, HHS released proposed regulations, substantially revising ACA Section 1557. As background, Section 1557 took effect in 2016 and prohibits health care discrimination on the basis of race, color, national origin, sex, age, or disability. Specifically, the law mandated that individuals cannot be denied access to health care or coverage, or otherwise discriminated against, based on one of those factors. Notably, the law protects transgender individuals under the auspices of discrimination based on sex.

After various court cases challenged the law (including a partial injunction in 2016 on the Section 1557 provisions relating to gender identity and termination of pregnancy), HHS is proposing to revise the law by mainly repealing the definition of discrimination on the basis of sex to exclude gender identity and pregnancy termination. The proposed rule also eliminates the requirement to include nondiscrimination notices in at least 15 languages.

Importantly, the proposed regulations also vastly limit the application of Section 1557 to only entities that are engaged in health care activities that are funded by HHS, whereas Section 1557 originally applied to all operations of an entity, even if it was not principally engaged in health care. This distinction will mean that most group health plan insurers and self-insured health plans will not have to comply with Section 1557.

As we have seen with many other proposed changes to ACA provisions, there have already been legal challenges to this new proposed rule. So, any employer that wants to change health coverage under their plan in a way that is consistent with the finalized version of this rule will need to consult with legal counsel before doing so. We will continue to follow any developments on this issue and report them in Compliance Corner.

Proposed Rule »

HHS News Release »

HHS Fact Sheet »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

HHS Reduces HIPAA Violation Penalties

On April 30, 2019, HHS exercised its discretion in how it applies the regulations related to HIPAA privacy and security violations. As background, in 2009, the HITECH Act set penalty limits based on four tiers of knowledge and intention. Each tier had a maximum penalty of $1.5 million per calendar year when the violations were of an identical requirement or prohibition. The new guidance, found in the Federal Register, reduces the maximum annual penalty to the following amounts per tier:

•No knowledge: The covered entity did not know, and by exercising due diligence, would not have known they violated a provision. Maximum annual penalty is now $25,000.
•Reasonable cause and not willful neglect: The covered entity had knowledge of the violation, but lacked conscious intent and reckless indifference. Maximum annual penalty is now $100,000.
•Corrected willful neglect: The covered entity had knowledge of the violation, acted with conscious intent or indifference, and corrected the violation within 30 days of having knowledge. Maximum annual penalty is now $250,000.
•Willful neglect and not corrected: The covered entity had knowledge of the violation, acted with conscious intent or indifference, and did not correct the violation within 30 days of having knowledge. Maximum annual penalty remains $1.5 million.

The changes are effective immediately. HHS expects to issue revised regulations in the future.

Notification of Enforcement Discretion Regarding HIPAA Civil Money Penalties »

Filed under: Abentras Blog

DOL Issues Additional Guidance After District Court Invalidates AHPs Formed Under New Rules

On May 13, 2019, the DOL issued Part Two in a series of questions and answers they’ve provided after a federal district court invalidated their final AHP rules. As background, in New York v. DOL, the U.S. District Court for the District of Columbia invalidated the DOL’s rules relating to association health plans (AHPs). Since then, the DOL has issued a statement indicating that they intend to appeal the decision. They also provided a set of questions and answers that essentially reiterates the information they provided in their statement.

Part Two of those questions and answers provides additional clarification on the DOL’s stance. Specifically the questions and answers provide the following:

•Pathway 1 AHPs (which is the DOL’s term for AHPs that were formed pursuant to the old rules) are not affected by the district court’s decision. The DOL also briefly reminds readers of the requirements for AHPs formed under those rules.
•Pathway 2 AHPs (which is the DOL’s term for AHPs that were formed pursuant to the new rules) cannot market to or sign up new employer members. Existing employer members can sign up special enrollees, though, and will fall under enforcement relief the DOL provided through their statement.
•Pathway 2 AHPs with a contract term of more than one year can also avail themselves of the enforcement relief, if, for example, their coverage doesn’t end until after the end of the current plan year.
•Pathway 1 AHPs that would like additional guidance on meeting their requirements or would like to possibly request an advisory opinion indicating that they meet those requirements can reference the guidance EBSA has already provided (found here).

As we mentioned in previous articles on this subject, NFP Benefits Compliance will continue to monitor the lawsuit and any related developments.

Questions and Answers Part Two »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

CMS Provides Guidance on Non-Federal Governmental Plans

CMS recently updated its guidance that provides an overview of the federal market requirements applicable to non-federal governmental plans, including self-funded and fully insured plans. As background, CMS is the entity that oversees compliance and enforcement of the Public Health Service Act (PHSA) and applicable provisions of the ACA for group health plans related to municipal governments, school districts, fire departments, and funds that pool together a number of smaller municipalities.

The guidance gives a general overview of the laws that apply to non-federal governmental plans, including the ACA and PHSA. They also discuss which of these laws don’t apply to these plans.

There is also helpful information regarding the assistance that CMS makes available to help plans remain compliant, including technical assistance, website resources and information, and access to subject matter experts within CMS that have specialized knowledge.

The guidance also discusses CMS’ investigative process. Specifically, investigations into plan compliance generally begin through inquiries or complaints from enrollees or representatives. If CMS discovers a plan is non-compliant, they will initiate enforcement action and work to create a corrective action plan to bring the areas identified into compliance and, if necessary, require that the plan compensate enrollees who did not receive the benefits or processes to which they were entitled. Once the plan documents and processes are fully compliant, CMS will approve notices to enrollees and the appropriate method for compensation (if necessary, for both). CMS will end the investigation only upon confirmation that all steps within the corrective action plan are carried out (usually, this includes compensated enrollees).

While this information is not new, it does serve as a reminder of the importance of compliance for non-federal governmental plans.

Guidance »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

IRS Expands the Employee Plan Compliance Resolution System

Effective April 19, 2019, the IRS expanded the system of correction programs for plan sponsors of retirement plans with the release of Rev. Proc. 2019-19. As background, plan sponsors are permitted to correct certain failures through the Employee Plans Compliance Resolution System (EPCRS) and in some circumstances avoid paying any fees or sanctions. There are three programs in the system: the Self-Correction Program (SCP), the Voluntary Correction Program (VCP), and the Audit Closing Agreement Program (Audit CAP).

This revenue procedure allows plan sponsors of a qualified plan, a 403(b) Plan, a Simplified Employee Pension Plan (SEP), or a SIMPLE IRA Plan that satisfy the eligibility requirements to correct certain operational failures or plan document failures under SCP. A plan sponsor may correct an operational failure by plan amendment to conform the terms of the plan to the plan’s prior operations if three conditions are satisfied: 1) the plan amendment would result in an increase of a benefit, right, or feature, 2) the increase in the benefit, right, or feature is available to all eligible employees, and 3) providing the increase in the benefit, right, or feature is permitted under the Code and satisfies the correction principles.

Also, this revenue procedure provides a new correction method for failure to obtain spousal consent for a plan loan. The sponsor must notify the affected participant and spouse so that the spouse can provide consent. If consent is not obtained, the failure must be corrected using either VCP or Audit CAP. Plan loans that are made in excess of loan limits may be corrected only under VCP or Audit CAP.

Finally, the EPCRS may not be used to correct the initial failure to adopt a qualified plan or failure to timely adopt a written 403(b) plan document.

The Treasury Department and the IRS invite comments on how to improve EPCRS and expect to update the system in the future based on those comments.

If a plan is currently out of compliance with requirements based on an operational or plan document failure, the plan sponsor should work with their retirement plan consultant to see if they are eligible to use EPCRS to get the plan into compliance.

Rev. Proc. 2019-19 »

Source: NFP BenefitsPartners

Filed under: Abentras Blog