IRS Affirms Employer Mandate Enforcement Efforts

On June 28, 2019, the IRS sent a letter (number 2019-0008) to Senator Susan Collins, reaffirming that they will continue enforcing the employer mandate. Senator Collins, on behalf of several of her constituents, had written to the IRS asking whether the IRS might waive or reduce employer mandate penalties based on hardship or other factors. Senator Collins had also asked whether the IRS might be willing to extend transition relief for employers with fewer than 100 employees.

In the letter, the IRS, via Associate Chief Counsel Victoria Judson, responded by saying that the employer mandate does not provide for a waiver of penalties. The IRS also stated in the letter that no transition relief is available for 2017 and future years.

The letter also addresses a January 20, 2017 White House executive order directing federal agencies to exercise authority and discretion permitted to them to waive, defer, grant exemptions from, or delay regulatory burden imposed by the ACA. The IRS states that the legislative provisions of the ACA are still in force until Congress changes them, and therefore taxpayers (employers, when it comes to the ACA’s employer mandate) must follow the law and pay what they may owe.

The letter contains no new employer obligations, but does serve as a reminder that the IRS continues to enforce the ACA’s employer mandate. Recently, employers have been receiving letters from the IRS for failure to comply with the employer mandate and for late-filing the related forms (Forms 1094/95-C). Employers should continue to diligently comply with the employer mandate and reporting.

IRS Letter 2019-0008 https://www.irs.gov/pub/irs-wd/19-0008.pdf »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

IRS Expands List of Preventive Care Services Under HSA Rules

On July 17, 2019, the IRS published Notice 2019-45, which expands the preventive care benefits that can be provided by a HDHP without affecting the HDHP participants’ HSA eligibility. As background, to be eligible to establish and contribute to an HSA, an individual must have qualifying HDHP coverage and no impermissible coverage. A qualified HDHP is one that does not provide benefits for any year until the minimum deductible for that year is satisfied. However, there is a safe harbor for the absence of a deductible for preventive care — so an HDHP can provide preventive care without causing an individual to lose HSA eligibility.

Previously, preventive care generally was not defined as including services or benefits aimed at treating existing illnesses, injuries, or conditions. However, a June 2019 executive order called for the IRS to amend those rules and allow for a change to that definition to include such existing illnesses, injuries, and conditions. One reason for this expansion is that failure to address these types of chronic conditions has been demonstrated to lead to consequences, such as amputation, blindness, heart attacks, and strokes, that require considerably more extensive medical intervention.

As a result of the executive order, the IRS published the new notice, which states that certain services and items that are used for chronic conditions are considered preventive care for purposes of HSA eligibility, when they are prescribed to prevent exacerbation of the diagnosed condition or the development of a secondary condition. The notice includes an appendix that lists 14 medical services or items for individuals with 11 specific chronic conditions (asthma, congestive heart failure, diabetes, coronary artery disease, osteoporosis and/or osteopenia, liver disease, depression, hypertension, bleeding disorders, and heart disease).

For example, insulin and other glucose lowering agents, retinopathy screening, glucometer and Hemoglobin A1c testing are now considered preventive care for individuals diagnosed with diabetes. Similarly, inhaled corticosteroids and peak flow meters are considered preventive care for individuals diagnosed with asthma.

The notice is clear that the listed services/items are considered preventive care only to the extent that they are used to treat the chronic conditions specified; if they are used to treat other conditions, then they are not considered preventive care. Also, the notice does not impact or change the definition of preventive care for purposes of the ACA’s preventive care mandate (the requirement to cover preventive care without cost-sharing).

The notice is effective immediately. The notice does not require HDHPs to cover all the conditions and treatments listed; but if they do, those services will be considered preventive care (and therefore wouldn’t adversely impact HSA eligibility). Employers will want to review any HDHP/HSA offerings to determine if changes are necessary.

Employers can wait until the next plan year to implement any changes (since it would require an amendment to the plan documents and employee communications). Employers should consider whether they want to cover all the conditions and treatments listed in the guidance, and whether they want to cover them at 100% (or add in cost-sharing, such as copayments or coinsurance). With those considerations in mind, employers should work with their advisor in determining next steps.

Notice 2019-45 »

News Release »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

DOL Offers Temporary Relief to Multiple Employer Plans with Annual Reporting Failures

On July 24, 2019, the DOL issued Field Assistance Bulletin No. 2019-01, which provides temporary penalty relief from certain Form 5500 filing requirements for multiple employer plans (MEPs) subject to Title 1 of ERISA. Generally, MEPs file one Form 5500 that aggregates the data of the underlying participating employers.

However, in 2014, Congress added Section 103(g) to ERISA, which requires MEPS to include a list of names and EINs of participating employers and a good faith estimate of the percentage of total contributions made by each employer for the plan year. Unfunded or insured welfare plans must also specify the participating employers, but do not need to include the contribution information.

The DOL initiated enforcement action in 2019, upon recognition that a significant number of MEP filings in recent years had failed to fully comply with the ERISA Section 103(g) requirements. Following a dialogue with MEP plan sponsors, some of whom objected to the release of the employer-specific data, the DOL reiterated its position that such data is public information and must be open for public inspection.

Before proceeding with further civil penalty enforcement actions, the DOL is offering transition relief to MEPs who voluntarily comply with ERISA Section 103(g) by providing complete and accurate employer information for the 2017 plan year or any prior plan year. Specifically, the DOL will not reject such filings or assess civil penalties solely for the failure to include the ERISA Section 103(g) employer details, provided the plan’s 2018 Form 5500 complies with the requirements.

Additionally, for 2018 calendar year plans, which have a July 31, 2019 Form 5500 filing deadline, the DOL granted a special two and a half month extension to comply with ERISA Section 103(g). The special extension requires only the selection of a designated box on the Form 5500; however, the filer can also complete the standard Form 5558 to request an extension. The relief is also available to MEPs that already filed the 2018 Form 5500, provided the filing is amended by October 15, 2019.

Affected MEP sponsors should review previous Form 5500 filings (beginning with the 2014 plan year) to determine if the ERISA Section 103(g) required information was provided. Sponsors who failed to specify the necessary employer details on past filings can voluntarily provide such information and take advantage of the available penalty relief.

For the 2018 plan year, MEPs on extension (either through the special extension option or the Form 5558) should ensure the required employer data is attached. If the 2018 Form 5500 was already filed without the complete ERISA Section 103(g) data, relief under this guidance is still available to sponsors who amend the form to include the missing employer specifics prior to October 15, 2019.

FAB No. 2019-01 »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

HHS Updates Federal External Review Process

On July 12, 2019, the HHS issued an update to Technical Guidance-01-2018 for self-insured, non-federal governmental health plans (and insurance carriers in the group and individual markets) that rely upon the HHS-administered federal external review process. As background, non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual coverage must comply with the applicable external review process in their state if that process meets the standard established by the National Association of Insurance Commissioners (NAIC). If the state external review process does not meet this standard, or if the plan or issuer is not subject to state insurance regulation, then those group health plans and health insurance issuers must still implement an effective external review process meeting those same standards. The Code of Federal Regulations establishes the federal external review process for this purpose.

The guidance notes that MAXIMUS, a federal contractor, has started accepting online requests for external review through their online portal. As a result, there are now three options for employees (policyholders) and beneficiaries to request an external review (the other options being via mail or fax). Plans that use the HHS-administered external review process must now update the applicable notices to properly describe these available options.

This technical release also replaces technical guidance issued September 11, 2018 by providing a revised website address where a claimant can make an online request for external review.

The federal external review process requires an adverse benefit determination or a final internal adverse benefit determination to contain a notice to the claimant that the claimant can request an external review of the adverse benefit determination or final internal adverse benefit determination. A claimant can now submit such a request online to externalappeal.cms.gov under the “Request a Review Online” heading, in writing by faxing their request to 1.888.866.6190, or by sending it by mail to: MAXIMUS Federal Services, 3750 Monroe Avenue, Suite 705, Pittsford, NY 14534.

Self-insured employers that rely upon the HHS-administered federal external review process should update the notice to properly inform claimants of their three options for requesting an external review (via email, mail, fax, or through the online portal).

Update to Technical Guidance-01-2018 »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

Third Circuit Affirms Injunction of Contraceptive Mandate Exemptions

On July 12, 2019, the US Court of Appeals for the Third Circuit affirmed a district court decision that enjoined the 2017 HHS final rules providing exemptions for 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 October 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 November 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. Federal district courts in Pennsylvania and California both issued injunctions blocking enforcement of the interim and final rules.

The Third Circuit took up the case that came out of the Pennsylvania District Court on appeal, and they agreed with the lower court that the states included in the suit against the federal government had standing to sue. They also agreed that the states are entitled to an injunction of the law because they are likely to succeed in showing that the adoption of the final rules violated the APA.

Additionally, they argued that a nationwide injunction was necessary to avoid harm to individuals throughout the country. Specifically, they reasoned that employees working for employers in the states that filed the lawsuit might actually live in other states and that students covered by these plans might also go to school out of state.

We expect the government to continue to appeal this decision. We’ve also seen a conflicting opinion come out of the federal district court in the northern district of Texas (which invalidated the entire contraceptive mandate for certain employers).

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.

Commonwealth of PA v. President U.S. of America, 888 F.3d 52 (3rd Cir. 2018) »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

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