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:

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

House Committee Unanimously Approves SECURE Act

On April, 2019, the US House of Representatives’ Ways and Means Committee unanimously approved the Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act”). While the Benefits Compliance team doesn’t normally report on bills that haven’t yet passed, we chose to provide this information as the SECURE Act, if passed, would result in major changes to retirement regulations. Additionally, the unanimous vote from the Ways and Means Committee reflects bipartisan support for the Act, which means that there are good chances that some version of it will be signed in to law.

As background, the SECURE Act comes after multiple bills attempted to include similar provisions. Specifically, the Retirement Enhancement and Savings Act (RESA) was approved by the Senate Finance Committee and the Family Savings Act was passed by the House in 2018, respectively. The SECURE Act includes provisions found in both of those bills and adds some new provisions.

The SECURE Act is broken up into four titles, and some of the major provisions are summarized as such:

Title I: Expanding and Preserving Retirement Savings
•Increases auto enrollment safe harbor cap to 15 percent
•Simplifies 401(k) safe harbor, notably eliminating the notice requirement
•Increases tax credit for small employer plan start ups
•Provides credit for small employers that start plans that include automatic enrollment
•Prohibits plan loan distribution through credit cards
•Allows portability of lifetime income investments for defined contribution, 403(b), and governmental plans
•Requires employers to offer 401(k) plan participation to long-term part-time workers
•Provides penalty-free withdrawals for qualified births and adoptions
•Increases the age for required minimum distributions from age 70 1/2 to age 72

Title II: Administrative Improvements
•Permits plans adopted by the employer’s tax return due date to be treated as in effect as of the close of the plan year
•Requires annual benefit statements to include a lifetime income disclosure
•Provides safe harbor for fiduciaries that select lifetime income provider

Title III: Other Benefits
•Expands Section 529 plans to cover additional educational costs, notably include student loan repayment

Title IV: Revenue Provisions
•Modifies required minimum distribution rules relating to death of the account owner
•Increases penalties for failure to file a Form 5500

As noted, this legislation would result in an overhaul of many of the retirement regulations that have been in place for decades. If passed, it will likely require employers to amend their plans and adjust their plan operations. We will continue to monitor any developments.

SECURE Act Text »

SECURE Act Press Release »

SECURE Act Summary »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

CMS Announces 2020 Medicare Part D Parameters

On April 1, 2019, CMS released the 2020 parameters for the Medicare Part D prescription drug benefit. This information is used by employers to determine whether the prescription drug coverage offered by their group coverage is creditable or non-creditable. To be creditable, the actuarial value of the coverage must equal or exceed the value-defined standard Medicare part D coverage provides.

For 2020, the defined standard Medicare Part D prescription drug benefit is:

•Deductible: $435 (a $20 increase from 2019)
•Initial coverage limit: $4,020 (a $200 increase from 2019)
•Out of pocket threshold: $ 6,350 (a $1,250 increase from 2019)
•Total covered Part D spending at the out-of-pocket expense threshold for beneficiaries not eligible for the coverage gap discount program: $9,038.75 (a $1,385 increase from 2019)
•Estimated total covered Part D spending at the out-of-pocket expense threshold for those eligible for the coverage gap discount programs: $9,719.38 (a $1,579.84 increase from 2019)
•Minimum cost-sharing under catastrophic coverage benefit: $3.60 for generic/preferred multi-source drug (a $.20 increase from 2019) and $8.95 for all other drugs (a $.45 increase from 2019)

Employers should use these 2020 parameters for the actuarial determination of whether their plans’ prescription drug coverage continues to be creditable for 2020. For additional information, please consult with your adviser.

CMS Announcement »

Additional information on Medicare Part D coverage »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

IRS Updates Operational Compliance List for 2019

On March 26, 2019, the IRS updated their operational compliance list (“OC List”) to include changes to the hardship distribution rules. As background, the OC List is provided by the IRS to help plan sponsors and practitioners achieve operational compliance by identifying changes in qualification requirements effective during a calendar year.

The updated list incorporated the most recent changes to the hardship distribution rules. (We discussed those changes in the November 28, 2018, edition of Compliance Corner.) The list also highlights the relief available to victims of the hurricanes that occurred in 2018.

The IRS periodically updates the OC List to reflect new legislation and guidance. As such, it is a useful tool for plan sponsors. However, the list is not intended to be a comprehensive list of every item of IRS legislation or guidance. Plan sponsors should work with their advisers to ensure their continued compliance with the retirement plan regulations.

Operational Compliance List »

Source: NFP BenefitsPartners

Filed under: Abentras Blog