IRS Reminder: Health Insurance Tax Returns for 2020

On November 15, 2019, the IRS revised its webpage related to the Health Insurance Providers Fee with a reminder that the fee was suspended in 2019, but will be in effect for 2020. The Health Insurance Providers Fee is commonly referred to as the Health Insurance Tax (HIT). It applies to insured medical, dental, and vision policies. It does not apply to self-insured plans.

The fee is paid by the insurer, but may be passed on to the employer as the policyholder in the premiums charged. Employers may then pass along the fee to participating employees by considering it in their employee premium calculation. The amount of the fee varies based on the insurer’s ratio of net premiums compared to net premiums for all US health insurance policies. The amount passed along to group policyholders is generally considered to be 3% to 5% of the policy’s premium.

There is no action required from employers. It is just a reminder that the fee will be back in effect in 2020, so employers may notice a line item on their premium invoice detailing the fee if the insurer chooses to itemize. Otherwise, the insurer may simply add the fee to the premium without itemizing on the invoice.

IRS Reminder »

Source: NFP BenfitsPartners

Filed under: Abentras Blog

Proposed Health Care Transparency Rule Requires New Cost-Sharing Disclosures

On November 15, 2019, the Departments of Health and Human Services (HHS), Treasury, and Labor (the “Departments”) released the Transparency in Coverage proposed rule that imposes new cost-sharing disclosure requirements upon employer sponsored group health plans and health insurers. The proposal followed Executive Order 13877, issued on June 24, 2019, which instructed the Departments to determine how health plans, insurers, and providers should make information regarding out-of-pocket health care costs more accessible to consumers.

As background, the Trump administration has focused on promoting greater price transparency in order to provide individuals with necessary cost-sharing data to make informed health care decisions. Under recently issued final rules effective in 2021, hospitals will soon be required to disclose standard charges for products and services, including negotiated rates with insurers. The Transparency in Coverage proposed rule builds upon these regulatory initiatives and is applicable to non-grandfathered group health plans (including self-insured plans) and health insurance issuers. Account-based plans such as health reimbursement arrangements and flexible spending accounts would not be subject to the new requirements.

The proposed rule encompasses two approaches. First, the health plans and issuers would be required to make personalized out-of-pocket cost information for all covered health care items and services available through an online self-service tool and in paper format (upon request). This individualized disclosure is designed to provide participants with estimates of their cost-sharing liability with different providers, allowing them to better understand and compare health care costs prior to receiving care. The format could be similar to an Explanation of Benefits and would include actual negotiated rates, out-of-network allowed amounts, real-time accumulated amounts towards deductibles and out-of-pocket maximums and treatment limitations. Any prerequisites for coverage, such as prior authorization, would also need to be referenced. The rules do not require disclosure of balance billing amounts for out-of-network providers, but provide for a disclaimer to alert participants of a potential balance bill.

Second, these entities would be required to publicly disclose negotiated rates for in-network providers and historical out-of-network allowed amounts in standardized files on their website. These machine-readable files would need to be updated regularly, and are intended to encourage price comparison and innovation.

Additionally, the proposal offers medical loss ratio (MLR) credits to insurers that offer new plans that encourage participants to shop for lower-cost, higher-value providers and share in the resulting savings. According to HHS, this provision was included to ensure that issuers would not be required to pay rebates for innovative plan designs that benefit participants, but are not currently factored into the MLR calculation.

The Departments are seeking public comments regarding all aspects of the proposed rule. They are also formally requesting information on whether to require price and cost-sharing information to be included in a publicly available forum through the use of certain technology that enables software to connect and exchange information. In addition, feedback is sought regarding whether provider quality measurements should be required with the cost-sharing information.

These disclosure obligations are proposed to apply to plan years beginning one year from or following finalization of the rule. However, the MLR provision would be applicable beginning with the 2020 MLR reporting year.

Employers should be aware of the proposed rules and new requirements. They also may want to discuss the potential disclosure obligations with their insurance carriers and/or third party administrators. However, it is important to understand that no immediate changes are necessary because the proposed rule is not currently in effect and may be modified prior to finalization. Additionally, some carriers may challenge the requirement to disclose negotiated rates, which they consider to be confidential information.

Transparency in Coverage Proposed Rule »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

IRS Announces 2020 Limits for Health FSAs, Commuter Benefits, and Adoption Assistance

On November 6, 2019, the IRS published Revenue Procedure 2019-44, which relates to certain cost-of-living adjustments for a wide variety of tax-related items, including health FSA contribution limits, transportation and parking benefits, qualified small employer health reimbursement arrangements (QSEHRAs), penalties for ACA reporting, the small business tax credit, and other adjustments for tax year 2020. Those changes are outlined below.

Health FSAs: For plan years beginning in 2020, the annual limit on employee contributions to a health FSA will be $2,750 (up $50 from 2019).
Transportation/Commuter Benefits: For 2020, the monthly limit on the amount that may be excluded from an employee’s income for qualified parking increases to $270 (up $5 from 2019), as does the aggregate fringe benefit exclusion amount for transit passes.
Adoption Assistance: For 2020, the maximum amount an employee may exclude from their gross income under an employer-provided adoption assistance program for the adoption of a child is $14,300 (up from $14,080 in 2019).
QSEHRAs: For 2020, the maximum amount of reimbursement under a QSEHRA may not exceed $5,250 for self-only coverage and $10,600 for family coverage (an increase from $5,150 and $10,450, respectively, in 2019).
ACA Employer Reporting Penalties: For 2020 employer mandate reporting (Forms 1094/95-C filed in early 2021), the penalties for failure to report will be $280 per return, with a maximum of $3,392,000 (up from $270 per return and a $3,275,000 per calendar year maximum for 2019 returns).
Small Business Tax Credit: For 2020, the average annual wage level at which the credit phases out for small employers is $27,600 (up $500 from 2019). The maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10.

Employers with limits that are changing (such as for health FSAs, transportation/commuter benefits, and adoption assistance) will need to determine whether their plan documents automatically apply the latest limits or must be amended (if desired) to recognize the changes. Any changes in limits should also be communicated to employees.

Revenue Procedure 2019-44 »

Source: NFP BenefitsPartnersContinue reading

Filed under: Abentras Blog

IRS Releases Updated Publication 5165 for Electronically Filing ACA Information Returns

On November 4, 2019, the IRS released a revised version of Publication 5165, entitled “Guide for Electronically Filing Affordable Care Act (ACA) Information Returns for Software Developers and Transmitters,” for tax year 2019 (processing year 2020). This publication outlines the communication procedures, transmission formats, business rules, and validation procedures for returns transmitted electronically through the Affordable Care Act Information Return System (AIR). The filing is quite technical. The forms must be filed using the Extensible Markup Language (XML) schemas outlined in the publication.

Employers who plan to electronically file Forms 1094-B, 1095-B, 1094-C, or 1095-C should review the latest guidance and make any necessary adjustments to their filing process. Because of the complexity, most employers partner with a payroll or software vendor to assist them with the electronic filing. Those employers still have a responsibility to review the forms for accuracy before submission to the IRS and distribute to employees. Employers filing fewer than 250 forms may file by paper with the IRS.

At this time, no extensions have been announced related to the due dates. Thus, the Forms 1095-C and 1095-B would need to be distributed to employees by January 31, 2020, and those forms along with the Forms 1095-B and 1094-B would need to be filed with the IRS by March 31, 2020, if filing electronically and by February 28, 2020, if filing by paper.

Publication 5165 »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

DOL Proposes New Electronic Disclosure Safe Harbor

On October 23, 2019, the DOL proposed a new rule to expand the options available to retirement plan sponsors for electronic delivery of required disclosures. The proposal followed Executive Order 13847, which instructed the DOL to determine whether regulatory actions could be taken to improve the effectiveness of participant disclosures and reduce their cost to employers. After review and consultation with other regulatory agencies, the DOL set forth a new “notice and access” safe harbor under which ERISA retirement plan disclosures could be made available on a website following specified notice.

As background, in 2002, the DOL issued a safe harbor that permitted electronic delivery of disclosures provided that the method was reasonably calculated to ensure actual receipt, notice and content requirements were satisfied, and participants maintained the right to request paper copies. Under this prior safe harbor, employees with “integral access” to the employer’s computer system at work could be defaulted to electronic delivery; all others were required to affirmatively consent to the electronic method. In recognition of technological advances and increased participant internet access, the notice and access option is offered as a new alternative to (rather than a replacement of) the existing 2002 safe harbor.

The proposed alternative permits required disclosures for retirement plans (including multi-employer plans) to be posted online following notice to covered individuals, who can then access the documents continuously using an internet connected device. Covered individuals are participants, beneficiaries, and any other individuals entitled to documents, who have provided the plan administrator (or designee) with an electronic address, such as email address or smartphone number. Alternatively, if an electronic address is assigned by an employer for this purpose, the employee is treated as if they provided the electronic address. Covered documents include all disclosures required under Title 1 of ERISA, with the exception of documents that must be furnished upon request (such as the plan document).

The new safe harbor requires plan administrators to send a notice of internet availability to each covered individual’s electronic address whenever a covered document is made available on the website. Administrators are permitted to combine certain annual disclosures, for which the notice of availability would be considered timely if furnished not later than 14 months following the date of the prior plan year’s notice.

The new safe harbor lays out specific content that must be included in the notice. The referenced website address must be “sufficiently specific” to provide ready access to the covered document, either by leading the covered individual directly to the covered document or to a login page that provides a prominent link to the covered document. Generally, the notice must not contain additional information or be accompanied by other documents and it must be written in a manner calculated to be understood by the average plan participant.

The proposed rule includes two significant protections for individuals who prefer to receive paper versions of covered documents. First, any covered individual has the right to request and receive a paper copy free of charge. Second, a covered individual who prefers to receive all covered documents in paper may opt out of receiving covered documents electronically. If a plan administrator becomes aware of an invalid address (for example, if an email is returned as undeliverable), the individual must be treated as if they opted out of electronic delivery.

Plan administrators who choose to use the new safe harbor must send an initial paper notification to apprise covered individuals of the new electronic delivery method and the opportunity to opt out.

The DOL has requested public comments and information regarding the proposed alternative electronic delivery method on or before November 22, 2019. The new safe harbor option will be effective 60 days following publication of a final rule. In response to the executive order’s directive, the DOL is also seeking information and ideas regarding measures (in addition to the notice and access framework) that would enhance the effectiveness of ERISA disclosures for participants and beneficiaries. This second request focuses upon the design and content of the disclosures and includes specific questions upon which feedback is sought.

Employers who are seeking an alternative electronic delivery method for retirement plan disclosures may want to review the proposed rule. It is important to note that the proposed notice and access delivery method does not currently incorporate welfare benefit plan disclosures. (The DOL declined to extend the proposal to welfare benefit plans, pending review and consultation with other regulatory authorities.)

Please stay tuned to Compliance Corner for further updates on these initiatives.

Default Electronic Disclosure Rule »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

IRS Outlines FY 2020 Compliance Strategies and Priorities

On October 17, 2019, the IRS issued a Program Letter outlining its compliance strategies and priorities for fiscal year 2020. Employee benefits-related issues they will focus on include:

*Determining whether fringe benefits are properly taxed for FICA and income tax withholding
*Contacting employer plan sponsors who fail to file a Form 5500
*Examining 403(b) and 457 plans for compliance related to universal availability, excessive contributions, catch-up contributions under IRC Section 414(v) (for 403(b) plans), and the proper use of the special three-year catch-up contribution rule (for 457 plans)
*Continuing to pursue referrals received from internal and external sources that allege possible noncompliance by a retirement plan

While it may be helpful for employers to see the areas where the IRS will focus their enforcement efforts in fiscal year 2020, compliance in all areas related to employer-sponsored plans should always be a priority. If you have any questions related to your plan’s compliance, please contact your advisor for assistance and resources.

Program Letter »

Souce: NFP BenefitsPartners

Filed under: Abentras Blog

IRS Releases Draft Version of 2019 Form 5500-EZ Instructions

On October 3, 2019, the IRS published a draft version of the 2019 Form 5500-EZ instructions. As background, IRS Form 5500-EZ is an annual filing requirement for retirement plans that are either a one-participant plan or a foreign plan. The draft instructions are only for informational purposes and may not be used for 2019 Form 5500-EZ filings, but employers should familiarize themselves with the instructions in preparation for 2019 plan year filings. They should be reviewed in connection with the draft form discussed in the October 1, 2019 edition of Compliance Corner.

The IRS does not appear to have made any significant changes to this year’s form or instructions. While many employers outsource the preparation and filing of this form, employers should also familiarize themselves with the form’s requirements and work closely with outside vendors to collect the applicable information.

Draft 2019 Form 5500-EZ Instructions: »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

IRS Proposes New Safe Harbors for Individual Coverage HRAs

On September 30, 2019, the IRS proposed regulations regarding the application of the ACA’s employer shared responsibility provisions (also known as the employer mandate) to HRAs integrated with individual health insurance coverage or Medicare, known as individual coverage HRAs (ICHRAs). The guidance also addressed the application of the self-insured plan (Section 105(h)) non-discrimination rules to ICHRAs. The proposed rules supplement the June 2019 final regulations, which permitted the use of ICHRAs effective January 1, 2020, and subsequent related guidance under IRS Notice 2018-88.

As background, an HRA is an employer-funded, account-based group health plan that allows for payment of employee medical expenses on a tax-advantaged basis (the HRA reimbursements are not included in the employee’s gross income). In order to comply with the ACA mandates applicable to group health plans, such as the prohibition against annual or lifetime limits for essential health benefits and the provision of preventive care without cost sharing, HRAs previously needed to be integrated with an ACA compliant group health plan. This meant that stand-alone HRAs were generally prohibited. However, the June 2019 final rules introduced the ICHRA, which allowed for the integration of HRAs with individual health insurance coverage, provided certain conditions are satisfied.

Applicable large employers (those with 50 or more full-time employees, including full time equivalents) during the preceding calendar year) that sponsor ICHRAs must still satisfy the ACA employer shared responsibility mandates to avoid tax penalties. The penalties can arise if an employee receives a premium tax credit through the ACA marketplace because he or she was not offered employer-sponsored MEC that is of MV and is affordable. To avoid penalties, the employers must offer such coverage to at least 95% of full-time employees and their children until age 26. The IRS has indicated that an employer’s offer of an ICHRA is an offer of MEC. Satisfying the affordability condition is more challenging.

Prior IRS guidance provided that an ICHRA is deemed affordable if the benefit makes the lowest cost individual silver policy in an ACA exchange rating area affordable to an employee who resides there. By definition, the silver plan would cover at least 60% of required costs and thus also meet the minimum value standard. ICHRA coverage is considered affordable if the employee’s required monthly contribution (that is, premium cost-HRA benefit) does not exceed 9.78% (for 2020) of the employee’s household income. When determining affordability for employer mandate purposes, an employer can use any of the previously established safe harbors (specifically, Form W-2 wages, rate of pay, and federal poverty line), provided that the application is uniform and consistent for any acceptable classification of employees.

However, the previous guidance failed to adequately address the inherent complexities of applying the affordability requirement to a diverse employee group, whose members would be purchasing individual coverage. For example, employees could reside in different rating areas, so premiums for the lowest cost silver plan could vary dramatically. Costs could also differ based upon ages of the employees themselves. Additionally, the premiums for the lowest cost silver plan on the exchange are typically not known until October, which makes it difficult for employers to plan and fund for ICHRAs prior to the start of the plan year.

In an effort to address these concerns, the new proposed regulations provide optional safe harbors and clarification regarding the affordability determination. First, the guidance provides a location safe harbor for ascertaining the lowest cost silver plan. This safe harbor allows an employer to use the ACA rating area for an employee’s primary site of employment instead of the employee’s residence. The primary site of employment is the location where the employer reasonably expects the employee to perform services as of the first day of the ICHRA plan year (or coverage date, if later). For remote workers, the location would be the site from which they actually work, unless they are required to periodically report to the employer’s work site, which would then be considered the employee’s primary site. A permanent change in employee work sites must be taken into account for affordability purposes by the first day of the second month following the employee’s relocation.

Second, the IRS declined to provide an age-based safe harbor. The IRS was concerned that employees older than a set safe harbor age may not find their cost of coverage affordable and receive tax credits on the exchange, although the employer would be deemed to have satisfied the affordability mandate. However, for a particular rating area, an employer is permitted to use the lowest cost silver plan for employees in the lowest age bracket as the base plan for determining affordability. For older employees, the employer could then use the price of that plan for the applicable age bracket to determine affordability (regardless of whether a less expensive silver plan was available for the age group). The guidance also clarifies that for affordability purposes, an employer should use the employee’s age on the first day of the plan year (or his or her date of coverage, if later).

Third, the proposed rules introduce a look-back month safe harbor that allow employers with calendar year ICHRAs to base the monthly cost of the cheapest silver policy for a year on the cost of that policy as of the first day of the previous year. So, an employer offering an ICHRA with a plan year beginning January 1, 2020, could use the exchange rates as of January 1, 2019. Non-calendar year plans could use the rates as of January 1 of the current year.

Fourth, the IRS emphasizes that an employer electing to use any of the optional safe harbors must apply the chosen method uniformly and consistently for all employees in a class. The permitted classes are as specified in the June 2019 final ICHRA rules, which include salaried vs. hourly; full time vs. part time; bargaining unit vs. non-bargaining unit; seasonal vs. regular; and employees in one rating area, state, or region vs. another. The guidance also confirms that employers can report employee required contributions (for Forms 1094-C and 1095-C) based upon the safe harbors and that premiums for affordability purposes do not need to reflect tobacco surcharges or wellness incentives, unless the wellness program incentive relates exclusively to tobacco use, in which case the incentive is treated as earned. Additionally, the proposed rules allow employers to rely upon the accuracy of the premium information made available by the government marketplace.

Finally, the IRS provides clarification regarding the application of the Section 105(h) nondiscrimination rules to ICHRAs. These rules generally apply to self-insured health plans and prohibit discrimination in favor of highly compensated individuals (HCIs), which include the five highest paid officers, more-than-10% shareholders/owners and the highest-paid 25% of all employees. However, if an ICHRA only reimburses insurance premiums (and not other medical expenses), it is treated as an insured plan and not subject to the Section 105(h) rules. The rules propose two nondiscrimination safe harbors. First, the maximum ICHRA contribution can vary within a class of employees if the variation applies under the same terms to all within the class, and between classes if each class is a permitted class under the ICHRA rules. Second, ICHRA designs can vary contributions based upon family size and age (provided the maximum contribution for the oldest participant does not exceed three times the amount for the youngest participant), without the plan automatically being deemed as discriminatory. However, the guidance notes that an ICHRA that is not discriminatory in design could still fail the Section 105(h) test, if HCIs actually benefit disproportionately to non-HCIs.

Employers who are considering adopting ICHRAs should review the new guidance and speak with their benefit consultants. Organizations planning to offer ICHRAs effective January 1, 2020, can use the 2019 exchange rates – as outlined above – for purposes of setting contribution and funding levels.

Some large employers may find the new safe harbors helpful in satisfying the ACA shared responsibility provisions. In particular, the rules provide some simplifications for determining affordability for employees that reside in diverse geographic locations. However, it is unclear if the proposed regulations adequately address the administrative concerns of potential ICHRA plan sponsors.

The IRS has requested comments on the proposed rules by late December. However, employers can generally rely on the guidance in designing ICHRA options for 2020. The proposed rules will remain effective for any plan year that begins at least six months prior to the publication of final rules. Please stay tuned to Compliance Corner for further updates on this topic.

ICHRA Proposed Rules »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

IRS Releases Publication 5164, Test Package for 2019 Electronic ACA Filers

The IRS recently released an updated version of Publication 5164, entitled “Test Package for Electronic Filers of Affordable Care Act (ACA) Information Returns (AIR),” for tax year 2019 (processing year 2020). The publication describes the testing procedures that must be completed by those filing electronic ACA returns with the IRS, specifically Forms 1094-B, 1095-B, 1094-C, and 1095-C. As a reminder, those who are filing 250 or more forms are required to file electronically with the IRS.

Importantly, the testing procedures apply to the entity that will be transmitting the electronic files to the IRS. Thus, only employers who are filing electronically with the IRS on their own would need to complete the testing. If an employer has contracted with a software vendor who’s filing on behalf of the employer, then the testing and this publication would not apply to the employer, but would apply to the software vendor instead.

Similar to prior years, the IRS provides two options (see pages 12-13) for submitting test scenarios for reporting year 2019: predefined scenarios and criteria-based scenarios. Predefined scenarios provide specific test data within the submission narrative for each form line that needs to be completed. Criteria-based scenarios give more flexibility to test and create data that may be unique to their organization when completing the necessary test scenarios. Correction scenarios are also provided (see page 17), but those are not required in order to pass testing.

As a reminder, electronic filing of 2019 returns will be due March 31, 2020. Most large employers that are required to file the forms work with third-party vendors in performing electronic filing, so the testing outlined in Publication 5164 wouldn’t apply to the employer. But if the employer is filing on their own, they’ll want to review the updated testing requirements in Publication 5164. Large employers that are required to file electronically, and would like information on third-party vendors who can assist, can contact their advisor for more information.

IRS Publication 5164 »
AIR Program »

Source: NFP BenefitsPartners

Filed under: Abentras Blog

Agencies Issue Final MHPAEA FAQ, Disclosure Form, and 2018 Enforcement Report

On September 5, 2019, the DOL, IRS, and HHS (the Departments) released a number of documents concerning mental health parity compliance, including a finalized FAQ. As background, the Mental Health Parity and Addiction Equity Act (MHPAEA) requires that the financial requirements and treatment limitations imposed on mental health and substance use disorder (MH/SUD) benefits be no more restrictive than the predominant financial requirements and treatment limitations that apply to substantially all medical and surgical benefits. MHPAEA also imposes several disclosure requirements on group health plans and health insurance issuers.

In addition to finalizing FAQs About Mental Health and Substance Use Disorder Parity Implementation and the 21st Century Cures Act Part 39, the Departments also released a claims form that individuals can use to request documentation about their plan’s mental health treatment limitations, and three documents highlighting the DOL’s 2018 enforcement of MHPAEA. See below for a recap on each of those resources.

FAQs About Mental Health and Substance Use Disorder Parity Implementation and the 21st Century Cures Act Part 39
This document provides additional guidance to employers and individuals about the application of the law. The finalized rules make slight changes to the proposed version by providing certain clarifications and adding additional examples. Here is an overview of the 11 questions addressed in this document:

* Questions 1-8 address different nonquantitative treatment limitation issues, including experimental or investigative treatment limitations, prescription drug dosage limitations, step therapy and fail first policies, reimbursement rates for physicians and non-physicians, network adequacy, and medical appropriateness. One question also clarifies that plans can choose to exclude coverage for certain specific mental health conditions, as long as other federal or state laws don’t prohibit the exclusion.

* Questions 9-11 discuss MHPAEA’s disclosure requirements. Specifically, the Departments discuss the model form that individuals can use to request plan information about their MH/SUD benefits. They also remind employers that they can provide a hyperlink or URL address where participants can access their provider directory, but that directory must be up-to-date and accurate so that participants can access correct information pertaining to MH/SUD providers.

FAQs Part 39 »

Source: NFP BenefitsPartners

Filed under: Abentras Blog