Author Archives | Andie Schieler

About Andie Schieler

Andie is an attorney and works in J.W.Terrill's Compliance division specializing in interpreting the Affordable Care Act and various insurance laws. She advises clients on legal and regulatory issues affecting their employee benefit plans. She obtained her law degree from Saint Louis University and undergraduate from Indiana University Bloomington.

Better Late Than Never

November 16, 2018

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The Internal Revenue Service released Revenue Procedure 2018-57 today, which contains the 2019 cost-of-living adjustments for various employee benefit plans including employer sponsored health care flexible spending accounts, qualified transportation fringe benefits, and adoption assistance programs. The following provides a summary of the annual limits for these specific benefit programs along with a summary of the 2019 high deductible health plan and health savings accounts limits announced earlier this year.

Each of the limits described below are applicable for taxable years beginning in 2019. If you have any questions or need further details about the tax limits and how they will impact your employee benefit programs, please contact your account team.

Health Care Flexible Spending Accounts
Employees will be allowed to contribute up to $2,700 per plan year.

Qualified Transportation Fringe Benefit
The monthly dollar limit on employee contributions has increased to $265 per month for the value of transportation benefits provided to an employee for qualified parking. The combined transit pass and vanpooling expense limit will also increase to $265 per month.

Adoption Credit/Adoption Assistance Programs
In the case of an adoption of a child with special needs, the maximum credit allowed under Code Section 23 is increased to $14,080. The income threshold at which the credit begins to phase out is increased to $211,160. Similarly, the maximum amount that an employer can exclude under Code Section 137 from an employee’s income for adoption assistance benefits is increased to $14,080.

HDHP and Health Savings Account (HSA) Amounts
Earlier this year, the IRS released Revenue Procedure 2018-30 which included the 2019 minimum deductible and maximum out-of-pocket limits for high deductible health plans (HDHPs) and the maximum contribution levels for HSAs.

  • The minimum annual deductible for a plan to qualify as a HDHP will remain at $1,350 for self-only coverage and $2,700 for family coverage;
  • The maximum annual out-of-pocket limits allowable under an HDHP will increase to $6,750 for self-only coverage and $13,500 for family coverage; and
  • The 2018 maximum allowable annual contribution employees may make to their HSAs will increase to $3,500 for an individual with self-only coverage and increase to $7,000 for an individual with family coverage.

The HSA catch-up contribution limit for participants who are 55 or older on December 31, 2019, remains an additional $1,000 per year.

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Annual Creditable Coverage Notice Deadline Approaches

September 21, 2018

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The annual deadline for the Creditable Coverage notice is arriving once again. The Centers for Medicare and Medicaid Services (CMS) requires employers offering prescription drug coverage to disclose to all Medicare Part D eligible individuals the creditable status of their plan by October 15th each year. Employers may use the model notices available here on CMS’s website.

It can be very difficult for employers to know exactly who should receive the notice as there are ways to become Part D eligible beyond attaining age 65. Many employers resolve this issue by including the notice in enrollment materials or providing separate mailings to all employees who participate in the employer-sponsored plan. We’ve previously discussed distributing the notice here.

If mailing the notice, first-class mail is generally preferred. A single notice may be sent to Part D eligible employees and their Part D eligible spouse or dependents. If the employer is aware a spouse or dependent resides at a different address, a separate notice must be sent to their address. When including with enrollment materials, the notice must be:

  • Prominently referenced; and
  • In a (minimum) 14-point font in a separate box, bolded or offset on the first page.
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PCORI Fee Deadline Approaches

June 20, 2018

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The annual Patient Centered Outcomes Research Institute (PCORI) fee is due by July 31, 2018. The fee was created by the Affordable Care Act to help fund the nonprofit Patient-Centered Outcomes Research Institute which supports clinical effectiveness research. Typically only employers with self-funded health plans, including health reimbursement arrangements (HRAs), must calculate and pay the fee. Health insurance companies will pay the fee on behalf of employers with fully-insured health plans.

Plan sponsors will use IRS Form 720 (Quarterly Federal Excise Tax Return) to report the fee. The fee amount changes annually and is tied to the plan year. The amount due each year is calculated by multiplying the applicable fee by the average number of covered lives in the plan. Employers have several methods available to calculate the average number of covered lives including the actual count method, snapshot method and Form 5500 method. For plan years ending in January 2017 through September 2017, the fee will be $2.26. For plans ending in October 2017 through December 2017, the fee will be $2.39.

For more information on how to calculate and pay the PCORI fee, please contact your service team.

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2019 HSA Contribution Limits

May 14, 2018

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The IRS announced inflation-adjusted Health Savings Account limits for 2019 in Revenue Procedure 2018-30. They also announced minimum annual deductible and maximum annual out-of-pocket thresholds for 2019.

* The IRS announced they would continue to allow the original limit to stand for the remainder of 2018 despite the mid year reduction to $6,850.

 

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IRS Extends Relief for Those Affected by 2018 Family HSA Contribution Maximum Change

April 26, 2018

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In early March the IRS announced a change in the family HSA contribution maximum for 2018. As previously discussed, the Tax Cuts and Jobs Bill changed the way the IRS calculates benefit contribution maximums resulting in the 2018 family HSA contribution maximum changing from $6,900 to $6,850.

The IRS announced today that taxpayers with family coverage under a High Deductible Health Plan (HDHP) may continue to use the $6,900 limit for the rest of 2018. The IRS recognized the $50 reduction would “impose numerous unanticipated administrative and financial burdens” including the cost of adjusting cafeteria plan contributions for employers allow pre-tax HSA contributions.

This announcement is a little late for many who have taken steps to adjust their contributions. The new guidance provides ways for HSA holders to recoup those “mistaken distributions” (the $50 difference) without penalty. However, HSA custodians are not required to allow individuals to repay mistaken distributions. If an individual has received a distribution from an HSA of an excess contribution based on the $6,850 limit, they may repay the funds to the HSA. Those funds will not be includable in the individual’s gross income, will not be subject to the 20% excise tax on excess contributions and will not need to be reported on Form 1099-SA or Form 8889.

Those individuals who received a distribution from an HSA of an excess contribution based on the $6,850 limit but choose not to repay the distribution to the HSA will not be required to include the amount in gross income or pay the 20% excise tax if the distribution is received on or before the individual’s tax filing deadline (including extensions of time).

The tax treatment described above will not apply to distributions from an HSA that are attributable to employer contributions if the employer relies upon the $6,900 limit. Then, the distribution must either be used to pay qualified medical expense or it must be includible in the employee’s gross income and subject to the 20% excise tax. Employers should consult tax advisors with any concerns regarding this IRS’s guidance.

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IRS Lowers 2018 Family HSA Contribution Maximum

March 6, 2018

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Late last year Congress passed the Tax Cuts and Jobs Bill into law. It contained a number of tax reforms including a change to the way the Internal Revenue Service (IRS) calculates cost of living increases. The IRS now has to calculate the increases using “Chained CPI.” The new method takes into account consumers switching to cheaper products which reduce the effect of inflation. As a result, Chained CPI results in lower cost of living increases than what we’ve previously seen.

These cost of living increases are used to calculate the HSA contribution maximums for the year. Due to the new calculation method, the IRS announced today the family HSA contribution maximum is reduced from $6,900 to $6,850. Health FSAs and other benefit limits are not impacted. The 2018 limits are as follows:

HSA/HDHP Limits 2018 2017 2016
HSA Contribution Limit (Self-Only) $3,450 $3,400 $3,350
HSA Contribution Limit (Family) $6,850 $6,750 $6,750
HSA Catch-up Contribution Limit (55+years) $1,000 $1,000 $1,000
HDHP Minimum Deductible (Self-Only) $1,350 $1,300 $1,300
HDHP Minimum Deductible (Family) $2,700 $2,600 $2,600
HDHP Maximum Out-of-Pocket (Self-Only) $6,650 $6,550 $6,550
HDHP Maximum Out-of-Pocket (Family) $13,300 $13,100 $13,100

Ultimately it is HSA holders’ responsibility to abide by the contribution maximums as they are individually owned accounts. Because it is so early in the year, most HSA holders likely haven’t contributed the maximum yet. If they have, they will need to speak to their tax advisors about a curative distribution, which can help avoid the 6% excise tax on excess contributions.

Employers should communicate the family HSA maximum contribution change to their employees, especially if they previously provided the old limit. HR departments will also need to check their payroll accounts and adjust any employee HSA contributions that would exceed the maximum.

In addition, limits for employer adoption assistance programs have changed. The maximum amount that can be excluded from an employee’s gross income for qualified adoption expenses dropped from $13,840 to $13,810 and the adjusted gross income threshold after which the adoption exclusion begins to phase out is lowered from $207,580 to $270,140.

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Upcoming 1094/1095 Deadline

February 22, 2018

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Two 1094/1095 deadlines are quickly approaching for applicable employers. Employers filing paper copies of Forms 1094/1095 have until February 28, 2018 to mail them in to the IRS. Only those employers filing less than 250 informational returns are allowed to file paper copies and it must be sent via First-Class mail. The forms must be sent in a flat mailing (not folded) with no paperclips or staples. If sending the forms in multiple packages, write the employer’s name on each package, number them consecutively and place Form 1094-C in the first package. Where to send the forms depend on where the employer’s principal business office or agency is located.

The second deadline is on March 2, 2018. Employers have until then to distribute copies of Forms 1095-B or 1095-C to individuals. This deadline was originally January 31st but the IRS extended it in December 2017. Employers can provide these forms electronically (email or posting on employer’s website) but employees must specifically consent to the electronic distribution. Consent may be given on paper or electronically. If consent is given on paper, the individual must confirm the consent electronically.

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What the 2017 Tax Reform Actually Means for Employers

January 5, 2018

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On December 22nd President Trump signed the 2017 Tax Cuts and Jobs Act, marking his administration’s first successful modification to the Affordable Care Act (ACA). Two core aspects of the ACA are the employer mandate and in the individual mandate. The individual mandate requires U.S. citizens have minimum essential coverage for each month, qualify for an exemption, or face a tax penalty. Contrary to popular news, the tax act did not repeal the individual mandate. Rather, it took the teeth out of the law by making the individual mandate penalties $0 as of 2019. Individuals will still need to either have qualifying coverage or pay a penalty for the 2017 and 2018 filing seasons.

The employer mandate was left untouched by the bill. Applicable Large Employers (ALEs) will still need to offer affordable, minimum essential coverage providing minimum value to their full-time employees and their dependents. This means employers likely won’t be affected until 2019 when healthy individuals may decide to forgo coverage absent a penalty. Some speculate employers may have adverse enrollment effects as a result of losing healthier employees.

There’s been some uncertainty if Congress will launch another repeal effort in 2018. Senate Majority Leader Mitch McConnell suggested in late December that the Senate will give up ACA repeal efforts in 2018 due to the difficult odds of repealing and replacing with a 51-49 Senate party division. But other Republicans, including Senator Lindsey Graham (R-S.C.) and House Speaker Paul Ryan (R-Wis.) expressed support for another attempt at reform. Ultimately employers will need to wait to see if Congress will pass other changes to the ACA.

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IRS Gives an Early Present to 1094/1095 Filers

December 22, 2017

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Today the IRS announced in Notice 2018-06 they will be extending due dates and good faith filing relief to 2017’s 1094/1095 reporting requirement. Under the Affordable Care Act, Applicable Large Employers (ALEs) are required to complete Form 1095-C for each of their full-time employees. In addition, issuers of coverage must report on all those enrolled in their plans with Form 1095-B. The original deadline to provide a copy of these forms to individuals was January 31, 2018. The IRS extended the deadline to provide the 1095-C and 1095-B forms to March 2, 2018. However, employers will still need to send copies with the IRS by February 28, 2018 or by March 31, 2018 if filing electronically. In addition, the 30 day extension will not be available to the new March 2, 2018 deadline but it will still be available for the IRS filing deadlines by using Form 8809.

As we’ve previously mentioned, the IRS will not require tax filers to submit copies of their Form 1095-B or 1095-C with their tax returns. Instead, filers will certify health insurance coverage by checking certain boxes on their returns.

The notice also extended the good faith filing relief that was available last year. This means the IRS will not impose penalties on reporting entities if they can show they made a good-faith effort to comply with the information-reporting requirements. This relief applies to incorrect and incomplete information reported on the forms. No relief is available to employers who do not timely file the forms.

 

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New ALEs Subject to Employer Mandate on Calendar Year Basis

November 14, 2017

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The Affordable Care Act’s employer shared responsibility provisions require Applicable Large Employers (ALEs) to offer affordable, minimum value coverage to their full-time employees or face a penalty. In previous years, the IRS extended transitional relief to ease the burden of the employer mandate. For example, non-calendar year plans with part of their 2015 renewal falling in 2016 wouldn’t be subject to the employer mandate for those months in 2016 despite their ALE status. Unfortunately, the government has declined to extend any more transitional relief.

ALE status is determined by calculating the average number of Full Time Equivalent (FTE) employees during the prior calendar year. Because ALE status and the employer mandate apply on a calendar year basis, employers who are on the brink of becoming ALEs due to employee growth will need to monitor their full time equivalent count. If an employer grows substantially during the second half of a year, it may cross the 50 FTE threshold for that year and need  to comply as of January 1st of the following year. This can pose a problem for non-calendar year plans that may be left scrambling to comply with the law in the middle of their plan year.

Luckily the final regulations still contain some relief for those first-time ALEs. The employer mandate imposes two potential penalties for non-compliance. However, first-time ALEs will not be subject to a subsection (a) penalty for failing to offer full-time employees coverage as long as they offer coverage by April 1st of the first year following ALE status. If the employer does not offer coverage to the full-time employee by April 1st, the employer may be subject to the subsection (a) penalty for those months (January-March) in addition to any subsequent calendar months for which coverage is not offered. The first-time ALE will also not be subject to a subsection (b) penalty if the coverage offered on April 1st provides minimum value. If the employer does offer coverage by April 1st but the coverage does not provided minimum value, the employer may be subject to the subsection (b) penalty for those initial calendar months (January-March) in addition to any subsequent calendar months for which the penalty may apply. This transitional relief is only available for the first year in which an employer is an ALE. ALEs will not be able to rely on it for subsequent years if their employee counts fluctuate over and under the 50 FTE threshold.

In sum, employers with non-calendar year plans on the verge of being ALEs should be prepared to offer “full-time” employees coverage on January 1st the first year they are an ALE.

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2017 Tax Returns Require Filers to Certify Health Insurance

October 18, 2017

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On October 13, 2017 the IRS announced that it will require tax filers to certify if they had health coverage for the year on their tax returns.  The IRS will not accept paper or electronic filings if the filer does not report full-year coverage, claim a coverage exemption or report a shared responsibility payment on the tax return.

Individuals with qualifying coverage for the entire year will check the “Full-year coverage” box on their federal income tax return. Those who are claiming a coverage exemption will file Form 8965 with their federal income tax return.  Those who owe a shared responsibility payment will report the payment on Form 1040 in the Other Taxes section and on the corresponding sections on Form 1040A and 1040EZ.

In previous years tax filers did not need to provide this certification despite the Individual Shared Responsibility Provision (aka, Individual Mandate) being in effect. The Individual Mandate requires individuals to have qualifying health care coverage (minimum essential coverage) for each month, qualify for an exemption or pay a penalty when filing their federal income tax return. Minimum essential coverage includes:

  • Most health coverage provided by your employer;
  • Health insurance purchased through the Marketplace;
  • Coverage under a government-sponsored program; and
  • Individual policies purchased from insurance companies.

Individuals have through Monday, April 16, 2018 to file their federal income taxes.

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Interim Rules on Contraceptive Exemptions

October 10, 2017

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On October 6, 2017 the Department of Health and Human Services (HHS) and the Department of the Treasury released interim rules expanding the exemptions from providing contraceptive coverage without cost sharing.

Background

The Affordable Care Act (ACA) required coverage of certain preventive services without cost sharing. Congress granted the Health Resources and Services Administration (HRSA), a part of HHS, discretion to determine what was included in “preventive services” for women. HRSA concluded that preventive services included contraceptives. However, the Departments reserved authority to reevaluate the definition of “preventive services” and the accommodation/exemption rules.

On May 4, 2017 President Trump issued the “Presidential Executive Order Promoting Free Speech and Religious Liberty.” This directed various Departments to “consider issuing amended regulations, consistent with applicable law, to address conscience-based objections to the preventive care mandate…” This prompted federal Departments to release interim final rules on October 6th that expand the exemptions for religious and moral objections to contraceptive coverage.  Departing from tradition, these interim rules are effective immediately and not upon the issuance of final regulations. The Departments are holding a notice-and-comment period that expires December 5, 2017. It’s unknown when the government anticipates releasing final regulations.

Religious Objections

Previously, only nonprofit “religious employers” were eligible for an exemption from the contraceptive mandate. This was extended to closely held, for-profit employers with sincerely held religious objections after the Hobby Lobby Supreme Court decision.

The new rules expand the exemption to many non-governmental employers, issuers and individuals with sincerely held religious objections. The following are now eligible to claim a religious exemption:

  • For-profit corporations (regardless of size or if they are publically/privately held);
  • Churches, integrated church auxiliaries, church conventions or association and religious orders;
  • Nonprofit organizations; and
  • Higher education institutions.

Moral Objections

The interim rules also created a new exemption for certain non-governmental employers with sincerely held moral convictions against the contraceptive mandate. The following are now eligible to claim a moral exemption:

  • Nonprofit organizations;
  • Privately held for-profit employers;
  • Insurers; and
  • Higher education institutions.

How to Claim the Exemption

Under the interim rules, if an employer objects on either religious or moral ground they do not have to provide any kind of self-certification or notice to the government to claim the exemption. The existing accommodation process still exists; it’s just optional. However, ERISA plans will still need to follow employee notice procedures for changes in covered benefits. In addition, if information contained in the Summary of Benefits and Coverage (SBC) is materially changed, plans should send out a Summary of Material Modification (SMM) 60 days before adopting the reduction.

What’s Next?

There’s a lot of uncertainty around these interim rules. The interim rules request comments and suggestions around multiple aspects of the law including if the eligible parties should be expanded, if a formal procedure to claim the exemption should be added, how to determine if a religious or moral objection is “sincerely-held,” and how this will affect various types of corporate entities. To complicate matters, multiple lawsuits have already been filed that may halt the interim rules. The California Attorney General and the American Civil Liberties Union (ACLU) already filed suit and others are expected to follow.

In sum, employers should proceed with caution if claiming the religious or moral exemption due to the continued administrative process and ongoing litigation.

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