Author Archives | Chris Beinecke

About Chris Beinecke

Christopher Beinecke, J.D., LL.M. has joined MMA in the newly created position of EH&B National Compliance Leader to oversee this effort. Chris is a highly skilled legal practitioner with deep knowledge and years of experience in the areas of compliance and administrative best practices for health and welfare benefit programs. Chris’s legal experience is vast and diverse. Most recently, with the employee benefits practice at international corporate law firm Haynes and Boone, LLP. Prior to that, Chris was a senior compliance consultant for 10 years at Towers Watson and played a major role in the development of the firm’s U.S. health and welfare compliance practice. Chris also worked as an employee benefits lawyer in private practice before entering consulting. Chris received his J.D. from Ohio State University Moritz College of Law, and an LL.M. in taxation from Washington University in St. Louis School of Law. He also holds a B.S. in finance from Miami University Ohio. Chris is licensed to practice in both Texas and Missouri, and is admitted to the U.S. Tax Court.

The Rise of State Individual Mandates – March 2020

March 23, 2020

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As of 2019, the Tax Cut and Jobs Act of 2017 reduced the ACA’s individual mandate penalty to $0. In reaction, several states and the District of Columbia have enacted their own ACA-style individual mandates requiring taxpayers to provide proof of health coverage to avoid financial penalties. This article focuses on the obligations for employers sponsoring group medical coverage and summarizes what we know so far.

For more information, download here.

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A Coronavirus Update for Employers

March 20, 2020

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Just released:

Important information on the Families First Coronavirus Response Act (FFCRA)

The U.S. House of Representatives passed the Families First Coronavirus Response Act (FFCRA) Saturday morning, March 14, 2020. We expect the FFCRA will pass the Senate and be signed by the President into law later this week. For more information, download here.

Stay up-to-date on information and guidance about COVID-19 on MMA’s resource page: https://mma.marshmma.com/coronavirus-outbreak-resource-page.

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The Rise of State Individual Mandates

February 13, 2020

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Restoring an Affordable Care Act (ACA) Requirement

As of 2019, the Tax Cut and Jobs Act of 2017 reduced the ACA’s individual mandate penalty to $0. In reaction, several states and the District of Columbia have enacted their own ACA-style individual mandates requiring taxpayers to provide proof of health coverage to avoid financial penalties. This article focuses on the obligations for employers sponsoring group medical coverage and summarizes what we know so far.  

Note: We intend to update this article as new or additional state individual mandate guidance becomes available. This article is current as of the publication date appearing at the top of this page.

Quick Summary

More detailed information for each state/jurisdiction appears after this section. For the remainder of this article, our use of the word “state” includes the District of Columbia.

State Effective Plan Reporting Requirement Reporting Requirement Due Date
California 2020 Yes, to CA Franchise Tax Board March 31st of the following year
District of Columbia 2019 Yes, to D.C. Office of Tax and Revenue June 30, 2020 for 2019 reporting year For later years, 30 days after federal forms 1095 due to IRS
Massachusetts 2018 (current version) Yes, to MA Department of Revenue December 15th of the current year
New Jersey 2019 Yes, to NJ Department of Revenue and Enterprise Services March 31st of the following year
Rhode Island 2020 TBD, but to RI Department of Taxation TBD
Vermont 2020 TBD, but to VT Department of Taxes TBD

Effect on ACA Reporting Relief

In late 2019, the IRS granted penalty relief for failing to automatically distribute Forms 1095-B to covered individuals provided certain criteria is met. This relief is also available under very limited circumstances for distributing Forms 1095-C.

The state individual mandates generally[1] require Forms 1095 also be provided to the employees/covered individuals covered by the state individual mandate reporting requirement, which effectively defeats the IRS relief from automatically distributing forms.  

Excess Reporting and Data Privacy Issues

Federal and state data privacy rules (including HIPAA) generally provide exceptions for disclosing protected information if required by law.[2] These exceptions enable employers to report the information required under the state individual mandates without violating data privacy laws.

The reporting requirements for each of the state individual mandates is limited to covered individuals who are residents of that state, and employers should limit its reporting to those individuals. If an employer reports information for other non-resident individuals – which may occur if the employer simply files its entire Form 1095-C reporting file with the state – the additional disclosures may be violations of one or more data privacy laws. We realize it may be administratively difficult for an employer to separate and report only those records required by a state individual mandate.

California

Effective Date

California’s individual mandate is effective as of January 1, 2020.

Individual Mandate and Penalty

To avoid a penalty, California residents are required to maintain health coverage for themselves, any spouse or registered domestic partner, and any dependent(s) for each month of the calendar year unless an exemption applies.

Per Person Penalty Method Income Percentage Penalty Method Maximum Penalty Amount
$695 per adult   $347.50 per child under 18 2.5% of yearly household income above the applicable annual filing threshold[1] The lesser of: 1.    The greater of the per person or income percentage penalty method Or 2.    The state average premium for qualified health plans that have a bronze level of coverage for the applicable household size involved

Note:  The penalty amount is pro-rated by the number of months without coverage.

Example 1: A married couple both under age 65 have health coverage for eight months during 2020 but do not qualify for an exemption from California’s individual mandate for the first four months. The family’s household income for 2020 is $78,000. The applicable individual mandate penalty is calculated as follows: 

Per Person Penalty
= ($695 x 2)
= $1,390 x (4/12)
= $463.33                
Income Percentage Penalty
= ($78,000 – $36,4853)
= ($41,515 x 2.5%) x (4/12) 
= $345.96

The maximum penalty amount is $463.33 (assuming this is lower than the state average premium for bronze coverage for a married couple for four months).

Plan Reporting Requirement

Reporting is required for covered individuals who are California residents.

Employer-Sponsored Health Coverage Reporting Entity How Reported Due Date
Self-Insured Employer Duplicate IRS Forms 1095-B/1095-C will be filed with the CA Franchise Tax Board Reporting procedures are TBD March 31st of the following year (March 31, 2021 for the 2020 reporting year)
Fully Insured Insurance Carrier

Plan Reporting Penalty

Employers with self-insured coverage are subject to a $50 per covered individual penalty for failing to report.

Example 2: If an employer fails to file a duplicate IRS Form 1095-C with the CA Franchise Tax Board that reflects coverage for an employee, spouse, and two dependent children, the employer is subject to a $200 penalty ($50 x 4).

Additional Resources

California Franchise Tax Board Individual Mandate Information

California Individual Mandate (Code)

California Individual Mandate Penalty Estimator

District of Columbia

Effective Date

The District of Columbia’s individual mandate is effective as of January 1, 2019.

Individual Mandate and Penalty

To avoid a penalty, D.C. residents are required to maintain health coverage for themselves, any spouse, and any dependent(s) for each month of the year unless an exemption applies.

Per Person Penalty Method Income Percentage Penalty Method Maximum Penalty Amount
$695 per adult   $347.50 per child under 18 2.5% of yearly household income above the applicable federal annual filing threshold The lesser of:
1. The greater of the per person or income percentage penalty method Or
2. The state average premium for qualified health plans that have a bronze level of coverage for the applicable household size involved

Note:  The penalty amount is pro-rated by the number of months without coverage.

Example 1: A married couple both under age 65 have health coverage for eight months during 2020 but do not qualify for an exemption from D.C.’s individual mandate for the first four months. The family’s household income for 2020 is $78,000. The applicable individual mandate penalty is calculated as follows: 

Per Person Penalty
= ($695 x 2)
= $1,390 x (4/12)
= $463.33                     
Income Percentage Penalty
= ($78,000 – $24,400)
= ($53,600 x 2.5%) x (4/12)
 = $446.67

The maximum penalty amount is $463.33 (assuming this is lower than D.C.’s average premium for bronze coverage for a married couple for four months).

Plan Reporting Requirement

Reporting is required for covered individuals who are D.C. residents.

Employer-Sponsored Health Coverage Reporting Entity How Reported Due Date
Self-Insured Employer Duplicate IRS Forms 1095-B/1095-C will be filed with the D.C. Office of Tax and Revenue (OTR) Reporting is done electronically through MyTaxDC.gov and there is no paper reporting option (employers who pay D.C. taxes should already be registered) June 30, 2020 for 2019 reporting year For later years, 30 days after federal forms 1095 due to IRS
Fully Insured Insurance Carrier
(see note below)

Note:  It is unclear under existing D.C. guidance if an employer must report anything if coverage is solely fully insured, but this is implied since an employer would not have coverage information to report.

Guidance from OTR indicates an employer with fewer than 50 full-time employees (including at least one in D.C.) during the reporting year does not have a reporting requirement. This is not consistent with the D.C. statute which does not excuse smaller employers with self-insured coverage.[4] OTR is the enforcing agency, so smaller employers with self-insured coverage should not be subject to penalties for failing to report. This means employees of smaller employers with self-insured coverage may need to substantiate their own coverage to avoid a D.C. individual mandate penalty.

Plan Reporting Penalty

D.C. has not specified the applicable penalty to an employer for failing to report one or more Forms 1095 to OTR.

Additional Resources

D.C. Health Link Individual Mandate  

D.C. Office of Tax and Revenue Guidance

MyTaxDC.gov (for reporting)

D.C. Individual Mandate (Code)

Massachusetts

Massachusetts has long required residents to maintain health coverage that meets the Massachusetts Creditable Coverage (MCC) standard and required plans to report to covered individuals whether the plan met the MCC standard using Form MA 1099-HC.

Massachusetts also revived the health insurance responsibility disclosure (HIRD) in 2018. This HIRD is different from the version used from 2007 – 2013, and is used to provide information about employer-sponsored insurance to help the state administer the MassHealth Premium Assistance Program.  

Effective Date

Massachusetts has maintained an individual mandate requirement since July 1, 2007. The first revived HIRD was due November 30, 2018 (but note a different annual due date applies for later years). 

Individual Mandate and Penalty

To avoid a penalty, Massachusetts residents are required to maintain MCC for themselves, any spouse, and any dependent(s) for each month of the year unless an exemption applies. The penalties scale based on income and are indexed annually.

MCC Penalties for 2020
Individual
Income Category*
>150-200% FPL >200-250% FPL >250-300% FPL >300% FPL
Penalty $22/month $264/year $43/month $516/year $65/month $780/year $135/month $1,620/year
*Use the chart below to determine the applicable federal poverty level (FPL) based on family size
Schedule Reflects 2019 FPL Standards for 2020 Eligibility
Family Size 150% FPL 200% FPL 250% FPL 300% FPL
1 $18,210 $24,280 $30,350 $36,420
2 $24,690 $32,920 $41,150 $49,380
3 $31,170 $41,560 $51,950 $62,340
4 $37,650 $50,200 $62,750 $75,300
5 $44,130 $58,840 $73,550 $88,260
6 $50,610 $67,480 $84,350 $101,220
7 $57,090 $76,120 $95,150 $114,180
8 $63,570 $84,760 $105,950 $127,140
Each add’l person add: $6,480 $8,640 $10,800 $12,960

Plan Reporting Requirement

Different reporting requirements apply in Massachusetts.

Employer-Sponsored Health Coverage Reporting Entity for Form MA 1099-HC How Reported Due Date
Self-Insured Employer (or TPA on employer’s behalf) Mailed to primary enrollee or electronically with consent January 31st of the following year  
Fully Insured Insurance Carrier

Employer-Sponsored Health Coverage Reporting Entity for HIRD How Reported Due Date
Self-Insured Employer if employing 6 or more employees in Massachusetts Reporting is done electronically through MassTaxConnect to the MA Department of Revenue and there is no paper reporting option (employers who pay MA taxes should already be registered) December 15th of the current year
Fully Insured

Reporting Penalties

Employers with self-insured coverage are subject to a $50 penalty for each individual it failed to provide with a Form MA 1099-HC, capped at $50,000 per year.

Employers who fail to file or knowingly falsify a HIRD are subject to a penalty of $1,000 – $5,000 for each violation. There are no other penalties related to information provided by an employer in a HIRD.

Additional Resources

MMA Article on MCC and Form MA 1099-HC

Mass.gov Information on Form MA 1099-HC

2019 Form MA 1099-HC

MMA Article on HIRD Reporting

Mass.gov Information on HIRD Reporting

Massachusetts 2020 Individual Mandate Penalties

New Jersey

Effective Date

New Jersey’s individual mandate is effective as of January 1, 2019.

Individual Mandate and Penalty

To avoid a penalty, New Jersey residents are required to maintain health coverage for themselves, any spouse, and any dependent(s) for each month of the year unless an exemption applies.

Per Person Penalty Method Income Percentage Penalty Method Maximum Penalty Amount
$695 per adult   $347.50 per child under 18 2.5% of yearly household income above the applicable annual filing threshold The lesser of: 1.    The greater of the per person or income percentage penalty method Or 2.    The state average premium for qualified health plans that have a bronze level of coverage for the applicable household size involved

Note:  The penalty amount is pro-rated by the number of months without coverage.

Example 1: A married couple both under age 65 have health coverage for eight months during 2020 but do not qualify for an exemption from New Jersey’s individual mandate for the first four months. The family’s household income for 2020 is $78,000. The applicable individual mandate penalty is calculated as follows: 

Per Person Penalty
= ($695 x 2)
= $1,390 x (4/12)      
= $463.33                
Income Percentage Penalty
= ($78,000 – $20,000)
= ($58,000 x 2.5%) x (4/12)
 = $483.33

The maximum penalty amount is $483.33 (assuming this is lower than New Jersey’s average premium for bronze coverage for a married couple for four months).

Plan Reporting Requirement

Reporting is required for covered individuals who are New Jersey residents.

Employer-Sponsored Health Coverage Reporting Entity How Reported Due Date
Self-Insured Employer Duplicate IRS Forms 1095-B/1095-C will be filed with the NJ Department of Revenue and Enterprise Services (DORES) Reporting is done through the DORES MFT SecureTransport system used for reporting Forms W-2 and there is no paper reporting option (employers who pay NJ taxes should already have an account) Employers may request an account or a bulk filing account by contacting DORES March 31st of the following year (March 31, 2020 for the 2019 reporting year)
Fully Insured Insurance Carrier

Reporting Penalty

New Jersey has not specified the applicable penalty to an employer for failing to report one or more Forms 1095 to DORES. In draft regulations, employers with self-insured coverage are subject to a $50 penalty for each missed form that should have been reported to DORES.

Additional Resources

New Jersey Health Insurance Mandate Information for Employers

DORES MFT SecureTransport system (for reporting)

New Jersey Individual Mandate (Code)

NJ Individual Mandate Penalty Calculator

2019 NJ-1040 Excerpt (shared responsibility payment)

Rhode Island

Rhode Island enacted an individual mandate, but it remains a work-in-progress and guidance addressing plan reporting requirements and penalties has not been issued.

Effective Date

Rhode Island’s individual mandate is effective as of January 1, 2020.

Individual Mandate and Penalty

To avoid a penalty, Rhode Island residents are required to maintain health coverage for themselves, any spouse, and any dependent(s) for each month of the year unless an exemption applies.

Per Person Penalty Method Income Percentage Penalty Method Maximum Penalty Amount
$695 per adult   $347.50 per child under 18 2.5% of yearly household income above the applicable annual filing threshold*   *In Rhode Island, the filing threshold is the standard deduction plus the number of available exemptions for the taxpayer’s filing status. The lesser of: 1.    The greater of the per person or income percentage penalty method Or 2.    The state average premium for qualified health plans that have a bronze level of coverage for the applicable household size involved

Note:  The penalty amount is pro-rated by the number of months without coverage.

Example 1: A married couple both under age 65 have health coverage for eight months during 2020 but do not qualify for an exemption from Rhode Island’s individual mandate for the first four months. The family’s household income for 2020 is $78,000. The applicable individual mandate penalty is calculated as follows: 

Per Person Penalty
= ($695 x 2)
= $1,390 x (4/12) 
= $463.33                                            

Filing threshold
= $17,800 + ($4,150 x 2)
= $26,100

Income Percentage Penalty
= ($78,000 – $26,100)
= ($58,000 x 2.5%) x (4/12)
= $483.33

The maximum penalty amount is $483.33 (assuming this is lower than Rhode Island’s average premium for bronze coverage for a married couple for four months).

Plan Reporting Requirement

TBD, but we know reporting will be made to Rhode Island’s Department of Taxation.

Reporting Penalty

TBD

Additional Resources

Rhode Island Department of Taxation Health Coverage Mandate Page

Individual Mandate Information from HealthSource RI (RI Public Insurance Marketplace)

Rhode Island Individual Mandate (found in 2020 budget bill beginning on page 316)

Vermont

Vermont enacted an individual mandate, but it remains mostly a statement of intent.

Effective Date

Vermont’s individual mandate is effective as of January 1, 2020.

Individual Mandate and Penalty

There is no individual mandate penalty for 2020. Vermont intends to use the data to communicate coverage options to the uninsured. Penalties may apply in later years.

Plan Reporting Requirement

TBD, but we know reporting will be made to Vermont’s Department of Taxes.

Reporting Penalty

TBD

Additional Resources

Vermont Individual Mandate


[1] This does not apply to all of the states (e.g. Massachusetts), although further guidance and requirements are still pending.

[2] For example, 45 CFR §164.512(a) of the HIPAA regulations permits a HIPAA-covered entity to use or disclose protected health information to the extent that such use or disclosure is required by law and complies with and is limited to the relevant requirements of such law. A similar exception can be found in California’s Confidentiality of Medical Information law at California Civil Code Section 56.20(c)(1).

[3] This is the applicable 2019 threshold. The 2020 thresholds are not yet available.

[4] The ACA also requires small employers with self-insured coverage to report using IRS Forms 1094-B/1095-B

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IRS Releases Draft 2019 Instructions for Forms 1094/1095

November 20, 2019

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After a lengthy and unexplained delay, the Internal Revenue Service released drafts of the 2019 Forms 1094-C1095-C and their corresponding instructions on November 13, 2019.  The forms and reporting obligations are basically unchanged from 2018.  There had been speculation that reporting might be streamlined due to the repeal of the individual mandate, but that is not the case.

Minor Changes Only

  • All references to the individual mandate were removed, although the reporting requirements tied to the individual mandate remain.  These are Form 1095-B and Form 1095-C, Part III.
  • Amounts that are annually indexed were adjusted:
    • Penalty amount for failing to file or furnish a correct information return cannot exceed $3,339,000 each in a calendar year.
    • Affordability percentage updated to 9.86%.
  • Due dates for forms:
    • Employers must provide Forms 1095-C to full-time employees (and other employees enrolled in self-insured health coverage) by January 31, 2020.  The IRS historically extends this deadline to early March, but this hasn’t occurred yet.
    • Employers filing less than 250 returns may file paper returns with the IRS by February 28, 2020.
    • Employers filing electronically must file with the IRS by March 31, 2020. An employer who files 250 or more returns must file electronically.

The IRS simultaneously released the drafts for the 2019 Forms 1094-B1095-B and their corresponding instructions. No major changes were made to the B Forms.

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All That Glitters in not Gold

October 28, 2019

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A Cautionary Tale about Certain Claimed Tax Savings Arrangements Disguised as Wellness Programs

Promoters have long pitched some variation of the following wellness program to employers:

  • Employees pay pre-tax contributions to participate in a self-insured group health plan;
  • During the course of the plan year, the plan returns most or all of the employee contributions to the employees for the completion of wellness-related activities[1]; and
  • The reimbursements are tax free to the participants.

This proposal obviously sounds amazing to prospective employers due to the potential payroll tax savings to the employer and the payroll and income tax savings to employees. Many promoters will even provide some sort of memorandum from the promoter’s legal counsel and/or other written articles supporting the arrangement’s compliance with applicable laws, such as the Internal Revenue Code (IRC).  

As the old saying goes, “If it sounds too good to be true, it usually is.”   

Buyer Beware

At least three of these types of arrangements have been either rejected outright or limited by the IRS for impermissible tax avoidance. 

  1. The Double Dip
    This arrangement is the oldest of the three and generally works as described above. Participants typically receive large reimbursements greatly exceeding any actual out-of-pocket medical expense and/or for completing pretty nominal wellness-related activities. These may include watching a webinar, attending a presentation providing general health information,  or attending general health counseling sessions. It may also include participating in more robust wellness activities such as biometric screening.

    The IRS has explicitly stated on several occasions that programs whose primary purpose is to refund pre-tax contributions as tax free reimbursements do not qualify for an income tax exclusion for the employee under IRC Sections 105 or 106 when the reimbursements are disproportionately larger than any actual out-of-pocket medical expense (please see Revenue Ruling 2002-3). Despite this clear position, the Double Dip continues to pop up. The U.S. Department of Justice recently convicted the promoters of a Double Dip known as the Classic 105.
  2. The Sleight of Hand
    Under the Sleight of Hand arrangement, employees pay a small contribution toward the self-insured group health plan on an after-tax basis. The arrangement may or may not also involve the employees paying significantly larger pre-tax contributions toward coverage. Similar to the Double Dip, participants typically receive large reimbursements greatly exceeding any actual out-of-pocket medical expense and/or for completing wellness-related activities.

    The Sleight of Hand is an attempt to move the tax exclusion away from IRC Sections 105 and 106 to IRC Section 104(a)(3) and avoid the IRS’ unfavorable Double Dip guidance on disproportionately large reimbursements. Under IRC Section 104(a)(3), benefits are not taxable to the recipient if the health insurance coverage (or an arrangement that operates like health insurance) is not paid for on a tax free basis. 

    In IRS Chief Counsel Memorandum 201719025 (released May 12, 2017), the IRS indicated that IRC Section 104(a)(3) does not apply to these arrangements, because the plan cannot qualify as health insurance (or an arrangement that operates like health insurance). This is because there is no actual insurance risk for the participants, all or nearly all of whom are virtually guaranteed to receive benefits far in excess of their after-tax contributions. In addition, the IRS believes this demonstrates a significant portion of the coverage is really being provided on a tax free basis. As a result, the excess of the benefits received over the amount of any after-tax contribution should be treated as taxable income to the employee.
  3. The Flex Credit Switch
    This arrangement is similar to the Double Dip or Sleight of Hand, but with a twist. Under the Flex Credit Switch, some or all of the benefits received from the self-insured group health plan are provided as flex credits that can be used to purchase other benefits on a pre-tax basis through the client’s IRC Section 125 cafeteria plan instead of being provided as direct reimbursements.   

    If the flex credits are used to purchase non-taxable benefits under the cafeteria plan, the flex credits are excluded from the employee’s taxable income. A “non-taxable benefit” is a benefit that can both be paid for on a pre-tax basis and provide tax free benefits to participants. In other words, the Flex Credit Switch works when the flex credits are used for non-taxable benefits.

    This makes sense, because the entire exercise amounts to the employee deferring otherwise taxable income to make pre-tax cafeteria plan elections. But…there’s a catch.

    Under many Flex Credit Switch arrangements, the benefits that can be purchased with the flex credits are actually taxable benefits. This means the benefits cannot both be paid for on a pre-tax basis and provide tax free benefits. When this is the case, the flex credits are included in the employee’s taxable income (please see IRS Chief Counsel Memorandum 201719025, Situation #2).

Examples of problematic taxable benefits include:

  • Most accident and disability benefit products;
  • Whole and variable life insurance products;
  • Supplemental term life insurance products in excess of $50,000;[1]
  • Most fixed indemnity products;[2] and
  • Gym memberships.[3]

ERISA Note

We believe permitting employees to pay pre-tax for many fixed indemnity products will also cause them to be considered ERISA plans sponsored by the employer if this wasn’t already the case.

Our Recommendation

We strongly recommend against relying on an opinion letter, memorandum, or articles provided by a promoter selling the claimed tax saving arrangement. We strongly recommend reviewing any claimed tax savings arrangement with your own legal counsel and/or tax advisor before signing up and offering the program to your employees.

[1] The difference, if any, tends to be used to compensate the promoter unless the promoter is paid through other means.

[2] The IRC and related rules only permit the first $50,000 of coverage to be paid for on a tax free basis.

[3] Most indemnity products can provide benefits in excess of unreimbursed medical expenses and are considered at least partially taxable benefits.

[4] We addressed the tax consequences for employer-provided gym memberships in an earlier article.

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California Mandates a Notice Requirement for Flexible Spending Accounts

October 28, 2019

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But California gets an incomplete

California recently enacted AB 1554, which requires employers sponsoring flexible spending accounts to notify employees of “any deadline to withdraw funds before the end of the plan year.” 

The law does not define the term “flexible spending account,” but it does indicate this term is intended to include dependent care flexible spending accounts (“DCFSAs”), health care flexible spending accounts (“HCFSAs”), and adoption assistance flexible spending accounts. We’ll refer to these collectively as FSAs in this article. It is not immediately clear what other benefits, if any, might be considered FSAs subject to this law.[1] As written, it does not appear this includes pre-tax transportation benefit plans.

The Bottom Line

We’ll address the rules in more depth later in this article, but the main takeaways are:

  1. Employers offering FSAs to employees working in California will be required to provide two forms of notification regarding forfeiture deadlines for unused funds.
  2. California will need to clarify certain items not addressed in the law.
  3. The notification requirements appear limited to mid-plan year forfeitures.
  4. Most HCFSAs should be exempt from the notification requirement due to ERISA preemption.

So, when exactly?

The notification requirement is effective January 1, 2020, apparently without regard to an FSA’s actual plan year.

The basics

Participants forfeit unused FSA funds at the end of the plan year. This is commonly referred to as the “use it or lose it” rule, and it is delayed and/or affected only by the FSA’s use of a run-out period, grace period, or a carryover (in the case of an HCFSA).

California’s new law requires employers to notify employees of an FSA forfeiture deadline, presumably to help the employees avoid forfeitures. Employers must communicate this notice in at least two different forms. The following is a non-exhaustive list of permitted forms of this notice:

  • Email,
  • Telephone,
  • Text message,
  • Postal mail, and
  • In-person notification.[2]

An employer can only satisfy one of the two forms of notification electronically, meaning the second form of notice must be verbal or printed. An FSA’s summary plan description (or comparable document) should describe the FSA’s forfeiture rules. Delivery through a web portal, email, or in printed form will satisfy one of the required forms of notification. While a variety of forms of alternative notices could be used to satisfy the second form of notification, we suspect FSA vendors will develop template notices that can be used for this purpose and will likely assist employers with delivery.

Missing pieces…

AB 1554 is only three sentences long and leaves several unanswered questions.

  1. Timing requirement?
    Although the law is effective beginning January 1, 2020, it does not include any specific timing requirement for notice delivery. As written, an employer could comply with the letter of the law by frontloading two forms of notification at the beginning of a plan year. The spirit of the law seems to be designed to provide a warning about an impending forfeiture. We believe later guidance will require one of the notifications to be closer in time to the forfeiture deadline.   
  2. Two forms of notice?
    The law specifies two forms of notice are required, but does this mean an employer can satisfy the law by delivering the same notice in two different ways? We believe later guidance will clarify that two separate types of notice are required.
  3. Consequences for non-compliance?
    The law doesn’t indicate what happens if an employer fails to comply. Is the employer subject to a fine? Do affected employees receive more time to submit claims before forfeiture occurs? This must be addressed in later guidance.

Appears limited to mid-plan year forfeitures

Again, the law requires employers sponsoring flexible spending accounts to notify employees of “any deadline to withdraw funds before the end of the plan year.” This appears intended to require employers to notify employees who may be subject to mid-plan year forfeitures of unused FSA funds.

Although technical, participants are not required to withdraw funds before the end of the plan year to avoid normal plan year end FSA forfeitures. Forfeiture could be avoided by withdrawing funds by or as of the end of the plan year. This may simply be a case of imprecise language, and California could certainly clarify one way or the other. In any event, this will usually be moot. The overwhelming majority of FSAs provide for run-out and/or grace periods that delay forfeiture until after the end of the plan year. As a result, California’s notice requirement wouldn’t apply to most plan year end FSA forfeitures anyway.[3]

Some FSAs do not accelerate forfeitures for mid-plan year losses of eligibility and should also avoid the notice requirements.[4] By contrast, mid-plan year losses of FSA eligibility usually can result in a need to use funds before the end of the plan year to avoid forfeitures. This appears to be the real target of California’s law. For example, an FSA might require a former employee to submit already incurred claims within 60 days of the loss of employment before the funds are forfeited.

It’s not clear how the notice requirement might apply to a short plan year as a result of a plan amendment or termination.

ERISA preemption

Most HCFSAs are self-insured ERISA plans, and ERISA preemption should apply to California’s notice requirement. It is a slam dunk that ERISA will preempt the law from any modification of the HCFSA’s forfeiture rules. California does not always automatically recognize ERISA preemption, and it may take a successful challenge before California backs off. An employer can always voluntarily comply with the notice requirements, and a conservative employer will want to comply until someone [else] is successful with an ERISA preemption challenge.

ERISA preemption is not available for the HCFSAs of governmental entities or church plans, DCFSAs, or adoption assistance flexible spending accounts. Employers should be ready to comply with the notice requirements for these FSAs by January 1, 2020.


[1] A health reimbursement arrangement (HRA) could theoretically qualify as an HCFSA, but most cannot due to an unrestricted carryover feature for unused funds. We will not discuss HRAs further in this article.

[2] Hand delivery of a printed document should qualify as in-person notification.

[3] Various FSA rules generally require some sort of notification to participants about the plan and its operations, so this just means the employer likely doesn’t have to provide a second form of notice.

[4] This should include DCFSAs with a permitted spend down feature for terminated participants.

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New Health Reimbursement Arrangements Allowed Under Final Rules

September 30, 2019

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Updated: September 30th, 2019

The President signed an Executive Order on October 12, 2017, directing the U.S. Departments of Labor, Treasury, and Health and Human Services (collectively, the “Agencies”) to consider rules expanding the availability and permitted uses for Health Reimbursement Arrangements (HRAs). The clear intent was to ultimately enable employers to offer HRAs to employees that can be used to purchase individual insurance policies. The Agencies issued a set of final regulations addressing this and related issues on June 13, 2019. Treasury issued additional proposed regulations on September 27, 2019.

Note: This is an update to our earlier article that addressed the June 13, 2019 final regulations. We have incorporated the additional information provided by Treasury in its September 27, 2019 proposed regulations. This new information is identified under Details about Individual Coverage HRAs by marking affected Items with an asterisk (*). Marked items with guidance may be relied upon as a safe harbor until further notice.

The Bottom Line

We’ll address the rules in more depth under Details about Individual Coverage HRAs below, but the main takeaways are:

  • Premiums – Employers will be able to offer HRAs to employees that can be used to pay for individual health insurance coverage and Medicare premiums. These will be referred to as “Individual Coverage HRAs” or “ICHRAs” in this article.
  • Employer mandate – ICHRAs can be used to avoid the Employer Shared Responsibility provisions (also known as the “employer mandate”) penalties under the Affordable Care Act (ACA).

However

  • It’s one or the other – An employer can offer traditional group health coverage to a class of employees or an ICHRA, but not both (with a very limited exception).

So, when exactly?

The effective date is for plan years beginning on or after January 1, 2020, which is unchanged from the earlier proposed rules. There is every indication that both the federal and state-run public insurance exchanges will not be ready to handle the anticipated increase in enrollment, adjust product offerings, or make accurate eligibility determinations until much later, so 2020 may prove chaotic for individuals covered by ICHRAs and the employers offering them. 

Details about Individual Coverage HRAs

ITEM

GUIDANCE

Eligibility

 

Employees (including former employees) and dependents enrolled in major medical coverage purchased in the public insurance exchange, individual insurance market, or Medicare[1] are eligible to participate.

Coverage for any part of a month for which a premium is due qualifies.

Employees who are enrolled in coverage consisting solely of excepted benefits,[2] short-term limited duration insurance, TRICARE, or health care sharing ministry coverage are ineligible.

Reimbursements

The ICHRA may be designed to limit reimbursements solely for individual insurance premiums, or it can be designed to also allow reimbursements for qualified medical expenses (so long as the expenses are not limited to medical expenses not covered by Medicare).

Classes of Employees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employers may divide their workforces into the following classes of employees:

  1. Full-time employees
  2. Part-time employees
  3. Employees working in the same geographic location (generally, the same insurance rating area, state, or multi-state region)
  4. Salaried workers
  5. Non-salaried workers (such as hourly employees)
  6. Seasonal employees
  7. Employees covered by a collective bargaining agreement
  8. Employees eligible for the employer’s traditional group health coverage who are in a waiting period
  9. Non-resident aliens with no U.S.-based income
  10. Temporary employees of staffing firms
  11. Any group formed by combining two or more of the above classes (Example:  Full-time, salaried employees).

If an ICHRA is offered to a class, it must be offered on the same terms to all employees within the class.[3] Benefit levels can vary only based on age[4] and family size within a class.

If an employer offers an ICHRA to a class, it cannot offer its traditional group health coverage to that class, except that an employer may offer traditional coverage to grandfathered members of a class and limit new hires of that class to ICHRAs after a date chosen by the employer.

Employee Class Size

If an employer offers traditional group health coverage to some of its employees, a minimum employee class size applies to ICHRAs offered to classes (1) – (5) described above or any combination that includes one of those classes.

The minimum class size is:

  • 10 employees for an employer with < 100 employees,
  • 10% of the total number of employees, for an employer with 100 to 200 employees, and
  • 20 employees for an employer with > 200 employees.

Special Enrollment Period

Individuals who gain access to an ICHRA qualify for a 60-day special enrollment period in the public insurance exchange and individual market.

ACA and the Employer Mandate*

 

An ICHRA automatically qualifies as “minimum essential coverage” and is an “offer of coverage” for the purposes of meeting the ACA’s employer mandate to offer coverage to at least 95% of full-time employees (FTEs).

An ICHRA is deemed “affordable coverage” if the difference between the monthly premium for the lowest cost available silver plan and 1/12th of the annual ICHRA contribution is equal to or less than the applicable affordability safe harbor percentage.

There are three factors used to determine the applicable lowest cost available silver plan for an FTE:  (1) The FTE’s location; (2) the FTE’s age; and (3) a silver plan cost look-back safe harbor.

(1) FTE’s Location

An employer may use an FTE’s primary worksite as a safe harbor for the FTE’s location. In general, an FTE’s primary worksite is where the employer reasonably expects the FTE to perform services on the first day of the ICHRA plan year (or the coverage effective date for new hires).[5]

If the FTE’s primary worksite changes during the year, the location of the applicable lowest cost available silver plan must also change no later than the 1st day of the 2nd month following the change in primary worksite.

For remote employees (e.g. telecommuters):

  • If the remote employee reports to a work location when not working remotely, this work location is the primary worksite.
  • If the employee is only expected to work remotely, the employee’s primary residence is the primary worksite.

Note: It is possible for a multi-site employer to have more than one FTE primary worksite in the same geographic rating area with different applicable lowest cost available silver plan options as a result.

(2) FTE’s Age

An employer may use the silver plan with the lowest premium cost at the lowest age bracket as the applicable lowest cost silver plan for all ages at a given location. An employer may also use the FTE’s age as of the first day of the ICHRA plan year (or the coverage effective date for new hires) for the entire ICHRA plan year. There are no other special rules related to FTE age.[6]  

(3) Silver Plan Cost Look-Back Safe Harbor

To address employer planning concerns:

  • A calendar year ICHRA may use the premium from the lowest cost silver plan in a given location as of January from the prior calendar year.
  • A non-calendar year ICHRA may use the premium from the lowest cost silver plan in a given location as of January from the current calendar year.

Affordable Coverage Example

In 2020, an employer makes an annual contribution of $6,000 to an FTE’s calendar year ICHRA. As of January 2019, the monthly premium for the lowest cost available silver plan for the FTE’s primary worksite and age was $600.  

$600 – ($6,000/12) = $100/month

The ICHRA is an affordable offer of coverage for the employee if $100/month is within an affordability safe harbor for that employee in 2020. Under the Rate of Pay safe harbor, this is affordable for an employee whose Rate of Pay income is at least $1,022/month ($100 / 9.78% = $1,022). Under the W-2 safe harbor, this is affordable for an employee who worked the entire calendar year and has Box 1 reportable W-2 wages of at least $12,264 ($1,022 x 12 = $12,264).

Consistent with other guidance, if a silver plan bases its premium cost on the completion of certain wellness activities, enrollees are deemed to automatically satisfy all tobacco-based requirements and fail all other requirements. In other words, the applicable premium to use is the premium for non-tobacco users who do not meet any other wellness standard.

An ICHRA deemed affordable coverage is automatically deemed to satisfy the ACA’s minimum value requirement paired with its individual major medical insurance policy.

An employer may vary the use of the ICHRA affordability rules across classes of employees but not within a class of employees.

Silver Plan Database*

The federal agencies intend to provide a national database of lowest cost silver plan information at a later date.

Waiver

 

Employees must be permitted to waive participation annually at the beginning of the plan year or effective date of coverage.

Exchange Subsidies

An individual who enrolls in an ICHRA is ineligible for subsidies through the public insurance exchange. An individual who waives coverage may be eligible for subsidies if the HRA is not considered an offer of affordable, minimum value coverage by the employer.

Substantiation

 

Employers are required to adopt reasonable substantiation procedures to confirm participants are enrolled in eligible medical coverage and communicate these to eligible employees no later than the first day of the plan year or effective date of coverage.

The rules indicate an employer may rely on the employee’s attestation of coverage or require reasonable proof of enrollment (such as an ID card).[7] A model attestation is available.

Employees are required to substantiate enrollment in eligible medical coverage (including for any dependents) each time a request for reimbursement is submitted.

ERISA Status, etc.

 

The ICHRA is itself an employer-sponsored group health plan.

The individual insurance coverage reimbursed by the ICHRA will not be considered an ERISA plan offered by the employer so long as the employer does not sponsor it or play a role in its selection.

HSA Eligibility

An individual who uses the ICHRA to purchase qualified high deductible health plan coverage is eligible to contribute to a health savings account unless the ICHRA can also be used to pay for general medical expenses.

Cafeteria Plan Option

 

An employer may allow employees within a class to pay for any remaining premium for eligible medical coverage through the employer’s cafeteria plan, but this is not available for coverage purchased through the public insurance exchange.[8]

Nondiscrimination*

A compliant ICHRA will generally be deemed to satisfy the applicable nondiscrimination rules under Section 105(h) of the Internal Revenue Code (IRC). However, an ICHRA that disproportionally benefits highly compensated employees may still be found to be discriminatory in actual operation.

Notice Requirements

 

Employers must provide eligible employees with a notice describing:

  1. The terms of the ICHRA,
  2. Contact information for assistance,
  3. The availability of a special enrollment right for individual coverage, and
  4. The effect the ICHRA may have on the employee’s eligibility for a subsidy in the public insurance exchange.

The notice must be provided at least 90 days before the beginning of the plan year. A model notice is available.

ACA Reporting*

The IRS will release guidance addressing ACA reporting on Form 1095-C for ICHRAs at a later date.

The employee class and class size limitations should make it difficult for an employer to simply shift its highest cost claimants to the individual market. That said, some classes of employees may incur higher medical expenses than others, and an employer could still shift a more expensive class to the individual market. The ICHRA may also provide employers with a lower, fixed cost coverage alternative to provide to certain classes of employees that present less significant attraction and retention challenges than others.

And for Good Measure…

The Agencies also created another category of HRA known as an “Excepted Benefit HRA” that may be offered on a standalone basis exempt from the ACA’s mandates if all of the following are true:

  • The employer offers traditional group health coverage to the employee whether or not the employee elects it (this means the employee cannot also be offered an ICHRA);
  • The maximum annual contribution is $1,800 (indexed);
  • Reimbursements are limited to general medical expenses and premiums for COBRA, short-term limited duration insurance, and other excepted benefits coverage (this can include many types of non-major medical health coverage); and
  • The Excepted Benefit HRA is available on a uniform basis to all similarly situated employees and is not designed to get high cost claimants to waive coverage.[9]

An Excepted Benefit HRA does not interfere with an individual’s eligibility for subsidies in the public insurance exchange. This form of HRA may be an interesting alternative to a traditional opt-out credit. It does not require the employee to actually enroll in other group health coverage to avoid impacting affordability calculations for the employer’s traditional group health coverage, and the HRA contributions aren’t subject to payroll taxes.[10]


[1] Oddly, fully insured student health insurance also qualifies.

[2] This is based on HIPAA’s “excepted benefits” rule.

[3] An employer can offer an ICHRA to some former employees within a class and not others so long as the terms are uniform for those offered coverage.

[4] ICHRA contributions for older employees are limited to a maximum of three times the contributions provided to younger employees.

[5] An employer could use an FTE’s primary residence. However, the employee class rules will require the employer to use the lowest cost available silver plan with the highest premium applicable to any FTE in the class across the entire class.

[6] An employer could rely on the age of the oldest FTE in an employee class as a sort of age-based safe harbor. This may result in a windfall for younger employees paying lower premiums for silver plan coverage.

[7] This may make the ICHRAs vulnerable to being used to pay for premiums for ineligible coverage.

[8] Employers are not required to permit this, and it might prove complex to administer.

[9] This is based on HIPAA’s “similarly situated groups” rule and is not tied to the permitted classes of employees under the Individual Insurance HRA.

[10] The IRC Section 105(h) nondiscrimination rules apply to Excepted Benefit HRAs.

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The Affordable Care Act’s Employer Mandate: Part 2

September 18, 2019

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Determining Full-Time Employees

This article is Part 2 in a series intended to provide an overview of the Employer Shared Responsibility provisions (also known as the “employer mandate”) under the Affordable Care Act (ACA). The employer mandate generally requires employers known as applicable large employers (ALEs) to offer medical coverage to full-time employees and certain dependents in order to avoid potential penalties.

We covered how to determine whether an employer is an ALE in Part 1. This Part 2 will address how to determine who is an ACA-defined full-time employee (FTE). This article assumes an employer has already determined it is an ALE, and we will be using the terms ALE and employer interchangeably throughout.

Full-Time Employee Status Matters

Although ALE status is determined using both full-time employees and full-time equivalent employees (described in Part 1), the employer mandate penalties only take full-time employees into account. This is why it is so important to be able to identify the full-time employees. This article does not attempt to address all of the nuances that apply under the ACA’s measurement rules.

What’s in a Name?

Continuing from Part 1, the employer mandate is filled with many defined terms, including:

  • Full-time employee (FTE) – An employee who is reasonably expected to work at least 30 hours per week on average and/or who does average at least 30 hours of service per week over the course of a measurement period.
  • Part-time employee (PTE) – An employee who is not reasonably expected to work at least 30 hours of service per week on average and/or who averages less than 30 hours of service over the course of a measurement period.
  • Variable-hour employee – A new employee with a flexible or uncertain work schedule preventing the employer from determining whether the employee will reasonably average more or less than 30 hours of service per week. Factors the employer should consider when classifying an employee as a variable-hour employee include:
    1. Whether the individual is replacing an employee who averaged 30 or more hours of service per week;
    2. Whether employees in the same or comparable position typically average 30 or more hours of service per week; and
    3. How the position was advertised (i.e., as a full-time or part-time position).

Please do not confuse a short-term or high turnover position with the definition of variable hour employee. If we know the employee will average 30 or more hours per week, the employee is not a “variable-hour employee” (but he or she might be a “seasonal employee”).

Note: The term “variable-hour employee” only applies to the look-back measurement method (describe later in this article). Technically, an employee is only a variable-hour employee when initially hired. The variable-hour employee will subsequently measure and be classified as an FTE or PTE thereafter.

  • Seasonal Employee – An employee hired into a position customarily needed for six months or less and related to staffing needs that recur around the same time each year. These are not the same as temporary employees who are hired as needs arise throughout a year. A seasonal employee can be subject to measurement even if reasonably expected to average at least 30 hours of service per week, and the idea is the seasonal employee will be gone before having to be treated as an FTE for ACA purposes.

Note: The term “seasonal employee” only applies to the look-back measurement method.

  • Hour of service – Each hour for which an employee is paid for duties performed or entitled to payment for periods during which no duties are performed (i.e., vacation, holiday, illness, incapacity, disability,[1] layoff, jury duty, military duty, or leave of absence).
  • Break in service – A period of consecutive weeks in which the employee is not credited with an hour of service.
  • Limited Non-Assessment Period (LNAP) – A period during which an ALE will not owe an employer mandate penalty without regard to whether an FTE was offered coverage. LNAPs include:
    • January through March of the first calendar year in which an employer is considered an ALE, but only for employees not offered coverage during the prior year.
    • A waiting period before coverage is effective.[2]
    • An employee’s first calendar month of employment if hired after the 1st of the month.
    • An employee’s initial measurement period and initial administrative period under the look-back measurement method (described later in this article).
    • If an employee in an initial measurement period transitions to a known FTE position, the three full calendar months following the transition qualify as an LNAP. In the real world, many employers will transition the employee to FTE status faster than the rules require.

Different Strokes for Different Folks Possible
Employers may use different measurement methods for the following categories – or combination of categories – of employees:

  1. Salaried employees and hourly employees;
  2. Employees located in different states (but not within the same state);
  3. Collectively bargained employees and non-collectively bargained employees; and
  4. Employees subject to different collectively bargained agreements.

In other words, an employer can use a different measurement method for salaried, non-collectively bargained employees than it uses for hourly, collectively bargained employees. This rule also permits an employer to use measurement periods that differ in length and/or their beginning and end dates for different categories of employees when using the look-back measurement method.

Monthly Measurement Method (MMM)

Under the MMM, an employer measures an employee’s actual hours of service at the end of each calendar month. If an employee averages 30 or more hours of service per week (130/month) for a calendar month, the employee was an FTE for that month. Since coverage cannot be offered retroactively, an employer may be exposed for failing to offer coverage to an employee determined to be an FTE after-the-fact unless an LNAP applies. If an employer does not select a measurement method, the ACA rules default the employer to the MMM.

Weekly Rule: The MMM rules also permit employers to measure hours of service using a “weekly rule” method. Under this method, the employer can use the number of work weeks used for payroll purposes during a calendar month. This can result in some months having 4 weeks and others having 5 for measurement purposes.

  • 4-week months ->TE = 120+ hours
  • 5-week months ->TE = 150+ hours

Look-Back Measurement Method (LBMM)

Under the LBMM, an employer can make certain employees[3] wait until the end of a measurement period to determine if they were FTEs after-the-fact. The employee’s FTE or PTE status is then locked in for a corresponding stability period. Unlike the MMM, an employer can avoid potential penalties by prospectively offering coverage during an FTE’s corresponding stability period.

An employee who is locked in as an FTE during a corresponding stability period cannot lose that status during the stability period while employed by the employer, even if the employee’s hours are reduced.[4]

Remember: An employee’s FTE status is protected prospectively during a stability period because the employee retroactively measured as an FTE. Also, an employee who is reasonably expected to average 30 or more hours of service per week is a known FTE and should not be made to wait for measurement to determine FTE status.

Under the LBMM, there are separate measurement rules for new employees and ongoing employees.

New Employee
An employee who has been employed for less than one complete standard measurement period (defined below).

Ongoing Employee
An employee who has been employed for at least one complete standard measurement period or who was present when the first standard measurement period was implemented.

New Employees

Initial Measurement Period (IMP)

  • The employer may determine the months in which the IMP begins and ends
  • The IMP can be 3 – 12 months in length (but the minimum ISP is 6 months)
  • IMP used to determine whether new employees measure as FTEs or PTEs

The IMP may begin on the date of hire or the first of the following month

The IMP may also begin on the first payroll date that occurs between the date of hire and first of the following month

Initial Stability Period (ISP)

  • The ISP can be 6 – 12 months, but it cannot be shorter than the employer’s IMP
  • During the ISP, the employee is treated as either:
    • An FTE for employer mandate purposes, or
    • A PTE and no coverage must be offered to avoid penalties

For new variable hour and seasonal employees, the ISP must begin immediately after the IAP

For those who are determined to be FTEs, The ISP must be the same length as the SP for ongoing employees

Initial Administrative Period (IAP)
The period of time during which the employer finishes measurement, determines whether coverage should be offered, and conducts enrollment.

  • The employer is permitted to select an IAP of up to 90 days.
  • The IAP may include a period beginning before and after the IMP. This allows an employer to begin the IMP on the first of the following month or next payroll period instead of the date of hire. The remaining IAP may be used after the IMP and before the ISP begins.
  • The IMP and the IAP combined may not exceed 13 months and a fractional month from the date of hire. In other words, the ISP cannot begin later than the 1st day of the 14th month after the date of hire.

Ongoing Employees

Standard Measurement Period (SMP)

  • The employer may determine the months in which the SMP begins and ends
  • The SMP can be 3 – 12 months in length (but the minimum SP is 6 months)
  • An employer can administer the SMP to coincide with a calendar year, a non-calendar plan year, or a different 12-month period (i.e. an annual enrollment event)
Standard Stability Period (SP)

  • The SP can be 6 – 12 months, but it cannot be shorter than the employer’s SMP
  • During the SP, the employee is treated as either:
    • An FTE for employer mandate purposes, or
    • A PTE and no coverage must be offered to avoid penalties

The SP must begin immediately after the AP.

Standard Administrative Period (AP)

The period of time during which the employer finishes measurement, determines whether coverage should be offered, and conducts enrollment.

  • The employer is permitted to select an AP of up to 90 days.
  • The AP begins immediately after the SMP ends.

NOTE: The AP cannot exceed 90 days, and nearly all 3-month time frames will exceed the maximum period allowed for an AP in any given year (e.g. using all of October, November, and December results in an AP of 92 days).

Putting it Together – The LBMM and When a New Employee Becomes an Ongoing Employee

Click here to view the graphic

A Quick Side-by-Side of Some Remaining Items

Monthly Measurement Method Look-Back Measurement Method
Easy for an employer whose workforce is made up entirely or almost entirely of known FTEs and PTEs Better suited for employers with a more flexible workforce and/or a workforce with a less certain FTE/PTE status
Less record keeping Generally best to hire a vendor and/or use specific software for measurement
Employer can adjust quickly for changes from FTE to PTE status Employee is “locked in” as an FTE (or PTE)[1] for the corresponding stability period
Handling a break in service is straightforward.

  • If an FTE has a break in service less than 13 weeks (26 for educational institutions), the employee is considered a continuing FTE and cannot be subject to a new waiting period upon returning to work. Coverage must be reinstated by the first of the month following the return.
  • If the break in service is 13 weeks or more (or 26 for educational institutions), the returning employee can be treated as a new employee and subjected to another waiting period.
Breaks in service are modified by special rules

  • If an FTE has a break in service less than 13 weeks (26 for educational institutions), the employee resumes their prior stability period. Coverage must be reinstated by the first of the month following the return.The employee generally earns 0 hours of service during the break in service for measurement purposes.
  • If the break in service is due to FMLA, USERRA, or jury duty, the employee does not have a break in service, and the employer must account for this leave period in the measurement period by either:
    • revising the measurement period to exclude this leave; or
    • using the employee’s weekly average hours of service during the rest of the measurement period for this leave period

Note: If the FMLA, USERRA, or jury duty is concurrent with other paid leave, the employee is already accruing hours of service.

Full-time determination is at the end of the month, leaving exposure without a remedy Rules vary depending on whether the employee is hired as full-time or non-full-time. The MMM is running in the background during the first measurement period

About the Authors:

Jennifer Stanley is a Compliance Consultant in the Employee Health & Benefits Compliance Center of Excellence for Marsh & McLennan.

Christopher Beinecke is the Employee Health & Benefits National Compliance Leader for Marsh & McLennan Agency.

[1] Again, in the real world, many employers will transition the employee to FTE status faster than the rules require.

[1] Paid disability leave generally counts toward hours of service unless solely paid for after-tax by the employee or provided through a workers’ compensation program.

[2] The waiting period rules vary between the monthly measurement and look-back measurement methods.

[3] These are variable hour, seasonal, and part-time employees.

[4] Similarly, PTE status cannot generally be affected either. In the real world, many employers will transition the employee to FTE status faster than the rules require.

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And in this Corner…the Fight to Expand Association Health Plans Continues

August 15, 2019

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The U.S. Department of Labor (DOL) issued Advisory Opinion 2019-01a to little fanfare on July 8, 2019, but the DOL’s move was a little bigger than the attention it received. It marked Round #3 in the ongoing battle between certain states and the DOL over the expansion of Association Health Plans (AHPs).

The Bottom Line
In its Advisory Opinion, the DOL agreed that Ace Hardware’s[1] corporate operations and independently owned retail stores were employers within the same industry and approved their formation of a Pathway 1 AHP in a large number of states. Traditional Pathway 1 AHPs have historically been limited to the same state, and this appears to be a reaction by the DOL to the unfavorable court opinion given to Pathway 2 AHPs last March.

A Quick Roadmap
The DOL refers to the two categories of AHPs as Pathway 1 and Pathway 2, and we’ll use those terms in this article.[2] Both can enable member employers to participate in large group insurance coverage or potentially self-insure. Please see below for a discussion of Pathway 1 and Pathway 2 AHPs and how we got here.

Pre-Fight

Pathway 1 AHP

AHP Member Employers Must:

  • Be within the same industry, trade, line of business or profession
    AND
  • Be located within the same geographic location (usually within the same state)

This was the AHP environment before the final rules expanding AHPs were issued:

Round 1
The final rules creating the Pathway 2 AHP were issued on June 18, 2018. There were staggered effective dates described in our earlier expansion of AHPs article.

Pathway 1 AHP

Pathway 2 AHP

AHP Member Employers Must:

AHP Member Employers Must:

  • Be within the same industry, trade, line of business or profession
    AND
  • Be located within the same geographic location (usually within the same state)
  • Be within the same industry, trade, line of business or profession (without regard to geographic location)
    OR
  • Have their principal place of business located within the same state or metro area (even if the metro area crosses state lines)

Pathway 2 AHPs also permit broader participation by self-employed individuals.

Round 2
Eleven States and the District of Columbia sued the DOL over Pathway 2 AHPs and received a favorable ruling on March 28, 2019. In an earlier article, we indicated the ruling appeared to leave wiggle room for employers in the same trades or businesses to form Pathway 2 AHPs across state lines. In a set of FAQs released in May, the DOL indicated it would appeal the ruling but would restrict the expansion of existing or the formation of new Pathway 2 AHPs in the meantime.

Pathway 1 AHP

Pathway 2 AHP | SUSPENDED
AHP Member Employers Must:

AHP Member Employers Must:

  • Be within the same industry, trade, line of business or profession
    AND
  • Be located within the same geographic location (usually within the same state)
  • Be within the same industry, trade, line of business or profession (without regard to geographic location)
    OR
  • Have their principal place of business located within the same state or metro area (even if the metro area crosses state lines)

Round 3
The DOL’s recent Advisory Opinion has this effect:

Pathway 1 AHP

Pathway 2 AHP | SUSPENDED

AHP Member Employers Must:

AHP Member Employers Must:

  • Be within the same industry, trade, line of business or profession (without regard to geographic location)
    AND
  • Be located within the same geographic location (usually within the same state)
  • Be within the same industry, trade, line of business or profession (without regard to geographic location)
    OR
  • Have their principal place of business located within the same state or metro area (even if the metro area crosses state lines)

What’s Next?
It will be interesting to see if the DOL’s Advisory Opinion encourages employers and insurance carriers/third party administrators to begin forming Pathway 1 AHPs across state lines or if most adopt a more general wait-and-see approach. It seems likely the States engaged in the current litigation with the DOL over Pathway 2 AHPs will also challenge this apparent expansion of Pathway 1 AHPs. The DOL appears to be on firmer footing with this Pathway 1 AHP expansion, and the position taken by the DOL also seems consistent with the language of the earlier court ruling from Round #2.[3]

[1] Full disclosure: Ace Hardware is a client of Marsh & McLennan Agency.

[2] In our previous articles, we referred to Pathway 1 as the “Narrow Standard AHP” and Pathway 2 as the “Relaxed Standard AHP.”

[3] Yes, we feel largely vindicated for our earlier interpretation that the court’s ruling seemed to leave room for employers in the same trades or businesses to form AHPs across state lines.

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Association Health Plans (AHPs) – Update

April 2, 2019

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Round One in the Fight over the new AHP Rules [Mostly] goes to the States
Last summer, eleven states and the District of Columbia (the “States”) sued the U.S. Department of Labor (DOL) over its final regulations intended to promote the expansion of AHPs (the “new rules”) on several grounds, including claims that the new rules conflict with both the Affordable Care Act and ERISA. On March 28, 2019, the U.S. District Court for the District of Columbia issued an opinion in favor of the States on certain key points while leaving other portions of the new rules intact.

In 30 Seconds or Less
Four key points from the Court’s ruling are:

  1. Related trades or businesses may still form AHPs across state lines under the new rules.
  2. Unrelated trades or businesses may not form AHPs at all.
  3. Associations cannot be formed for the primary purpose of offering an AHP.
  4. Self-employed individuals must remain limited in their ability to participate in an AHP, and independent contractors cannot participate.

And in More Detail…
There are two forms of permitted AHPs that we refer to as: (1) the Narrow Standard AHP created by prior guidance; and (2) the Relaxed Standard AHP created by the new rules.

The Final Regulations as Drafted
We provided an overview of the new rules and a side-by-side comparison of the two permitted forms of AHPs in an earlier article.

As Affected by the Court’s Ruling…
The Court’s ruling can be demonstrated by reproducing a portion of the side-by-side comparison from our earlier article in redlined form.

Narrow Standard AHP

Relaxed Standard AHP

Member employers must:

  1. Be within the same industry, trade, line of business or profession;
    AND
  2. Be located within the same geographic region (generally within the same state)
Member employers must:

  1. Be within the same industry, trade, line of business or profession;
    OR
  2. Their principal places of business must be located within the same state or metropolitan area (even if this crosses state lines)
The Association must already exist for a business purpose before it can provide the AHP to members The Association does not have to exist before providing the AHP to members, but it must have at least one other substantial business purpose

The requirement under the Narrow Standard AHP rule applies, meaning the Association must already exist for a business purpose before it can provide the AHP to members

Self-employed individuals are not eligible if running a business with no common law employees

 

Self-employed individuals who run a business with no common law employees may still be eligible under “Working Owner” test

“Working Owner” test:

  1. Works at least 20 hours/week or 80 hours/month for business
    OR
  2. Has earned income from the business at least equal to the cost of AHP coverage

The requirement under the Narrow Standard AHP rule applies, meaning self-employed individuals are not eligible if running a business with no common law employees

What’s next?
The Court’s opinion is missing an effective date, although this may be cleared up in the order that follows or through subsequent motions. The Court directed the DOL to consider how the new rules might operate with the overturned portions removed. The DOL could attempt to modify its new rules to better fit within the Court’s opinion instead, but this seems unlikely. This case was always headed for appeal, and the only surprise at this point might be which side is ahead after the first round.

The traditional appeal route would next move this case to the Circuit Court of Appeals for D.C. Whatever that outcome, it seems reasonable to believe the Circuit Court’s decision will also be appealed, meaning final resolution may need to come from the Supreme Court, which won’t occur in 2019. Although the Court’s opinion leaves open a path for related trades or business to form Relaxed Standard AHPs across state lines, we would not be surprised if interest cools in the interim.

All parties interested in or pursuing Relaxed Standard AHPs will need to evaluate whether to proceed or make modifications necessary to fit within the Court’s decision. This is a trickier proposition for an already operating Relaxed Standard AHP that is now in conflict with that decision. It may be reasonable for these AHPs to continue operating “as is” while the case is being appealed, but these AHPs should definitely consult with legal counsel first and may wish to suspend enrolling new member employers for the time being.

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Frequently Misunderstood Health Savings Account Issues

March 7, 2019

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Authors:
Christopher Beinecke is the Employee Health & Benefits National Compliance Leader for Marsh & McLennan Agency. 
Jennifer Stanley is a Compliance Consultant in the Employee Health & Benefits Compliance Center of Excellence for Marsh & McLennan Agency.


The health savings account (HSA) eligibility and contribution rules are often misunderstood, which can result in potential adverse consequences for participating employees.[1] This article focuses on certain employer-provided benefits that may unexpectedly affect an employee’s ability to make or receive HSA contributions as well as certain rules that affect the contribution amounts a participant can make and/or receive during the year.

Unexpected Disqualifying Other Coverage and Potential Solutions

In order to be eligible to make or receive HSA contributions, an individual must participate in a qualified high deductible health plan (HDHP) and have no other disqualifying coverage. Some common employer-provided benefits may unexpectedly be disqualifying other coverage, and we’ll address three of the most common “gotcha’s” below.

1. Account-Based Plans (FSAs and HRAs)
General purpose health FSAs and HRAs that may be used to reimburse for a broad range of qualifying medical expenses are generally disqualifying other coverage and disqualify an individual from making or receiving HSA contributions for the entire plan year. This is also true if the FSA or HRA is your spouse’s and can be used to reimburse for your medical expenses (whether or not this actually happens).

HSA Eligibility Solutions for Account-Based Plans –
Employers should consider the following HSA compatible FSA plan design options when offering an account-based plan and an HDHP (these are often referred to as “HSA compatible FSAs”):

  • Offer a limited-purpose FSA or HRA that may only be used to reimburse for dental and vision expenses;
  • Offer a post-deductible FSA or HRA that may only be used to reimburse for general medical expenses after the individual has met their annual HDHP deductible; or
  • An employer can actually offer an FSA or HRA that combines both features by being limited to dental and vision expenses until the annual HDHP deductible is met and can then be used to reimburse for general medical expenses afterwards.

Run-Out Periods, Grace Periods, and Carryover Provisions – FSAs usually operate with a run-out period allowing participants to submit claims after a plan year ends and may also include either a grace period or carryover provision (but not both). We’ll describe how these can affect HSA eligibility when used in a general purpose FSA:

  1. Run-Out Period When we say run-out period, we mean a participant has some period of time after the end of the plan year to submit claims that were incurred during the plan year. For
    example, a calendar year FSA may allow participants until March 31st to submit claims incurred by or before December 31, 2018. If I enroll in an HDHP during annual enrollment, an FSA with a run-out period does not interfere with my ability to make or receive HSA contributions at the start of the next plan year. In this example, I am eligible to make or receive HSA contributions on January 1, 2019.
  2. Grace Period When we say grace period, we mean a participant has some period of time after the end of the plan year to submit claims that were incurred during the plan year OR during the grace period. For example, a calendar year FSA may allow participants until March 31st to submit claims incurred by or before March 15, 2019. If I enroll in an HDHP during annual enrollment, an FSA with a grace period can interfere with my ability to make or receive HSA contributions until the first of the month after the grace period is over. In this example, if I have an FSA balance as of December 31, 2018, I would not be eligible to make or receive HSA contributions until April 1, 2019.The issue is whether I have an FSA balance at plan year end. If I have a zero FSA balance at plan year end (December 31, 2018 in our example), I am HSA eligible at the start of the next plan year without regard to the FSA’s grace period.
  3. Carryover Provision An FSA might include a carryover provision permitting participants to carry over the lesser of: (i) their unspent FSA account balance as of the end of the plan year; or (ii) $500 as a contribution toward their FSA balance for the next plan year. Amounts carried over do not count toward an individual’s annual FSA contribution limit ($2,700 for 2019). If funds are carried over into the following year and can be used to reimburse for general medical expenses, an individual will be ineligible to make or receive HSA contributions for the entire year.An employer can provide employees with options to avoid losing HSA eligibility for the following year:
  • The rules allow FSA funds to carry over from a general purpose FSA into an HSA compatible FSA plan. An employer could design the carryover feature to automatically carry over a balance from a general purpose FSA into an HSA compatible FSA when an individual elects HDHP coverage. This option obviously requires the employer also maintain an HSA compatible FSA.
  • An employer could allow affected employees to decline or waive a carryover at the end of the FSA plan year. An employer that doesn’t provide an HSA compatible FSA might choose this option.

2. Clinics (both onsite and offsite clinics)

In terms of HSA compatibility, clinics can be divided into two categories:

HSA Conflict

A clinic will cause an HSA conflict if all of the following is true:

  • The clinic provides medical services other than first aid, dental or vision care, preventive services, or certain disease management or wellness services;
  • The clinic provides the general medical services before an individual has met their annual HDHP deductible; and
  • The individual does not pay for the fair market value (FMV) of the general medical services before meeting their annual HDHP deductible.

No HSA Conflict

A clinic does not cause an HSA conflict if any of the following is true:

  • The clinic’s services are limited to first aid, dental or vision care, preventive services, or certain disease management or wellness services;
  • The clinic does not provide other medical services before an individual has met their annual HDHP deductible; or
  • The individual pays for the FMV of other medical services before meeting their annual HDHP deductible.

3. Telemedicine

There is much debate over whether telemedicine is a group health plan that is disqualifying other coverage for the purposes of HSA eligibility. We believe most telemedicine programs are disqualifying other coverage despite claims by some that telemedicine benefits should qualify for an exception available to employee assistance programs (EAPs).

The Myth of the EAP Exception for Telemedicine – IRS Notice 2004-50, Q/A #10 indicates that coverage under an EAP, disease management program, or wellness program isn’t other disqualifying coverage if the benefits do not provide significant medical care and provides an example of short-term counseling available through an EAP as meeting this standard. We’ll ignore for now whether a telemedicine benefit can be considered an EAP and agree there may be some wiggle room to do so.

The EAP exception is not a blanket exception for all EAPs without regard to their plan designs, and the real issue is whether the telemedicine benefit offers significant medical care. Some believe the medical care or treatment provided by a telemedicine benefit should not be considered significant because of the narrow range of available services that might be performed within a single telemedicine visit. We disagree. We can infer that a determination of significant medical care or treatment shouldn’t be limited to a single episode of care or the example of the permissible EAP in IRS Notice 2004-50, Q/A #10 wouldn’t bother describing the available counseling as “short-term.” Instead, the language used by the IRS strongly suggests that an EAP providing many or an unlimited number of visits would be considered other disqualifying coverage.

EAPs generally provide for a limited number of visits per year. By contrast, telemedicine programs tend to provide for an unlimited number of participant visits. In addition, telemedicine programs can usually write prescriptions which are not available through most traditional EAPs.

This view is also consistent with statements made by the Departments of Labor, Treasury, and Health & Human Services during the rulemaking process creating the EAP exception under the Affordable Care Act in which the agencies suggested an EAP providing for many or an unlimited number of visits would not qualify.

Potential HSA Eligibility Solutions for Clinics and Telemedicine

It is reasonable to assume that many telemedicine and clinic benefits will be considered other disqualifying coverage and cause an HSA eligibility issue without some sort of solution to resolve the conflict:

  1. Limit the scope – The benefits could be limited in scope to services that do not interfere with HSA eligibility, such as preventive services, dental or vision care, first aid (in the case of the clinic), or other services deemed insignificant care by the IRS such as immunizations and providing non-prescription pain relievers.This solution falls into the category of legally correct but not particularly useful, as limiting the scope of telemedicine and/or onsite health clinic benefits in this manner can defeat the purpose of meaningfully lowering the cost of the employer’s medical plan.
  2. Provide only post-deductible benefits – If the benefits are restricted to an HDHP participant until after he or she has met their HDHP deductible, there is no HSA conflict. This solution also falls into the category of legally correct but not particularly useful and can be both difficult and impractical to administer.
  3. Charge fair market value for the services – If the HDHP participants pay the FMV for the services received, there is no HSA conflict. While unpleasant, this is often the most practical solution to implement. There is no guidance explicitly directing how to calculate FMV for these benefits, which should make several approaches reasonable:(a) Use the Medicare reimbursement rate for the given service;
    (b) Use the in-network usual, customary, and reasonable charge for the given service; and
    (c) Develop standard rates for services/bundles of services based on the expected cost of providing them through the telemedicine or clinic benefit.

Flat rates are very common for telemedicine and clinic visits with additional charges for labs, tests, or prescriptions. An employer (particularly a healthcare system) may determine a discount is appropriate when determining the appropriate rates to take into account the lower cost of providing the services through a clinic or via telemedicine compared to general medical facilities. It is also not unusual for third-party administrators to have developed standard rates for services using the methods described above that employers can implement. If there is a monthly cost for access to the telemedicine or clinic benefit, that could be factored into the FMV fee calculation.

HSA contributions can be used to offset the cost of services for the telemedicine and clinic benefits, and employers can provide HSA contributions to assist. No fee needs to be charged for limited scope services (e.g., preventive, dental, vision, etc.). Although it adds a layer of administrative complexity, it is also true that the clinic does not need to charge anything once the individual has met the HDHP deductible for the year.

If point-of-service charges are limited to HDHP participants, it does raise a potential nondiscrimination issue under the Tax Code. However, if there is a reasonable mix of both highly and non-highly compensated participants in the HDHP and other medical plan options, this should not present an issue.

Certain Rules Affecting Annual HSA Contribution Limits

In general, an individual’s annual HSA contribution limit is pro-rated based on the number of months an individual is eligible to make or receive HSA contributions with HSA eligibility determined as of the first of each given month. This general rule has a lot of moving parts and is subject to several modifications.

  1. Aggregation Under the health FSA rules, the annual contribution limit ($2,700 for 2019) is based solely on the employee’s own contributions, excluding carryovers. By contrast, all contributions made or received to an individual’s HSA count toward the individual’s annual HSA contribution limit ($3,500 self-only; $7,000 family for 2019), with the exception of rollovers.
  2. The Last Month Rule – While eligibility and contribution limits are generally pro-rated monthly, an individual who is HSA eligible on December 1st can make or receive HSA contributions up to their full annual limit provided he or she remains HSA eligible through the end of the following calendar year. If the individual does not remain eligible throughout this period, the individual’s annual HSA contribution limit for the year is retroactively determined using the pro-rata method and will usually lead to adverse tax consequences. An employer is not required to administer the last month rule for payroll deduction purposes. If an employer does not administer this, the employee is still free to take advantage by contributing the additional amounts to the HSA bank on an after-tax basis (usually by writing a check) and taking a deduction on their personal income tax return using IRS Form 8889.
  3. A Special Rule for Spouses A husband and wife cannot establish a joint HSA, but each spouse can set up their own HSA if eligible. If either spouse has family coverage in an HDHP, both spouses are treated as having family coverage and are limited to the annual HSA family contribution limit split between them. This limit is divided equally unless they agree on a different division. Spouses can demonstrate they’ve agreed to a different division by electing unequal contributions toward their HSAs.A break for domestic partners – This special rule for spouses does not apply to domestic partners. Each domestic partner could contribute up to the annual HSA family contribution limit in this instance, because the contribution limit is not tied to tax dependent status. That said, an individual cannot use their HSA to pay for the medical expenses of a domestic partner on a tax free basis (or without penalty) unless the domestic partner is also the individual’s tax dependent. The individual could avoid the penalty if the individual was already age 65 or older.
  4. Catch-up Contributions HSA eligible individuals who are age 55 or older by the end of the calendar year may contribute an additional $1,000 for that year and every year thereafter so long as they remain HSA eligible.[2] If both spouses are over age 55 or older and HSA eligible, both are able to make catch-up contributions to their separate HSAs.

Putting it all together Chris (56 years old) is married to Jennifer (50 years old). Jennifer has enrolled in employee + children HDHP coverage through her employer and Chris has enrolled in employee-only HDHP coverage through his employer. Jennifer’s employer makes an HSA contribution of $1,000 to her HSA on January 1, 2019. Chris’ employer does not make a contribution to his HSA.

  • For 2019, Jennifer could normally contribute up to $7,000 to her HSA and Chris could normally contribute up to $3,500 to his HSA. Due to the special rule for spouses, Jennifer and Chris begin with a combined annual HSA contribution limit of $7,000.
  • Chris can contribute up to $3,500 plus an additional $1,000 catch-up contribution.
  • Assuming Chris does contribute $4,500, Jennifer’s annual contribution limit is $3,500. Her employer has already contributed $1,000, meaning Jennifer can only contribute an additional $2,500 herself.
  • Alternatively, Chris could limit his HSA contribution to his $1,000 catch-up contribution and Jennifer would be free to contribute $6,000 to her HSA in addition to the $1,000 received from her employer.

[1] We address the consequences of ineligible contributions in the “Mistaken HSA Contributions” article appearing later in this newsletter.

[2] Remember that an individual enrolled in Medicare is not HSA eligible.

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Texas Federal Court Rules ACA Unconstitutional

December 18, 2018

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Given the heavy media attention, you are probably aware that a Texas federal district court issued a decision on December 14, 2018, declaring the entire Affordable Care Act (ACA) unconstitutional. The final outcome will take a while, and the ACA remains in effect as this case moves through the appeals process. Employers (and their group health plans) should continue to comply with the ACA in the meantime.

DO NOT HALT OR DELAY YOUR
2018 FORM 1094/1095 REPORTING.

Texas v. Azar

In its 2012 National Federation of Independent Businesses (NFIB) v. Sebelius decision that preserved most of the ACA as originally written,[1] the U.S. Supreme Court held that Congress had the authority to implement the individual mandate and its penalty under the taxing power given to it by the U.S. Constitution. The individual mandate penalty was reduced to zero effective January 1, 2019, by the Tax Cut and Jobs Act of 2017 triggering the Texas v. Azar lawsuit over the continuing constitutionality of the ACA. This case was ultimately joined by thirty-six states and the District of Columbia giving it a distinctive red versus blue feel.

In his decision, Judge O’Connor determined that the elimination of the individual mandate penalty meant the individual mandate itself could no longer be viewed as a valid exercise of Congress’ taxing power. Judge O’Connor also determined that the individual mandate was so essential to and inseparable from the ACA that this renders the entire ACA unconstitutional.

Predicting the Future

Judge O’Connor’s ruling did not include an injunction, meaning the ACA is still in effect pending the appeals process. This fact was verbally repeated by the Trump administration. It is probably foolish to attempt to predict the future of Texas v. Azar, but if we had to:

    1. The 5th Circuit – This is a coin flip, but the U.S. Court of Appeals for the 5th Circuit overrules the district court opinion. While the court agrees that the individual mandate is unconstitutional, the 5th Circuit is unable to conclude that the individual mandate cannot be severed from the rest of the ACA. Whatever the outcome, the side that comes up short appeals to the U.S. Supreme Court.
    2. Congress – If the 5th Circuit finds the ACA unconstitutional, lawmakers work in earnest to draft legislation preserving ACA protections that are popular with voters and to avoid massive disruption in the insurance industry. One of these bills will have enough bipartisan support to be enacted by Congress and signed into law by the President should the Supreme Court declare the ACA unconstitutional.
    3. The Supreme Court The U.S. Supreme Court agrees to hear the case and preserves the ACA again by holding that the individual mandate is severable from the remainder of the ACA and/or for other reasons. Remember, the appointments of Justices Gorsuch and Kavanaugh notwithstanding, the five justices who ruled in favor of the ACA in NFIB v. Sebelius in that 5-4 opinion are still present.

We’ll keep you updated as this progresses.

[1] If you’ll recall, the mandate for all states to participate in the Medicaid expansion was struck down.

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