Under the Affordable Care Act, (ACA) a fund for a new nonprofit corporation to assist in clinical effectiveness research was created. To aid in the financial support for this endeavor, certain health insurance carriers and health plan sponsors are required to pay fees based on the average number of lives covered by welfare benefits plans. These fees are referred to as either Patient-Centered Outcome Research Institute (PCORI) or Clinical Effectiveness Research (CER) fees.
The applicable fee was $2.26 for plan years ending on or after October 1, 2016 and before October 1, 2017. For plan years ending on or after October 1, 2017 and before October 1, 2018, the fee is $2.39. Indexed each year, the fee amount is determined by the value of national health expenditures. The fee phases out and will not apply to plan years ending after September 30, 2019.
As a reminder, fees are required for all group health plans including Health Reimbursement Arrangements (HRAs), but are not required for health flexible spending accounts (FSAs) that are considered excepted benefits. To be an excepted benefit, health FSA participants must be eligible for their employer’s group health insurance plan and may include employer contributions in addition to employee salary reductions. However, the employer contributions may only be $500 per participant or up to a dollar for dollar match of each participant’s election.
HRAs exempt from other regulations would be subject to the CER fee. For instance, an HRA that only covered retirees would be subject to this fee, but those covering dental or vision expenses only would not be, nor would employee EAPs, disease management programs and wellness programs be required to pay CER fees.
In a recent statement released by the IRS it advised that it would not accept individual 2017 tax returns that did not indicate whether the individual had health coverage, had an exemption from the individual mandate, or will make a shared responsibility payment under the individual mandate. Therefore, for the first time, an individual must complete line 61 (as shown in previous iterations) of the Form 1040 when filing his/her tax return. This article explains what the new IRS position means for the future of ACA compliance from an employer’s perspective.
First, it will be critical (more so this year than in year’s past) that an employer furnish its requisite employees the Form 1095-C by the January 31, 2018 deadline. In previous years, this deadline was extended (to March 2, 2017 last year). However, with the IRS now requiring the ACA information to be furnished by individual tax day, April 17, 2018, employers will almost certainly have to furnish the Form 1095-C to employees by the January 31, 2018 deadline. This is a tight deadline and will require employers to be on top of their data as the 2017 calendar year comes to a close.
An employee who is enrolled in a self-insured plan will need the information furnished in part III of the Form 1095-C to complete line 61 on his/her tax return. It is reasonable to assume that an employee is more likely to inquire as to the whereabouts of the Affordable Care Act information necessary to complete his/her 2017 tax return. Therefore, the possibility of word getting back to the IRS that an employer is not furnishing the Form 1095-C statements to employees is also likely greater in 2017 compared to past years. Remember, an employer can be penalized $260 if it fails to furnish a Form 1095-C that is accurate by January 31, 2018 to the requisite employees. This penalty is capped at $3,218,500. The $260 per Form penalty and the cap amount can be increased if there is intentional disregard for the filing requirements.
The IRS statement continues the IRS’ trend of being more strenuous with ACA requirements. Many employers have received correspondence from the IRS about missing Forms 1094-C and 1095-C for certain EINs. Frequently, this has been caused by the employer incorrectly filing one Form 1094-C for the aggregated ALE group as opposed to a Form 1094-C for each Applicable Large Employer member (ALE member). While the IRS’ latest statement does not ensure that enforcement of the employer mandate (the section 4980H penalties) is coming soon, one could infer that the IRS will soon be sending out penalty notices with respect to the employer mandate.
With the actions taken by the IRS in 2017, all employers need to be taking the reporting of the Forms 1094-C and 1095-C seriously. As of the date of this publication, the Form 1095-C must be furnished to an employer’s requisite employees by January 31, 2018.
For more information about the VSP Eyes of Hope program, you can visit their website at www.vspglobal.com/disasteroutreach.
One of your employee’s comes to you and asks to cancel their medical insurance in the middle of the year. Seems like a simple request but is it really? Since most employers are deducting health, dental, vision, and/or supplement coverage premiums from employees on a pre-tax basis, the employee’s request must first meet certain requirements before they are eligible to adjust their election mid plan year.
With a valid Section 125 Cafeteria Premium Only Plan in place, the IRS allows employers to withhold premium deductions from employees for certain cover pre-tax. Part of the IRS requirement for taking deductions pre-tax is that employees must experience a qualifying event in order to change their election in the middle of the group’s plan year. The employee must notify their employer of the qualifying event (aka change in status) within 30 days of the event date to be able to adjust their election. If the employee fails to meet the requirements of a qualifying event or does not notify their employer within the allotted time frame, the employee must either wait until they experience another qualifying event or until the next open enrollment period at the group to adjust their election.
A qualifying event is simply explained as any major life event that affects and employee or dependent(s) eligibility for benefits. The following are qualifying events that may allow an employee to change their election mid plan year:
1. Change in legal martial status (i.e marriage, divorce, death of spouse, legal separation, etc.)
2. Change in number of dependents (i.e. birth, adoption, etc)
3. Change in the employment status of employee, spouse, or dependent which results in change in benefits (i.e. termination or start of employment, change in worksite, etc).
5. Dependent ceasing to satisfy eligibility requirements for coverage due to attainment of age, student status, marital status, etc.
6.Change in place of residence of employee, spouse, or dependent where current coverage is not available
7. Judgements, decrees, or orders
8. Change in the coverage of a spouse or dependent under another employer’s plan
9.Open enrollment under the plan of another employer for employee, spouse, or dependent.
10. COBRA qualifying event
11. Loss of coverage under the group health plan of governmental or education institution (i.e SHOP, Medicaid, etc)
12. Entitlement to Medicare or Medicaid
13. Change in Citizenship Status
14. Loss / Gain of coverage in the Marketplace or Exchange by employee, spouse or dependent
Once you have determined if an employee has experienced a qualifying event, you will need to have them complete a new election form (or change form) indicating the reason for their mid-year change and the date of the qualifying event. An employer is not required to keep copies of additional documents as proof of the qualifying event (i.e birth certificate, marriage certificate, etc) but you are required to inspect any necessary documents to validate an appropriate qualifying event has occurred and the date of occurrence. Be sure to indicate on the employee’s updated election/change form the date of the actual qualifying event as this will be the date that the coverage change takes effect with the carrier(s).
Example- Employee gets married on August 5th and wishes to add their new spouse to their coverage. They notify you within the allotted 30 day time frame. The spouse’s new coverage begins under your group plan as of the date of marriage (August 5th) and you will need to adjust any payroll deductions accordingly.
It is important to make sure you (as the employer) have documentation of any employee elections /change in the event that your group experiences an audit or an employee questions any elections/payroll deductions.
Depending on how your current contracts are set up with your insurance carriers will depend on how qualifying event changes affect your premiums with respect to any mid-month changes. Make certain any qualifying event changes are also processed with payroll and their deductions are adjusted accordingly once changes are processed with the insurance carriers.
Should you have any questions about how to properly administer a qualifying event change or if you want to implement a Section 125 Premium Only Plan, please contact our office for assistance.
The Office of Management and Budget (OMB) announced late Tuesday (8/29/17) that it was implementing an immediate stay of the revised EEO-1 Report, putting a halt to long-awaited pay data reporting requirements. The stay creates much needed relief for employers, but is expected to further refocus pay equity discussions on a statewide and local level.
Quick Recap Of Pay Data Reporting
Historically, employers with 100 or more employees, and federal contractors with 50 or more employees, have been required to submit Employer Information Reports (EEO-1 Reports) disclosing the number of employees by job category, race, sex, and ethnicity annually. Last year, the EEOC finalized proposed changes to the EEO-1 Report which would require employers to include pay data and the number of hours worked in their reporting. The proposed reporting expansion was intended to identify pay gaps, which the agency could then use to target specific employers and investigate pay discrimination practices.
The revised form, revealed in October 2016, required employers to submit the newly requested data based on a “workforce snapshot” of any pay period between October 1, 2017 and December 31, 2017 and was due to be submitted by March 31, 2018.
The U.S. Chamber of Commerce and many other observers identified serious flaws in the proposed rule. Following pushback by numerous business groups, the EEOC announced it would issue a second set of revisions to the form. However, the revisions encompassed only two minor changes and failed to alleviate significant employer concerns. Businesses across the country had thus been preparing to usher in a new day when it came to having their pay practices placed under a federal microscope, and until yesterday, it appeared inevitable that the disclosure would proceed as planned.
Feds Press Pause On Pay Data Reporting
All of that changed yesterday with the announcement from the federal government. In issuing an immediate stay of the revised EEO-1 report, the OMB voiced its own concerns with the revised reporting requirements. The office announced: “…[we are] concerned that some aspects of the revised collection of information lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentiality issues.”
Employers are still required to submit EEO-1 Reports using the previously approved form. The deadline for submission of 2017 data remains March 31, 2018. However, employers can breathe a sigh of relief when it comes to the proposed expanded pay data reporting requirements – for now.
Whether this development foreshadows the ultimate demise of the revised EEO-1 Report is currently unclear. However, national attention on wage inequities remains despite yesterday’s announcement, and the focus on pay equity enforcement is increasingly shifting to state and local levels. States like California, New York, Massachusetts, Oregon, Nevada, and others have all passed pay equity legislation in the last year. Consequently, with each state acting as its own incubator for how to best address these disparities, pay equity analysis and related litigation is becoming more complicated.
Prior to each year’s Medicare Part D annual enrollment period, plan sponsors that offer prescription drug coverage must provide notices of creditable or noncreditable coverage to Medicare-eligible individuals.
The required notices may be provided in annual enrollment materials, separate mailings or electronically. Whether plan sponsors use the federal Centers for Medicare & Medicaid Services (CMS) model notices or other notices that meet prescribed standards, they must provide the required disclosures no later than Oct. 15, 2017.
Group health plan sponsors that provide prescription drug coverage to Medicare Part D-eligible individuals must also disclose annually to the CMS—generally, by March 1—whether the coverage is creditable or noncreditable. The disclosure obligation applies to all plan sponsors that provide prescription drug coverage, even those that do not offer prescription drug coverage to retirees.
Background
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires group health plan sponsors that provide prescription drug coverage to disclose annually to individuals eligible for Medicare Part D whether the plan’s coverage is “creditable” or “noncreditable.” Prescription drug coverage is creditable when it is at least actuarially equivalent to Medicare’s standard Part D coverage and noncreditable when it does not provide, on average, as much coverage as Medicare’s standard Part D plan. The CMS has provided a Creditable Coverage Simplified Determination method that plan sponsors can use to determine if a plan provides creditable coverage.
Disclosure of whether their prescription drug coverage is creditable allows individuals to make informed decisions about whether to remain in their current prescription drug plan or enroll in Medicare Part D during the Part D annual enrollment period. Individuals who do not enroll in Medicare Part D during their initial enrollment period (IEP), and who subsequently go at least 63 consecutive days without creditable coverage (e.g., they dropped their creditable coverage or have non-creditable coverage) generally will pay higher premiums if they enroll in a Medicare drug plan at a later date.
Who Gets the Notices?
Notices must be provided to all Part D eligible individuals who are covered under, or eligible for, the employer’s prescription drug plan—regardless of whether the coverage is primary or secondary to Medicare Part D. “Part D eligible individuals” are generally age 65 and older or under age 65 and disabled, and include active employees and their dependents, COBRA participants and their dependents, and retirees and their dependents.
Because the notices advise plan participants whether their prescription drug coverage is creditable or noncreditable, no notice is required when prescription drug coverage is not offered.
Also, employers that provide prescription drug coverage through a Medicare Part D Employer Group Waiver Plan (EGWP) are not required to provide the creditable coverage notice to individuals who are eligible for the EGWP.
Notice Requirements
The Medicare Part D annual enrollment period runs from Oct. 15 to Dec. 7. Each year, before the enrollment period begins (i.e., by Oct. 14), plan sponsors must notify Part D eligible individuals whether their prescription drug coverage is creditable or non-creditable. The Oct. 14 deadline applies to insured and self-funded plans, regardless of plan size, employer size or grandfathered status
Part D eligible individuals must be given notices of the creditable or non-creditable status of their prescription drug coverage:
According to CMS, the requirement to provide the notice prior to an individual’s IEP will also be satisfied as long as the notice is provided to all plan participants each year before the beginning of the Medicare Part D annual enrollment period.
Model notices that can be used to satisfy creditable/non-creditable coverage disclosure requirements are available in both English and Spanish on the CMS website. Plan sponsors that choose not to use the model disclosure notices must provide notices that meet prescribed content standards.
Notices of creditable/non-creditable coverage may be included in annual enrollment materials, sent in separate mailings or delivered electronically. Plan sponsors may provide electronic notice to plan participants who have regular work-related computer access to the sponsor’s electronic information system. However, plan sponsors that use this disclosure method must inform participants that they are responsible for providing notices to any Medicare-eligible dependents covered under the group health plan.
Electronic notice may also be provided to employees who do not have regular work-related computer access to the plan sponsor’s electronic information system and to retirees or COBRA qualified beneficiaries, but only with a valid email address and their prior consent. Before individuals can effectively consent, they must be informed of the right to receive a paper copy, how to withdraw consent, how to update address information, and any hardware/software requirements to access and save the disclosure. In addition to emailing the notice to the individual, the sponsor must also post the notice (if not personalized) on its website.
In Closing
Plan sponsors that offer prescription drug coverage will have to determine whether their drug plan’s coverage satisfies CMS’s creditable coverage standard and provide appropriate creditable/noncreditable coverage disclosures to Medicare-eligible individuals no later than Oct. 15, 2017.