current developments in welfare benefits

Copyright 2015- Not to be reproduced without express permission of Benefit Express Services, LLC

By Larry Grudzien Attorney at Law


• Notice 2015-16-Guidance on Cadillac tax

• Notice 2015-17-Transtional Relief

• EEOC Releases Proposed Regulations on Wellness Programs

• IRS Releases Final Forms 1094 and 1095 for 2014

• IRS Releases HSA Limits for 2016

• Notice 2014-55- Participation in Cafeteria plan

• Proposed Regulations make changes to SBCs

• Extender Legislation Restored Transit Parity though end of 2014

• Notice 2014-69- Defining Minimum Value

• Enforcement Delay of HPID

• Online Enrollment in SHOP Exchange Available for 2015

Agenda

Notice 2015-16 Guidance on the

Cadillac Tax


• Starting in 2018, if the aggregate cost of applicable employer-sponsored coverage provided to an employee exceeds a statutory dollar limit, the excess is subject to a 40% excise tax.

• The Notice suggests and invites comment on possible implementation approaches to various issues—primarily defining applicable coverage, determining the cost of applicable coverage, and applying the annual dollar limit to the cost.

• The IRS anticipates issuing a separate notice to address other matters, including procedural issues relating to calculation and assessment of the tax.

Notice 2015-16


Notice 2015-16

Defining applicable coverage

• The Notice lists the types of plans specified under Code § 4980I as applicable coverage (e.g., health FSAs, HSAs, governmental plans, retiree coverage, and some on-site medical clinics) or excluded from applicable coverage (e.g., long-term care, stand-alone dental or vision, and fixed indemnity coverage) and describes possible implementation rules for certain types of coverage.

• It indicates that employer HSA and Archer MSA contributions (including salary reduction HSA contributions) would be considered applicable coverage, while employee after-tax contributions would be excluded.

• Coverage through on-site clinics providing only de minimis medical care would also be excluded, as would EAPs and limited-scope dental or vision benefits (whether insured or self-insured) qualifying as excepted benefits under final regulations.


Notice 2015-16

Determining cost of applicable coverage

• The Notice clarifies that (despite some statutory references to coverage that is “made available” to an employee) the excise tax is determined based on the cost of applicable coverage in which the employee is actually enrolled.

• Under Code § 4980I, the cost of applicable coverage is determined under rules similar to those for determining the COBRA applicable premium, with additional elements. For example, costs are calculated separately for “self-only” coverage and “other-than-self-only” coverage, and special rules apply for retiree coverage, health FSAs, HSAs, and Archer MSAs.

• The Notice acknowledges existing COBRA-related challenges in computing premiums—including determining who is “similarly situated” and calculating applicable premiums for self-insured plans and HRAs—and suggests that certain approaches implemented under Code § 4980I might be extended to COBRA computations as well. It sets forth a potential approach for determining groups of similarly situated employees with detailed rules on employee aggregation and disaggregation.


Notice 2015-16

Self-Insured Plans

The Notice also describes potential adjustments to the existing self-insured plan methods for computing COBRA premiums—the actuarial basis and the past cost methods—and invites comments on the feasibility of determining a self-insured plan’s cost of coverage using actual current costs (recognizing that this method would not be available for determining COBRA premiums, as those must be determined in advance of the coverage period).


Notice 2015-16

HRAs • Approaches under consideration for HRAs include determining the cost of coverage

based on amounts made newly available to a participant each year (disregarding carryover amounts) and, instead of or in addition to that method, permitting employers to determine the cost of coverage by adding all HRA claims and administrative expenses for a particular period (separately for each coverage level, such as self-only or family) and dividing that sum by the number of covered employees (for the period and coverage level).

• Another option under consideration is to permit or require employers to use the actuarial basis method to determine an HRA’s cost of coverage.

• Lastly, the Notice points out that, while the cost of coverage for Form W-2 reporting purposes is also based on rules similar to COBRA applicable premium rules, interim guidance issued in Notice 2012-9 is solely for Form W-2 purposes and is inapplicable to Code § 4980I.


Notice 2015-16

Applying the annual dollar limit

• Different statutory dollar limits apply depending on whether the employee has self-only ($10,200) or other-than-self-only coverage ($27,500).

• The IRS is considering several approaches to clarify the application of the dollar limit when an employee simultaneously has one type of coverage (e.g., major medical coverage) that is self-only coverage and another type of coverage (e.g., an HRA) that covers the employee and the employee’s family.

• The dollar limits are subject to various adjustments, including a “health cost adjustment percentage” for 2018 and cost-of-living adjustments for subsequent years, and adjustments for certain retirees and employers whose workforce age and gender characteristics vary from the national norm.

• Adjustments are also applicable for participants in plans primarily covering employees in specified high-risk professions (such as law enforcement and first responders).

• The Notice seeks input on how to determine whether a plan meets the applicable criteria and on whether further guidance on high-risk professions is desirable.

Notice 2015-17 Transitional Relief


Notice 2015-17

The IRS released Notice 2015-17 which provides transition relief from the assessment of excise tax under Code Section 4980D for failure to satisfy market reforms in certain circumstances.

The transition relief applies to employer healthcare arrangements that constitute: • Employer payment plans, as described in Notice 2013-54, if the plan is

sponsored by an employer that is not an Applicable Large Employer (ALE) under Code § 4980H(c)(2) and §§54.4980H-1(a)(4) and -2;

• S corporation healthcare arrangements for 2-percent shareholder-employees;

• Medicare premium reimbursement arrangements; and • TRICARE-related health reimbursement arrangements (HRAs).


• The IRS will not impose excise taxes otherwise assessable under Code § 4980H for employer payment plans maintained in 2014 or the first six months of 2015 (i.e., through June 30, 2015) for employers that are not “applicable large employers” (ALEs) for those periods.

• Employers eligible for the relief are also excused from the requirement to self-report these violations on Form 8928.

• The Notice relief does not apply to stand-alone HRAs or other arrangements to reimburse any expenses other than insurance premiums.

Notice 2015-17


The Notice also addresses “2% shareholder-employee healthcare arrangements,” under which a Subchapter S corporation pays for or reimburses premiums for individual health insurance coverage for a “2% shareholder” where the payment or reimbursement is included in income and the premiums are deductible by the 2% shareholder-employee under Code § 162(l).

Pending the issuance of additional guidance on these arrangements, the Notice provides that an S corporation will not be subject to Code § 4980D or required to file Form 8928 solely as a result of having a 2% shareholder-employee health care arrangement.

Notice 2015-17


Notice 2015-17

The Notice permits an employer’s reimbursement of Medicare Part B or Part D premiums to be integrated with another group health plan offered by the employer, but only if:

• The employer offers a group health plan (other than the premium

reimbursement arrangement) to the employee that does not consist solely of excepted benefits and offers coverage providing minimum value;

• The employee participating in the premium reimbursement is actually enrolled in Medicare Parts A and B;

• Premium reimbursement is available only to employees who are enrolled in Medicare Part A and Part B or Part D; and

• Reimbursement is limited to Medicare Part B or Part D premiums and premiums for excepted benefits, including Medigap premiums.


The Notice confirms that an employer may increase an employee’s taxable compensation, not conditioned on the purchase of health coverage, without creating an employer payment plan (or any group health plan at all).

The Notice reiterates the IRS’s position that an employer’s payment or reimbursement of employees’ individual health insurance premiums is a group health plan subject to the market reforms even if the payments or reimbursements are made on an after-tax basis.

Notice 2015-17

EEOC Releases Proposed Regulations on Wellness Programs


• The EEOC has proposed long-awaited regulations on how employer wellness programs may comply with the Americans with Disabilities Act (ADA).

• In addition, other agencies have released FAQ guidance covering related topics such as the design of health-contingent wellness programs, application of HIPAA’s privacy and security rules, and issues relating to insurers’ wellness programs.

• ADA permits a wellness program to include disability-related inquiries or medical examinations (e.g., health risk assessments or medical screenings) only if participation is voluntary, information is maintained according to ADA confidentiality requirements, and the information is not used to discriminate against an employee.

Proposed Regulations




Addressing the interplay between ADA requirements and the HIPAA wellness program rules, the proposed EEOC regulations would expand existing ADA regulations to provide guidance on the extent to which employers may offer incentives for participation in wellness programs with disability-related inquiries or medical examinations.

The preamble to the proposed regulations specifically rejects application of the ADA’s “bona fide benefit plan” safe harbor as a basis for permitting wellness incentives, stating that such an interpretation—adopted by the Eleventh Circuit in Seff v. Broward County —would render the ADA’s “voluntary” exception superfluous.



Maximum Incentive

• Incentives (whether structured as rewards or penalties) may be offered under wellness programs that are part of a group health plan without making the program involuntary, so long as the total incentive available under all programs—participatory or health-contingent—does not exceed 30% of the total cost of employee-only coverage.

• The EEOC has requested comments on whether regulations should address incentives under programs that are not part of a group health plan.

• The 30% limit permitted by the regulations is similar to the HIPAA rules for non-tobacco incentives under health-contingent wellness programs, although under HIPAA, the limit increases to 30% of the cost of family coverage when dependents participate in the program.

• The higher tobacco-related incentives permitted under HIPAA are not allowed under the proposed EEOC regulations unless the program does not include a disability-related inquiry or medical examination.

• An Appendix to the proposed regulations includes as an example a program in which employees are only asked about tobacco use as opposed to being tested for nicotine.



Other Requirements for Voluntary Programs

The proposed regulations also specify that an employer may not require participation in a wellness program, deny or limit coverage under any of its group health plans or benefit packages for non-participation, or take any adverse action against employees who do not participate or fail to achieve health outcomes.

Notice Requirements

Where a wellness program is part of a group health plan, the proposed regulations would require that employees receive a notice explaining what medical information will be obtained, how it will be used, the restrictions on its disclosure, and how improper disclosures will be prevented.



Confidentiality Requirements

• Medical information may only be provided to employers in aggregate terms that are unlikely to disclose an employee’s identity, with certain exceptions for employers that self-administer wellness programs.

• The Appendix lists legal requirements and “best practices” to protect confidentiality where a wellness program is not part of a group health plan.

• The Appendix also notes that when a wellness program is part of a group health plan, individually identifiable health information about wellness program participants will be protected health information (PHI) under HIPAA’s privacy and security rules and further notes that the wellness program likely will comply with the proposed regulations by complying with HIPAA.

• Generally, HIPAA permits employees of a health plan sponsor to receive PHI only to perform plan administration functions and requires a firewall between employees authorized to access PHI and all other employees.

• The EEOC also notes that using a third party may reduce the risk that information will be shared inappropriately, with the preamble seeming to suggest that a third party acting as an employer’s agent will be independently responsible for compliance with the confidentiality requirements.



Reasonable Design

• Wellness programs, including any disability-related inquiries or medical examinations that are part of such programs, must be reasonably designed to promote health or prevent disease.

• The HIPAA rules include a similar standard for health-contingent wellness programs.

• To meet this standard, the program must (1) have a reasonable chance of improving health or preventing disease, (2) not be overly burdensome, (3) not be a subterfuge for violating the ADA or other employment discrimination laws, and (4) not be “highly suspect” in its chosen methods.

• The Appendix includes examples of programs that will and will not meet this standard.

• For example, conducting a health risk assessment or biometric screening for the purpose of alerting employees to health risks would meet the standard; collecting medical information without providing follow-up information or advice would not.



Compliance With Other Laws

Compliance with the proposed regulations will not relieve an ADA-covered entity of its obligation to comply with other federal antidiscrimination laws, such as Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (ADEA), and Title II of the Genetic Information Nondiscrimination Act (GINA).

The preamble notes that future rulemaking will address the extent to which GINA affects an employer’s ability to condition incentives on a family member’s participation in a wellness program.

IRS Releases Final Forms 1094 and 1095

for 2014


IRS Releases Final Forms 1094 and 1095 for 2014

• The IRS has released much-anticipated final Forms 1094 and 1095 , which will be used to enforce Code § 4980H employer penalties, as well as individual mandate and tax credit eligibility rules. Issued under Code §§ 6055 and 6056, the forms were originally released as drafts in July 2014

• The “B forms” consist of the Form 1094-B transmittal and the Form 1095 -B information return.

• Although some employers and other entities will be required filers, health insurers will be the primary users of the B forms, which report individuals enrolled in minimum essential coverage (MEC).

• The final B forms and instructions make few changes to the drafts.

• The “C forms” consist of the Form 1094-C transmittal (which also reports important information relative to employer penalties) and the Form 1095 -C information return (which also serves as the required statement to employees).

• Filed by applicable large employers (ALEs), the final C forms themselves are largely unchanged from the drafts (except for some modifications to the recipient instructions in the 1095 -C).

• But the final C form instructions contain noteworthy clarifications and changes.


Forms Used for Filing

A link to the forms is provided below:

• Form 1094-B,Transmittal of Health Coverage Information Return: http://www.irs.gov/pub/irs-dft/f1094b--dft.pdf

• Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Return: http://www.irs.gov/pub/irs-dft/f1094c--dft.pdf

• Form 1095-A, Health Insurance Marketplace Statement: http://www.irs.gov/pub/irs-dft/f1095a--dft.pdf

• Form 1095-B, Health Coverage: http://www.irs.gov/pub/irs-dft/f1095b--dft.pdf

• Form 1095-C, Employer Provided Health Insurance Offer and Coverage: http://www.irs.gov/pub/irs-dft/f1095c--dft.pdf

IRS Releases HSA Limits for 2016


IRS Releases HSA Limits for 2016

The IRS has released the 2016 cost-of-living adjustments affecting health savings accounts (HSAs) and high-deductible health plans (HDHPs). Here are the details:

• HSA Contribution Limits. The 2016 annual HSA contribution limit for individuals with

self-only HDHP coverage is $3,350 (unchanged from 2015), and the limit for individuals with family HDHP coverage is $6,750 (a $100 increase from 2015).

• HDHP Minimum Required Deductibles. The 2016 minimum annual deductible for self-only HDHP coverage is $1,300 (unchanged from 2015) and the minimum annual deductible for family HDHP coverage is $2,600 (unchanged from 2015).

• HDHP Out-of-Pocket Maximums. The 2016 maximum limit on out-of-pocket expenses (including items such as deductibles, copayments, and coinsurance, but not premiums) for self-only HDHP coverage is $6,550 (a $100 increase from 2015), and the limit for family HDHP coverage is $13,100 (a $200 increase from 2015).

Why Would an Employer Participate in a HSA?

Notice 2014-55 Participation in Cafeteria Plan


Participation in Cafeteria Plan

• Notice 2014‐55 addresses cafeteria plan elections in two specific situations related to the availability of coverage through a Health Insurance Exchange (or Marketplace).

• An employee may want to revoke an election under his or her employer’s plan in order to purchase coverage through an Exchange if: The employee’s hours of service are reduced so that the employee is expected to average

less than 30 hours of service per week, but the reduction does not affect eligibility for coverage under the employer’s group health plan; or

The employee would like to cease coverage under the employer’s group health plan and

purchase coverage through an Exchange, without having a period of either duplicate coverage or no coverage.

• In each of these situations, Notice 2014‐55 permits a cafeteria plan to allow an

employee to prospectively revoke his or her election for coverage under the employer’s group health plan during a period of coverage.


Proposed Regulations Make Changes to SBCs


• The IRS, DOL, and HHS have issued separate but largely identical proposed regulations relating to health care reform’s summary of benefits and coverage (SBC) requirement, along with proposed revisions to the SBC template, instructions, uniform glossary, and other materials.

• The proposed regulations would modify the final regulations issued in 2012.

• According to the agencies, the proposed changes—which would generally apply to plan years beginning on or after September 1, 2015—are intended to streamline the SBC to more clearly provide the information most useful to individuals, and make compliance easier for insurers and group health plans.




Providing SBC at Application or Enrollment

• The SBC must be provided within specified timeframes upon a group health plan’s application to an insurer or a participant’s eligibility to enroll for coverage.

• The proposed regulations would clarify that if an SBC was provided prior to the applicable event, no new SBC is required unless required information in the SBC changed in the interim.

• Also, in connection with these rules, the proposed regulations would add references to “reissuance” and “re-enrollment” (to go along with existing references to renewal) and clarify that re-enrollment includes automatic re-enrollment.



Modified Content Requirements

Plans and insurers will continue to be required to provide contact information for questions, but insurers would be required to include an Internet address for obtaining a copy of the individual coverage policy or group certificate.

It appears that the SBC for a self-insured group health plan would not be required to provide an Internet address for obtaining a copy of the plan; of course, ERISA group health plans must provide a copy of the plan document upon written request by a plan participant or beneficiary under ERISA § 104(b).



Formalizing FAQ Guidance on Allocating Contractual Responsibility

The proposed regulations would formalize guidance previously issued in FAQ form regarding allocation of contractual responsibility for SBC compliance.

Under the proposed regulations, if an entity required to provide an SBC to an individual enters into a binding contract with another party to provide it, then the entity will be treated as satisfying the SBC requirement if the entity:

1. Monitors the other party’s performance;

2. Corrects any noncompliance determined to have occurred; and

3. If it does not have information necessary to correct the noncompliance,

communicates with participants and beneficiaries about the noncompliance and takes “significant” steps as soon as practicable to avoid future violations.



Formalizing Other FAQ Guidance

• Several proposed changes reflect other guidance previously issued in FAQ form.

• These include excluding Medicare Advantage plans from the SBC requirement permitting a group health plan utilizing two or more benefit packages to provide either a single or multiple SBCs; and allowing the SBC to be provided electronically in connection with online enrollment or in response to an online request.

• The SBC would have to be provided in paper form if a paper SBC is requested.



Consequences for Failure to Provide

• Lastly, the proposed IRS regulations would clarify that enforcement by the IRS does not apply to insurers and specify that the IRS will enforce the SBC requirement “using a process and procedure consistent with” Code § 4980D.

• ERISA group health plans are subject to enforcement by the DOL; the proposed DOL regulations would clarify that DOL enforcement would be according to a “process and procedure consistent with” that used for enforcing Form 5500 failures.

• Insurers and governmental plans are subject to enforcement by HHS; the HHS regulations already specified the HHS enforcement mechanism for SBC. failures.

• The statutory penalty for willful failure to provide the SBC is $1,000 per failure.



Proposed Changes to SBC Template

• The proposed revised SBC template would eliminate, from the “Important Questions” section, the question about annual limits, and the question about what is not covered.

• The explanations of co-payments, co-insurance, and other terms would be removed, as they are addressed in the Uniform Glossary. Information regarding whether the plan provides minimum essential coverage (MEC) or meets minimum value (MV) requirements would be presented differently.

• Currently, a plan must indicate, either on the SBC or separately, whether it provides MEC and meets the MV standard.

• As proposed, this information would have to be provided on the SBC itself, using language set forth in the proposed group health plan instructions.

• For plans providing MEC, the language explains that enrolling in the plan will satisfy health care reform’s individual mandate (referred to as the “individual responsibility requirement”).

• If a plan does not satisfy MV, it must include additional language explaining that this may create eligibility for financial assistance (subsidies) to purchase Marketplace (Exchange) coverage.

• Finally, the SBC would include an additional coverage example, detailing a foot fracture involving an emergency room visit. (The existing maternity and diabetes scenarios would still be included.)



Proposed Changes to Uniform Glossary

• Among the new terms that would be added to the Uniform Glossary are Claim, Cost Sharing, Cost-sharing Reductions, Individual Responsibility Requirement, Marketplace, Minimum Essential Coverage, Minimum Essential Coverage Exemption, Minimum Value Standard, Formulary, Specialty Drug, and Referral.

• Remember that the Uniform Glossary is used as-is, and may not be modified by plans or insurers.

• Plans should attempt to avoid inconsistencies between defined plan terms and glossary definitions.


Extenders Legislation Restored Transit Parity Through End of 2014


Congress has passed, and the President signed, legislation that retroactively increases the 2014 combined limit for transit and vanpooling benefits provided under a qualified transportation plan, making it equal to the limit for qualified parking benefits.

The increased limit is just one of many individual, business, and energy tax provisions extended by the portion of the legislation called the Tax Increase Prevention Act of 2014 (TIPA).



• The retroactive increase in the combined limit for transit and vanpooling benefits under a qualified transportation plan is accomplished by extending through December 31, 2014 the provision in Code § 132(f)(2) that temporarily makes the combined limit equal to the limit for qualified parking benefits.

• That temporary rule has been extended twice before.

• Prior to TIPA, the 2014 combined limit for transit pass and vanpooling benefits was only $130 per month, while the 2014 limit for qualified parking benefits was $250.

• As a result of TIPA, the combined transit pass/vanpooling limit for 2014 rises to $250. TIPA has no effect on the 2015 limits, which will be the same as the pre-TIPA limits for 2014, absent further Congressional action .



Notice 2014-69 Defining Minimum Value


The IRS released Notice 2014-69 which provides that health plans that fail to provide substantial coverage for in-patient hospitalization services or for physician services (or for both) referred to as Non-Hospital/Non-Physician Services Plan) do not provide the minimum value intended by the minimum value requirements for the employer mandate.

For an employers who has entered into a binding written commitment to adopt, or have begun enrolling employees in, a Non-Hospital/Non-Physician Services Plan prior to November 4, 2014 based on the employer's reliance on the results of use of the MV Calculator (a Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plan), they will not be penalized for not meeting the employer mandate for the 2015 plan year if that plan year begins not later than March 1 2015.

Defining Minimum Value

Enforcement Delay of HPID


On October 31, 2014, CMS announced a delay, until further notice, in enforcement of 45 CFR 162, Subpart E, the regulations pertaining to health plan enumeration and use of the Health Plan Identifier (HPID) in HIPAA transactions adopted in the HPID final rule.

This enforcement delay applies to all HIPAA covered entities, including healthcare providers, health plans, and healthcare clearinghouses.

Enforcement Delay of HPID

Online Enrollment in SHOP Exchange Available for 2015


• CMS has announced that online enrollment will be available for 2015 coverage through the Small Business Health Options Program (SHOP—the Exchange for small businesses) beginning November 15, 2014.

• Online enrollment was delayed in 2013 , and employers were directed to work with an agent, broker, or insurer to complete and submit paper applications for 2014 .

• The bulletin explains that, for 2015, employers will be able to choose coverage, complete an application, and enroll entirely online.

• Employers can also work with a registered agent or broker, who will have enhanced online capabilities.

• CMS Bulletin: Get Health Care for Your Small Business (Oct. 8, 2014)

• Available at: http://content.govdelivery.com/accounts/USCMSHIM/bulletins/d3f753

Online Enrollment in SHOP Exchange Available for 2015

Questions?


Contact Information

• Larry Grudzien

• Phone: 708-717-9638

• Email: [email protected]

• Site: www.larrygrudzien.com

current developments in welfare benefits

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