ALERT – Cadillac Tax & Transit Parity

Early this morning, Congressional negotiators reached an agreement on legislation to fund the federal government through September 2016 and to extend certain expiring tax breaks. The package deal contains at least two provisions that will have a positive impact on TASC’s Clients/Participants…first and foremost the ACA’s Cadillac Tax* has been delayed for two years (from 2018 to 2020), and secondly, parity has been permanently restored between qualified parking and transit benefits, meaning that the monthly limitations will now reflect equal dollar amounts.

The deal – which has bipartisan support – is expected to pass both the House and the Senate prior to December 22, when Congress will adjourn for the year.

We are continuing to review the language to see if any additional changes have been made to other TASC interests, but wanted to make you aware of these important items as soon as possible.

* The legislation also makes the excise tax deductible by businesses and calls for a study to determine suitable benchmarks for the age and gender adjustment that could result in an increase in the base thresholds.

 

 

 

 

If at first you don’t succeed…try, try again (AND AGAIN)

Congressional Republicans have voted to repeal the health care law 56 times

On Thursday, the Senate passed legislation repealing the core pillars of the Affordable Care Act (ACA), marking the first time such a bill has reached the president’s desk.  The measure attempts to gut the law by eliminating the individual and employer mandates, the medical device tax and the so-called “Cadillac” tax.  The Senate version also includes a delay of Medicaid expansion and exchange subsidies until 2018, among other things.

Republicans wrapped the measure in a special budgetary, filibuster-proof process (known as reconciliation) that required just 51 votes for Senate passage, circumventing the 60-vote hurdle usually required for controversial bills.  Ironically, Democrats used the same obscure budget procedure to pass the ACA back in 2009.

Not surprisingly, the White House has already promised a veto, saying the bill would “take away critical benefits and health care coverage” from families.

A significant — if only symbolic — victory

During the vigorous debate on the reconciliation bill, Senators adopted an amendment sponsored by Sen. Dean Heller (R-NV) to repeal the so-called “Cadillac” tax on high cost health plans by a vote of 90-10…providing momentum to the campaign being championed by companies across the nation in an effort to protect middle class workers who could see their benefit accounts scaled back or eliminated.

Created by the ACA, the Cadillac Tax is intended to discourage employers from offering health insurance plans with excessively rich benefits. Upon implementation in 2018, it will be equal to 40 percent of the value of any coverage in excess of $10,200 for an individual and $27,500 for a family. To determine whether these cost thresholds are exceeded, an overly broad net has been cast – one that includes many employer sponsored and consumer directed arrangements.  In particular, the statute is being interpreted such that employer and employee contributions to FSAs, employer contributions to HRAs, and employer and employee pre-tax contributions to HSAs are subject to the calculation. .

As the largest privately-held third party administrator in the United States, TASC – along with the Employers Council on Flexible Compensation (ECFC) – is leading the charge to lobby Congress in hopes of repealing the excise tax.  And while continuing to advocate for a full repeal, we recognize that achieving that goal by years end is unlikely given the various political realities, funding issues and time constraints.  Therefore, TASC believes Congress should enact legislation that would carve-out employee contributions to FSAs and HSAs, thus ensuring that they are not counted toward the calculation of whether an employer maintains high cost health coverage.

The simple reality is that these contributions are the employees’ own money and including them will harm the very people the ACA was trying to help.  Exempting employee contributions from the tax is an immediate step that will go a long way towards ensuring that American families will continue to be able to access important health benefits.

TASC will continue to keep you informed on this very important issue.

President Signs PACE ACT

A win-win for businesses and bipartisanship as companies faced a premium increase of 18%

This week, President Obama signed HR 1624 – the Protecting Affordable Coverage for Employees (PACE) Act – that amends the Affordable Care Act (ACA) definition of a “small employer” for the purpose of purchasing health insurance coverage.  The PACE Act repeals the mandatory expansion of the small group market to employers with up to 100 employees and reverts back to the prior definition of up to 50 employees[i]…although states still maintain the option to redefine the small market in order to cover businesses with up to 100 employees if they feel the conditions in their state necessitate the change.

This change is important; small employers are treated very differently than large insurers for purposes of insurance regulation under the ACA.  Insurers covering small employers must, for example, cover the ten essential health benefits and can only offer plans that fit into the actuarial value levels (platinum, gold, silver, and bronze) defined by the ACA. Large group plans are not bound by any of these requirements.

Most states have long defined a small group as consisting of 50 or fewer employees, which is how the term was originally defined by the Health Insurance Portability and Accountability Act (HIPAA).  The drafters of the ACA had hoped that extending the definition to encompass groups as large as 100 would both reduce premiums for the under 50 groups and extend the small group protections of the ACA to a larger population.  However, as 2016 approaches, it’s become increasingly clear that the change might do more harm than good.  The definition change would have also subjected mid-size employers to both the employer mandate and the strict small group insurance components, a result that could appear unfair.

A recent analysis[ii] by the Congressional Budget Office (CBO) and the Joint Committee on Taxation estimated that most states would not expand the definition of small employers.  As a result, they project that federal revenues will increase $400 million over the next decade.  Thus meaning it’s one of the few potential amendments to the ACA that does not increase the deficit and require a “pay-for.”

There will be some tangles to work out for sure given the fact that the change occurred so late in 2015 (i.e. insurers have presumably filed their 2016 rates and likely cannot refile in most states), but given the rancor that surrounds anything related to the ACA in a sharply partisan and largely nonfunctional Congress, this is a remarkable occurrence worthy of note.  With a total of 235 cosponsors, the measure represents an uncommon instance in which both parties rallied behind an effort to improve flexibility for states, avoid coverage disruptions, and avoid premium increases for employees in mid-size firms.

[i] Firms with 51-100 employees would not be able to offer coverage through a Small Business Health Options Program (SHOP) exchange.

[ii] “Estimate of H.R. 1624, the Protecting Affordable Coverage for Employees Act, as introduced,” September 2015

 

Breaking News: Federal Subsidies Upheld

SCOTUS rules 6-3 in favor of Burwell

In the biggest legal threat to the Affordable Care Act (ACA) since it was ruled constitutional three years ago, the Supreme Court upheld a key provision of the law on Thursday by affirming that consumers in all states—not just those that established their own marketplaces—are eligible to receive (and can continue to receive) insurance subsidies that allow them to purchase healthcare plans. The King v. Burwell ruling marks the second major win for the administration before Court.

The plaintiffs in the case had argued that the ACA subsidies were only available to those who enrolled through a marketplace “established by the state,” which by their interpretation clearly excluded those on the federal platform (HealthCare.gov). According to the Dept. of Health & Human Services, an estimated 6.4 million Americans currently receive subsidies in the 34 states that don’t have their own state-based marketplaces.

In the 6-3 decision, authored by Chief Justice John Roberts, a majority of the justices opined that a ruling killing off the subsidies would have set the state markets into a death spiral, and that this could not have been Congress’ intent…

“The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral. It is implausible that Congress meant the Act to operate in this manner. The argument that the phrase ‘established by the State’ would be superfluous if Congress meant to extend tax credits to both State and Federal Marketplaces is unpersuasive. Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter.”

The court’s four liberal justices (Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagen) joined the Roberts opinion, as did Justice Anthony Kennedy, who is often a swing vote on the court; conservative Justices Antonin Scalia, Clarence Thomas and Samuel Alito dissented.

Regardless of whether you agree with the Court or not, the public marketplaces make health insurance more accessible, more affordable and more attainable for many Americans. That being said, many employers continue to struggle with the health insurance options available to them, such as high deductible health plans or plans that increase the amount of cost sharing borne by employees. This trend is echoed on both the state-based and federally-facilitated marketplaces, where much of the coverage available has/does just that. Consequently, the importance of account-based, consumer-directed employee benefit arrangements—like those offered by TASC—is heightened in this ACA environment as employers take action to reduce the costs of their health coverage.

TASC believes that employee benefit plans (i.e. FSAs, HRAs & HSAs) are an important component of the current employer provided health system, and is dedicated to maintaining and expanding these products/service offerings, which in return encourages the efficient and effective use of tax-advantaged healthcare funds. This is consistent with TASC’s pro-Client/pro-Participant stance, and reflects our efforts to ensure customer footing at the forefront of the decision making processes.

Cafeteria Plan = Employer Payment Plan? No.

NOTE: This is a follow-up to a previous Capital Connection entry (Compliance of Premium Reimbursement Arrangements) dated Nov. 7, 2014.  

FAQ Part XXII – http://www.dol.gov/ebsa/faqs/faq-aca22.html

Analysis of the latest round of FAQs further clarifies that the Department’s* prior guidance (i.e. IRS Notice 2013-54) was specifically aimed at health reimbursement arrangements (HRAs) and “employer payment plans”…and does not apply to a Cafeteria Plan under Section 125.

A Section 125 Cafeteria Plan is an IRS Code creation that allows pre-taxed premium for qualified benefits, includes an option for employer funding and requires employee salary reduction. These FAQs do nothing to redefine the term “qualified benefits” under Section 125.** TASC has yet to see a regulatory statement converting a Section 125 Cafeteria Plan into a “group health plan,” thus making it subject to ERISA or PPACA & PHS Act mandates.

As a result, TASC maintains compliance and continues to back its NESP/NEFSA Plans with an Audit Guarantee for all enrolled employers and their Participants. TASC will support and assist enrolled employers or Participants whose Plan is challenged by the IRS. If all procedures and parameters are adhered to, TASC will assume financial responsibility for any penalty and/or interest charged as a result of an audit.

Click here for more information on TASC’s position https://tasccapitalconnection.com/2014/07/30/tascs-response-to-2013-54-compliance-bulletin-10-2/

* Departments of Labor (DOL), Health and Human Services (HHS), and Treasury
** Public Marketplace Plans are not considered a qualified benefit and premiums cannot be reimbursed; see IRC §125(f)

TASC’s response to 2013-54 (Compliance Bulletin #10.2)

Prior to consuming the information below, recipients are encouraged to review Compliance Bulletin #10.1 (dated December 2013).

The opinions expressed below are consistent with TASC’s pro-Client and pro-Participant stance, and reflect our efforts to ensure customer footing at the forefront of the decision-making processes. The final decisions in all Plan issues remain with the employer; those uncomfortable with this agile stance are welcome to opt for the more conservative approach. As we implement necessary changes and administrative process updates to comply, we will make every effort to accomplish these changes while posing no financial harm to our customers.

BACKGROUND

Non-Employer Sponsored Premium (NESP)
The IRS consistently defines an individual health insurance policy as a “qualified benefits plan” under a Section 125 cafeteria plan, thus assigning it the same status as any other qualified benefits plan (such as major medical or dental plans). And while Notice 2013-54 specifically addresses “group health plans,” clearly a Section 125 cafeteria plan is not a group health plan.

In sum, the Notice maintains (because it does not change) the fact that an individual health insurance policy is considered a qualified benefits plan. Further, employers may offer a Section 125 cafeteria plan even when they do not sponsor group health insurance. And because this benefit is not part of a Flexible Spending Account, certain contribution limits do not apply.

Non-Excepted Flexible Spending Account (NEFSA)
A footnote in Notice 2013-54 clearly states that a health FSA is not subject to the annual dollar limit prohibition, “regardless of whether the health FSA is considered to provide only excepted benefits.” Therefore, the NEFSA is simply a health FSA that is not considered an excepted benefits plan, and as such is an available option for Clients who do not offer other health coverage (i.e. group health insurance). Certain COBRA conditions may apply.

POSITION(S)

TASC remains confident
On May 13, 2014, the IRS issued a set of Frequently Asked Questions (FAQs) addressing the subject of Employer Healthcare Arrangements. Although brief, this latest publication highlighted the agency’s intention to impose a $100 per day—or $36,500 per year—excise tax (per employee) on arrangements failing to satisfy the market reforms applied to group health plans as the result of the Patient Protection & Affordable Care Act (PPACA).

TASC maintains compliance and continues to stand behind the NESP/NEFSA Plans by providing an Audit Guarantee to all enrolled employers and their Participants. TASC will support and assist enrolled employers or Participants whose Plan is challenged by the IRS. If all procedures and parameters are adhered to, TASC will assume financial responsibility for any penalty and/or interest charged as a result of an audit.

TASC continues to offer the same Sec. 125 plan (i.e. individual premium as a qualified benefit) that it has for many years. Remember, a Sec. 125 plan is not a group health plan; therefore, it is not subject to such PPACA reforms as the prohibition on annual limit maximums. (Note: Per PPACA, Public Marketplace premiums are NOT eligible for reimbursement from a Sec. 125 plan; this practice is strictly prohibited.)

It remains clear that an employer may offer an HRA or self-funded group health plan that pays individual premiums ONLY when that employer also offers a plan that complies with PPACA’s annual limits prohibition. As a result, TASC no longer supports stand-alone HRA plans. (Note: This does not affect TASC’s traditional one employee AgriPlanNOW/BizPlanNOW Plans…nor does it impact retiree HRA Plans or HRA Plans that are limited to dental and vision benefits.)

Employers dropping their group health insurance
TASC does not—nor has it ever—endorse the concept of vacating employer sponsored coverage in favor of placing a NESP/NEFSA Plan, especially in the group market (see “Impact” below). These Plans are merely a viable option for a small segment of TASC’s Clients.

IMPACT

NESP / NEFSA Plans will NOT help an employer avoid PPACA’s Employer Mandate
The Employer Shared Responsibility provision require “large employers” (i.e. those employing 50 or more full-time equivalents) to offer coverage that is affordable AND of minimum value to full-time employees and their dependents. Large employers failing to offer such coverage are subject to the “pay or play” penalty.

Employers Not Offering Coverage: If an employer does not offer minimum value coverage and one or more full-time employee receives a premium credit or cost-sharing subsidy through the Public Marketplace, the penalty is $2,000 per year per full-time worker.

Employers Offering Coverage: If an employer offers minimum value coverage at a cost that is not affordable, and one or more full-time employees receive a premium credit or cost-sharing subsidy through the Public Marketplace, the penalty is $3,000 per employee receiving the credit/subsidy.

Note: IRS Notice 2013-45 delayed enforcement until Jan. 1, 2015. Meanwhile, for employers with between 50 and 99 full-time equivalent employees, compliance is generally not required until the 2016 Plan Year.

MOVING FORWARD

Continued monitoring of PPACA (and others in our space)
The above positions reflect countless hours of research by TASC’s compliance, governmental affairs, and legal (both in-house and external) departments. Of course our study of PPACA implementation—not to mention the myriad of conflicting interpretations—is ongoing. This vigilance embodies our commitment to serve and our dedication to ensuring the best possible outcome for our Clients and Participants.

Future Communications
While TASC is aware that many view the recent guidance as an expansion of the limitations defined for “group health plans,” we do NOT share this opinion. Our analysts have yet to see definitive guidance that either converts a Section 125 plan to a “group health plan”’ (i.e. making a Sec. 125 plan subject to an SPD, DOL regulations, etc.) or limits the qualified benefits offered under Sec. 125.

These are TASC’s positions; any change in direction will ONLY come in the form of administrative guidance, Congressional action, or a court decision/ruling. We believe it is in TASC’s best interest to redirect our energy toward other areas material to the customer.

Employer Health Care Arrangements

On May 13th, the IRS issued a set of Frequently Asked Questions (FAQs) addressing the subject of Employer Health Care Arrangements. Although brief, this latest publication – in particular the entry below – seems to have sparked quite a buzz in the marketplace.

Q1. What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace)?

Under IRS Notice 2013-54, such arrangements are described as employer payment plans. An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation. As explained in Notice 2013-54, these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing. Notice 2013-54 clarifies that such arrangements cannot be integrated with individual policies to satisfy the market reforms. Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.

After a thorough review of this recent guidance by both our Corporate Compliance and Governmental Affairs Departments, TASC remains confident in its position and continues to stand behind the NESP / NEFSA Plan design by providing an Audit Guarantee* to all enrolled employers and participants. If all procedures and parameters are adhered to, TASC will assume financial responsibility for any penalty and/or interest charged as the result of an audit.

Full FAQ text available at http://www.irs.gov/uac/Newsroom/Employer-Health-Care-Arrangements.

* Applies to AgriPlanNOW / BizPlanNOW, DirectPay, and FlexSystem

ALERT: Small Group Deductible Limits Repealed

Earlier this week, President Obama signed legislation into law that provides relief from one of the Patient Protection & Affordable Care Act’s (PPACA’s) most onerous restrictions on account-based plans. H.R. 4302, the “Protecting Access to Medicare Act of 2014”–commonly known as the “Doc fix” bill–includes a provision eliminating the deductible limits imposed on health plans in the small group market.

PPACA currently limits deductible amounts offered by small employer plans to $2,000 for individuals and $4,000 for families.

You may recall that Wisconsin’s Insurance Commissioner announced last year that the state would allow insurance carriers the flexibility to increase the deductibles of a small group health plan. As a result of that policy change, TASC partnered with the Employers Council on Flexible Compensation (ECFC) in an advocacy effort–at both the state and federal levels–to elicit similar guidance.

This is a real victory… It will allow small employers to continue to offer affordable health plans along with flexible compensation options such as FSAs, HRAs and HSAs. Good news!

BREAKING NEWS: Employer Mandate Delayed (Again)

The Treasury Department said Monday that businesses with fewer than 100 employees would not be required to provide health care to its workforce in 2015. This latest policy announcement gives mid-size businesses (those with 50-99 employees) another year to adapt to the ever changing health care marketplace. Note: Small businesses with fewer than 50 workers have always been exempt from this provision.

The Administration is also giving “big” business (those with 100+ employees) more time to ramp up coverage. These large employers will still need to cover full-time workers next year — just not all of them…lowering the benchmark from 95% to 70% next year.

Developing story; more details to follow.

Just around the corner

More Healthcare Reform Notices due October 1st

A key component of the Patient Protection & Affordable Care Act (PPACA) is the creation of new Health Insurance Marketplaces,* which are meant to expand access of affordable coverage to individuals starting next year. Although that timeframe may seem far off to some, in the meantime employers must notify their employees of the various options available through these online portals in a mere two months (October 2013).

This obligation is imposed on ALL employers affected by the Fair Labor Standards Act (FLSA).** In general, the FLSA applies when an employer with one or more employees is engaged in, or produce goods for, interstate commerce. Employers must provide the Notice to each employee, regardless of Plan enrollment status or part-time/full-time employment status, but need not provide a separate Notice to dependents or other individuals who are—or may become—eligible for coverage under the Plan.

The Dept. of Labor (DOL) has issued two Model Notices. One is tailored for employers who provide health coverage for some/all employees (and includes information on whether the coverage meets the minimum value test***), and the other is intended for employers who do not provide health coverage.

While modifications to the Model Notice are permitted, any revised Notice must at minimum inform employees of the following: (a) the existence of the Marketplace; (b) that they may be eligible for a premium tax credit through the Marketplace if the employer plan’s share does not meet a ‘minimum value’ standard or if the employee’s premiums exceed 9.5% of household income; and (c) that if they purchase coverage through the Marketplace (c1) they may lose any employer contribution and (c2) if applicable, the employer’s contribution—and any employee contribution—may be excluded from their income for federal and state tax purposes.

Please note: the Model Notice includes an optional section with information that employers may provide to assist employees in comparing employer coverage versus Marketplace coverage. Any employer who considers providing employees with this optional information should assess the administrative costs of doing so, along with the potential risks of failing to convey this information.

The Notice Requirement was originally scheduled to take effect March 1, 2013, but was delayed to better coincide with the open enrollment period for the Marketplaces. In sum, with respect to current employees, employers are now mandated to provide the Notice by October 1, 2013.**** The good news is that the document may be sent electronically, as long it meets all federal electronic disclosure conditions.

Once again, TASC will make complying with this new regulation quick and painless…ensuring peace of mind for you and your Clients! More information will follow, so be on the look-out for additional communication from TASC (including here at the Capital Connection) in the coming weeks.

* Formerly known as “health insurance exchanges.”

** The FLSA also covers hospitals; institutions engaged in the care of the sick, aged, mentally ill, or disabled; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools, and institutions of higher education; and federal, state, and local government agencies.

*** An employer-sponsored health plan meets the “minimum value standard” if the plan’s share of the total allowed benefit costs covered by the plan is no less than 60%.

**** Post-October 1, 2013, the Notice must be given to each new employee upon hire. For 2014, it is to be provided within 14 days of the employee’s start date.