Ch-Ch-Changes

New cafeteria plan election rules and PCORI fee

Recently, the IRS issued guidance which expands the election rules for health coverage under a Section 125 Cafeteria Plan. In particular, Notice 2014-55 addresses two specific situations in which a Participant is permitted to revoke her/his election during a period of coverage (i.e. Plan year) in order to purchase a “qualified” health plan through a Marketplace.* In the first scenario, an employee’s hours of service are reduced, but the employer allows coverage under the group health plan to continue. In the second, an employee is purchasing Marketplace coverage during a special enrollment period or open enrollment period.

Prospective revocation is allowed provided that the following conditions are met:

Reduction in hours

  • The employee has been in an employment status under which he/she was expected to average at least 30 hours of service per week. Subsequently, per a change in status the employee is reasonably expected to average fewer than 30 hours of service per week (even if that reduction does not result in the employee ceasing to be eligible under the group health plan**); and
  • The revocation of the election of coverage under the group health plan corresponds to the employee’s intended enrollment in another plan that provides minimum essential coverage. The new coverage is effective no later than the first day of the second month following the date the original coverage is revoked.

Enrollment in a Qualified Health Plan***

  • The employee is eligible for a Special Enrollment Period or seeks to enroll in a Qualified Health Plan through a Marketplace during the annual open enrollment period; and
  • The revocation of the election of coverage under the group health plan corresponds to the employee’s intended enrollment in a Qualified Health Plan through a Marketplace for new coverage. The new coverage is effective no later than the day immediately following the last day of the original coverage that is revoked.

This guidance—effective as of September 18, 2014—does not apply to the health FSAs.

To allow the new permitted election changes under this notice, the cafeteria plan must be amended AND the employer must inform Participants of the amendment. As always, TASC has you covered. FlexSystem Clients can download the required Exchange Change in Status Amendment online at https://www.tasconline.com/flexsystem-plan-amendments.

AND, IN OTHER (IRS) NEWS… The agency also recently announced an adjustment in the Patient Centered Outcomes Research Institute (PCORI) fee. According to Notice 2014-56, the dollar amount will increase from $2.00 to $2.08 (per covered life) for Plan years ending on or after October 1, 2014 and before October, 1 2015.

* The federally-facilitated or state-based entities formerly known as “health insurance exchanges.”
** Typically will occur under certain plan designs intended to satisfy PPACA’s employer mandate and to avoid any potential pay-or-play penalties.
*** A health insurance policy sold through the Marketplace; PPACA requires certification that these health plans meet minimum standards contained within the law.

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.

ALERT: WI. waives deductible limit

Wisconsin’s Insurance Commissioner Ted Nickel has issued a “bulletin” clarifying the state’s policy regarding Section 1302(c)(2) of PPACA* for insurers offering small group health insurance plans outside of the Federally Facilitated Marketplace (FFM) that will be established in Wisconsin. It reads…

“Pursuant to clear statutory authority, Wisconsin insurers offering small group health insurance plans outside of the FFM will be allowed to increase the deductibles of a small group health plan. This will help ensure that a larger percentage of small employers and their employees will be able to maintain their current health care coverage.”

* NOTE: Section 1302(c)(2) states that in the case of a health plan offered in the small group market, the deductible under the plan shall not exceed $2,000 in the case of a plan covering a single individual and $4,000 in the case of any other plan.

Due to this recent development, TASC has partnered with the Employers Council on Flexible Compensation (ECFC) in an effort to develop a state-by-state approach encouraging others to issue similar guidance.

Important Reminder: PCORI deadline fast approaching!

Form 720 and fee due July 31

We continually tell you that changes created by the Patient Protection & Affordable Care Act (PPACA) are often confusing and hard to decipher. For example, did you know that there is a new fee on Health Reimbursement Arrangement (HRA) Plans that ended between October 1, 2012 and December 31, 2012? And to make matters worse, the calculation of this new fee and the determination of which employees count can be extremely complicated.

Established by PPACA, the Patient-Centered Outcomes Research Institute (PCORI) is charged with examining the relative health outcomes, clinical effectiveness, and appropriateness of different medical treatments by evaluating existing studies and conducting its own. This Institute will be funded by employer-paid fees and fines for missed or late filing may be accessed!

Fortunately for you and your clients, TASC makes complying with this new regulation quick and painless. For a small fee we will take the mystery out of PCORI and make sure that Plans stay in compliance by providing the fee calculation, an IRS Form 720, and instructions for completing the form/remitting payment. (Clients of TASC’s AgriPlanNOW, BizPlanNOW and ERISAEdge services receive these PCORI services at no additional charge.)

Help your HRA clients avoid penalties and fines. Don’t delay; time is of the essence…completed form – with payment – must be mailed to the IRS and postmarked no later than July 31, 2013.

If you have any questions about TASC’s new PCORI service call 1-800-422-4661.

Of all the changes created by PPACA, few are more confusing than the rights and protections now offered to employees. This is compounded by the potential of significant penalties for failing to comply. Our benefits experts make the job of complying with these ever-changing regulations quick and painless. We will continue to monitor future mandates to keep you informed and to ensure your Plan remains in compliance with changes as they occur. TASC has you covered!

Prohibiting Waiting Periods Longer Than 90 Days

Each year approximately 400,000 employees are subject to waiting periods of four months or longer.

Last month, Labor, Treasury, and HHS jointly issued proposed regulations addressing healthcare reform’s prohibition on excessive waiting periods.  These new standards are expected to further drive implementation of a pending PPACA provision aimed at both insured and self-insured group health plans.

The proposed regulations are substantially similar to the agencies’ initial guidance (August 2012) and contain virtually no surprises.  This requirement is absolute; it confirms that all calendar days are counted, that “90 days” is not synonymous to “three months,” and that the waiting period cannot be extended.  For example, consider a healthcare plan that seeks to establish coverage on the first day of a calendar month—or if the 90th day happens to fall on a weekend or holiday. Such a plan may choose to commence coverage prior to and NOT later than the cutoff date.

Meanwhile, the regulations do not indicate that an employee be restricted to 90 calendar days in which to sign up for coverage (as long as said employee had the opportunity to elect coverage within that 90 day window).  We interpret this language to clarify that granting employees additional time to make enrollment decisions will not be considered a compliance violation.  Likewise, other eligibility conditions/criteria (i.e. job classification or licensure requirements) will also be permissible, assuming they are not intentionally designed to circumvent the spirit and intent of the law.

While some plans require employees to wait a set amount of time before collecting healthcare benefits, others mandate reaching a set number of hours worked.  This prohibition does not bar one-time cumulative hours of service requirements, as long as the requirement does not exceed 1,200 hours.  For eligibility conditions that require a minimum number of hours of service per period (such as working full-time), a plan may use a reasonable measurement period of up to 12 months to determine whether a new employee with variable hours meets the condition.  In such an instance coverage must be made available no later than 13 months from the employee’s start date.

These waiting period rules are expected to go into effect on January 1, 2014 (i.e. Plan years beginning on or after that date). All group plans/insurers will be affected, regardless of grandfathered status.  If final regulations are more restrictive, they will not be implemented until January of 2015 at the earliest.

While compliance with the 90-day limit may seem relatively straightforward, there are some potential traps for the unwary.  Does this apply to all employers?  Are benefit accounts (FSAs/HRAs/HSAs) included?  Do any exceptions exist?  For answers to these questions and more, be sure to attend Capital Connection’s next quarterly webinar on Wednesday, April 10th.

CONSTITUTIONAL

The nation has been waiting with bated breath for the most consequential Supreme Court decision in over a decade.

This morning the Supreme Court issued its anxiously awaited ruling on the 2010 federal healthcare law–the Patient Protection & Affordable Care Act (PPACA). Specifically, the court announced three final opinions of the term before the summer recess.

It appears that the Supreme Court has upheld the healthcare reform law’s “individual mandate” in an opinion authored by Chief Justice John Roberts and joined in by Justices Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor.

The high court concluded, as did the majority of lower courts, that Congress was acting within its powers under the Constitution when it required most Americans to carry health insurance or pay a penalty.  That provision was at the center of the two-year legal battle.

The ruling is a victory for Democrats and President Barack Obama, who had passed the biggest reworking of the nation’s healthcare system since the creation of Medicare in the 1960s.  It also averts disruption for employers who have spent more than two years preparing for changes in the law.

Despite the ruling, the law’s future remains uncertain.  Healthcare reform will remain hotly contested, and is bound to play a prominent role in political campaigns between now and Election Day.  Republican presidential nominee Mitt Romney and GOP leaders have pledged to repeal the law if they take control of Congress and the White House in November.

TASC Governmental Affairs will fully digest the ruling and examine the opinions before commenting further. Meanwhile, rest assured that TASC will continue to execute on the implementation of programs/legislation per PPACA mandates, and that we will obtain additional governmental guidance if necessary.