New York State Releases Final Model Sexual Harassment Prevention Training Program and Policy

New York State has released finalized versions of its model sexual harassment prevention training program and model sexual harassment prevention policy. As a reminder, within 12 months of October 9, 2018, and annually thereafter, all New York employers must provide training to all employees using either the state’s model training program or one that equals or exceeds the state program. Additionally, starting October 9, 2018, all New York employers must adopt either the state’s model sexual harassment prevention policy or one that equals or exceeds the standards of the state policy, and provide it to employees in writing.

Visit the New York Sexual Harassment page of your HR library for more information.

IRS RELEASES NEW ACA ADJUSTED FEES FOR 2017

DEC 22 JOANNA KIM-BRUNETTI AFFORDABLE CARE ACT, IRS
The IRS has released its adjusted figures for certain fees coming into the new year. The Patient-Centered Outcomes Research Institute (PCORI) fee being one of them. The fee was started under the ACA for advancements in comparative clinical effectiveness research, and while the fee increases have been nominal over the years PCORI has been in place, there is still an increase in the fee, which is based on per average number of lives that are covered by the plan or policy.
For both policies and plans ending on or after October 1, 2016 and before October 1, 2017, the fee has been adjusted to $2.26 per life. Compare that to the previous year’s $2.17 per life (2015/2016), $2.08 per for 2014/2015, and $2 per life for 2013/2014. That’s roughly an 8.5 cent increase each year since 2013. Said fee for the coming year must be paid by July 31, 2017 along with the filing of Form 720.
Another fee, the Transitional Reinsurance Fee, saw great decreases over the years before being ceased for 2017. Created in an effort to provide the marketplace exchanges with reinsurance, the Transitional Reinsurance Fee for 2016 was $27 per covered life. In 2015 it was $44, and in 2014 was $63. Per the Department of Health and Human Services (HHS), these records must be retained for a minimum of ten years despite the fee ending in 2017.
There are two options for payment including a lump sum due by January 17, 2017 or broken up into two payments: one at $21.60 per covered life due by January 17, 2017 and the second at $5.40 per covered life, due by November 15, 2017. To make payments online, click
here.

 

  1. DOL HOME

By Topic: Workplace Posters

Topics

Overview

Some of the statutes and regulations enforced by the U.S. Department of Labor (DOL) require that notices be provided to employees and/or posted in the workplace. DOL provides free electronic copies of the required posters and some of the posters are available in languages other than English.

Please note that posting requirements vary by statute; that is, not all employers are covered by each of the Department’s statutes and thus may not be required to post a specific notice. For example, some small businesses may not be covered by the Family and Medical Leave Act and thus would not be subject to the Act’s posting requirements.

The elaws Poster Advisor can be used to determine which poster(s) employers are required to display at their place(s) of business. Posters, available in English and other languages, may be downloaded free of charge and printed directly from the Advisor. If you already know which poster(s) you are required to display, see below to download and print the appropriate poster(s) free of charge.

Please note that the elaws Poster Advisor provides information on federal DOL poster requirements. For information on state poster requirements please visit state Departments of Labor.

FOR MORE INFORMATION, PLEASE CONTACT US AT HILLERLEE@AOL.COM

 

ECFC Statement on Washington Post Editorial “United Against the Cadillac Tax”

Please read the editorial statement from the Washington Post below that explains WHY the Cadillac Tax poses a steep financial threat to employers, employees and consumerism, which helps to control healthcare spending.

http://www.ecfc.org/files/ECFC_Statement_on_WaPo_Editorial_final.pdf

 

 

ACA 29TH SET OF FAQS – 2015 DECEMBER

The Departments of Labor, Treasury, and Health and Human Services (collectively, the Departments) have issued the 29th set of Affordable Care Act (“ACA”) frequently asked questions (“FAQs”).

This time, the Departments tackle various questions on the preventive care mandate, wellness programs, and medical necessity determinations under the Mental Health Parity and Addiction Equity Act of 2008. Unless otherwise noted, this guidance is effective as of October 23, 2015.

Preventive Care

A non-grandfathered group health plan must provide coverage for in-network preventive items and services and may not impose any cost-sharing requirements (such as a copayment, coinsurance, or deductible) with respect to those items or services. The FAQs address some of those preventive items and services. Lactation counseling Comprehensive prenatal and postnatal lactation support, counseling, and equipment rental are part of the ACA’s mandated preventive care requirements. This includes lactation counseling. FAQs 1-4 address a number of issues related to lactation counseling: • Plans are required to provide a list of lactation counseling providers within a network. This requirement is generally met through providing the SBC, which includes an Internet address for obtaining a list of the network providers.

This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional.

Further, ERISA requires a group health plan to provide an SPD that, among other things, provides information on providers including a description of any provider networks and how to obtain a provider list without charge. • If a plan does not have in its network a provider who can provide lactation counseling services, the plan must cover the item or service when performed by an out-of-network provider without cost sharing. • If a state does not license lactation counseling providers, then, subject to reasonable medical management, lactation counseling must be covered without cost sharing by the plan when it is performed by any provider acting within the scope of his or her license or certification under applicable state law (e.g., a registered nurse). • It is not a reasonable medical management technique to limit coverage for lactation counseling to services provided on an in-patient basis (e.g., in a hospital setting). Moreover, coverage for lactation support services without cost sharing must extend for the duration of the breastfeeding. Breastfeeding equipment Under the preventive care mandate, the rental or purchase of breastfeeding equipment must be covered without cost-sharing. A plan may not require individuals to obtain breastfeeding equipment within a specified time period (e.g., 6 months from the date of delivery) in order for the equipment to be covered without cost sharing. Additionally, the coverage extends for the duration of breastfeeding, provided the individual remains continuously enrolled in the plan or coverage.

Weight management exclusions Screening for obesity in adults is a preventive service. Additionally, the guidelines currently recommend, for adult patients with a body mass index (“BMI”) of 30 kg/ m2 or higher, intensive, multi-component behavioral interventions for weight management. While plans and issuers may use reasonable medical management techniques to determine the frequency, method, treatment, or setting for a recommended preventive service, to the extent not specified in the recommendation or guideline, plans are not permitted to impose general exclusions that would encompass recommended preventive services. Colonoscopies FAQs 8-9 clarify that if the colonoscopy is scheduled and performed as a preventive screening procedure, it is not permissible for the plan to impose cost-sharing on a required specialist consultation or any pathology exam or biopsy in connection with a preventive colonoscopy. This clarifying guidance is effective for plan years that begin on or after January 1, 2016.

Eligible organizations and contraceptive services FAQ 9 outlines the two methods a qualifying non-profit or closely held for-profit employer with a self-insured group health plan can use to claim an accommodation: • Complete EBSA Form 700 and provide the form to the third party administrator (TPA): http://www.dol.gov/ ebsa/pdf/preventiveserviceseligibleorganizationcertificationform.pdf; or • Provide notice of the objection to HHS: https:// www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/Model-Notice-8-22-14.pdf. This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional.  The accommodation generally relieves the employer from any obligation to contract, arrange, or pay for the objectionable contraceptive and that has the legal effect of designating the third party administrator (“TPA”) as the ERISA plan administrator responsible for separately providing payments for those services. Note, the Supreme Court granted review of 7 cases contesting the contraceptives services mandate under the ACA, mainly centered on this accommodation process. The Court is expected to hear oral arguments in late March of 2016 with a decision likely in June.

BCRA Testing FAQ 10 states that women found to be at increased risk, using a screening tool designed to identify a family history that may be associated with an increased risk of having a potentially harmful gene mutation, must receive coverage without cost sharing for genetic counseling and, if indicated, testing for harmful BRCA mutations. This is true regardless of whether the woman has previously been diagnosed with cancer, as long as she is not currently symptomatic of or receiving active treatment for breast, ovarian, tubal, or peritoneal cancer.

Wellness Programs Non-financial rewards FAQ 11 provides that if a group health plan offers non-financial (or in-kind) incentives (e.g., gift cards, thermoses, sports gear) to participants who adhere to a health-contingent wellness program, the program must comply with HIPAA’s 5-factor test.

 

Obamacare Penalties Will Cost More Than Health Coverage for Millions Fines for skipping health insurance are going up.

Obamacare is about to test how well people respond to economic incentives.

About 3.5 million Americans who are uninsured today could get health coverage in 2016 for less than what they’ll pay in penalties under Obamacare, according to a new analysis. QUICKTAKE The Individual Mandate That’s because the Affordable Care Act’s fines for skipping health insurance will rise next year. On average, people currently uninsured would have to pay $969 in 2016, up from $661 this year, according to the report by the Kaiser Family Foundation. The penalties are rising to 2.5 percent of income or a flat dollar amount of $695 per adult, whichever is higher. That’s compared with 2 percent of income or $325 per adult this year.

About 11 million people are eligible for coverage but haven’t bought it. The big question is whether the steeper fines will prod more of them into the market. “That’s where the mandate matters the most, because it aims to bring healthy people into the risk pool, which will help keep premiums down,” says Larry Levitt, senior vice president at the Kaiser Family Foundation and one of the report’s authors. The new insurance markets created by Obamacare in 2014 need healthy people to enroll in order to be sustainable. Last month the largest U.S. health insurer, UnitedHealth Group, said it might withdraw from the Obamacare market entirely after next year because of mounting losses. More than 2 million people selected Obamacare plans in the first month after open enrollment began on Nov. 1, according to federal statistics, including 700,000 new to the marketplace. (The tally counts 38 states that use the federal marketplace, and omits states like New York and California with their own enrollment systems.) Obama administration officials have said they expect about 10 million people to sign up in the enrollment period that closes at the end of January, only a small increase over the current year. Obamacare relies on carrots and sticks to get people to enroll in health plans. Subsidies bring down the price of insurance, while the penalties discourage people from forgoing coverage. For many people, paying the penalty might be a rational choice, because it’s often still less money than what the cheapest health plan costs. Kaiser estimates that there are about 7 million uninsured people in this circumstance. But then there’s another group of about 3.5 million uninsured who are eligible for coverage, and could enroll in the least expensive health plans for less than what they’ll pay in penalties, or for no cost at all after subsidies. That’s roughly equivalent to the population of Connecticut. And they’d have to defy economic logic to remain uninsured next year. There are several reasons that they might. First, the penalties aren’t calculated until tax time: Fines people incur for not having health insurance in 2016 won’t be levied until they file their taxes in 2017. A lot of people who are eligible for subsidies to reduce the cost of coverage don’t realize it, Levitt says. And the administration has soft-pedaled the penalties, because they’re among the least popular parts of the law. “The mandate could be a very effective tool to encourage people to sign up,” Levitt says, “but the politics of it aren’t great.”

 

DOL RELEASES NEW FMLA FORMS

 
May 27, 2015
 
The Department of Labor posted the new model FMLA notices and medical certification forms over the weekend, Their expiration date is May 31, 2018!
 

In the instructions to the health care provider on the certification for an employee’s serious health condition, the DOL has added the following simple instruction:

Do not provide information about genetic tests, as defined in 29 C.F.R. § 1635.3(f), genetic services, as defined in 29 C.F.R. § 1635.3(e), or the manifestation of disease or disorder in the employee’s family members, 29 C.F.R. § 1635.3(b).

DOL added similar language to the other medical certification forms as well. For easy reference, here are the links to the new FMLA forms:

The forms also can be accessed from this DOL web page.

Click on the link below: http://www.dol.gov/whd/fmla/2013rule/militaryForms.htm

IRS SECTION 6056 Q & A

May 20, 2015
 
Today, the IRS released Q&As on Reporting of Offers of Health Insurance Coverage by Employers (Code Section 6056). The Q&A’s include the following topics:[1] Basics of Employer Reporting: Questions 1-4;[2] Who is Required to Report: Questions 5-12;[3] Methods of Reporting: Questions 13-17;4] How and When to Report the Required Information: Questions 18-31.For a copy of the Q&As, please click on the link below:http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-on-Reporting-of-Offers-of-Health-Insurance-Coverage-by-Employers-Section-6056

PROPOSED “SURPRISE MEDICAL BILL LAW” IN NY TO PROTECT OUT OF NETWORK MYSTERY BILLS.

 

The first set of proposed regulations has been issued to New York’s “Surprise Medical Bill Law.” The law is intended to provide consumer protections from certain medical bills received from out-of-network health care providers. Health care providers must be aware of three essential impacts of this law.

Download PDF
As summarized in a prior client alert ( see related link below), New York’s Emergency Services and Surprise Bills law (the “Surprise Medical Bill Law”), set to go into effect on March 31, 2015, is largely intended to provide consumer protections from medical bills received from out-of-network physicians for services rendered in a hospital emergency room. The law also applies to medical bills received from out-of-network physicians and other health care providers for services rendered outside an emergency room in those cases where, for example, a patient has been referred to an out-of-network provider by an in-network physician, absent required disclosures and consents. The Department of Financial Services issued proposed regulations on December 31, 2014, [ 1] which primarily focus on the qualifications and processes of the Independent Dispute Resolution Entity (the “IDRE”) that will handle disputes among health plans, providers and patients regarding reimbursement for “surprise bills” and bills for emergency room services submitted by out-of-network physicians. Additionally, the proposed regulations clarify that the law, in certain circumstances, applies to services rendered by non-physician health care providers like physical therapists and laboratories and defines essential terms of the law that were previously unclear, such as what constitutes a referral to a non-participating referred health care provider.
The Surprise Medical Bill Law is complex and every health care provider should take the time to consider how it will impact their specific practice and policies (especially for health care providers that do not participate in many, or any, health insurance plans). The three key aspects of the law are summarized below:
    • Patients are only responsible for in-network cost-sharing responsibilities in the emergency room. After March 31, insured patients will only be financially responsible for their in-network cost-sharing responsibilities (i.e., copayments and deductibles) for services rendered in the emergency room, regardless of whether those services were provided by in-network or out-of-network physicians. Physicians must submit their bills directly to the patient’s health plan and negotiate reimbursement. Disputes regarding reimbursement may be submitted to the IDRE.
    • Patient disclosures and increased transparency. Once in effect, the law requires health care providers to disclose information to patients such as: which health plans a provider participates with, the provider’s hospital affiliations, anticipated charges, and the names and contact information of any other professionals that may be involved in the patient’s care and from whom the patient may receive a bill for services (such as anesthesiologists or pathologists) so that the patient may learn of those providers’ network status. Hospitals must also post information for patients, such as a list of charges and the health plans that the hospital and its physician-employees participate in. Under the proposed regulations, health plans must also disclose information to its insureds on “surprise bills” and the independent dispute resolution process.
  • Failure to provide required patient disclosures and obtain consents will result in “Surprise Bills” and limitations on charges to patient. Outside the emergency room setting, insured patients must receive disclosures as to a health care provider’s participation status with the patients’ health plan and must explicitly consent to referrals to out-of-network providers. The proposed regulations clarify that, in this context, “providers” include non-physician professionals and entities such as physical therapists, laboratories and home care agencies. The proposed regulations also clarify that for these purposes “referrals” include 1) services performed by non-participating providers in the participating physician’s office or practice during the course of the same visit, 2) a specimen that is taken from a patient in the participating physician’s office and sent to a non-participating laboratory or pathologist, or 3) any services performed by a non-participating health care provider when referrals are required under the insured’s contract. Failure to provide such disclosures and obtain such consents will result in a bill presented by such providers to constitute a “surprise bill” and in turn the patient will only be responsible for the in-network cost-sharing responsibility. Such providers will be required to negotiate payment directly with the patient’s health plan and any disputes will be subject to the IDRE process.

Skinny Plans and Minimum Value: Do these plans really pass the test?

 
by Carol Taylor, Employee Benefit Advisor

D&S Agency, A UBA Partner Firm

There is a lot of buzz in the market right now as employers are implementing their plans for the upcoming year. Many employers are looking at ways to keep their costs for medical coverage low, but still meet the requirements of the Patient Protection and Affordable Care Act (PPACA). These plans, often referred to as ”skinny plans,” may only cover preventive services or may cover everything but inpatient or outpatient hospital services.

Since these plans will meet the minimum essential coverage requirement, as long as they are employer sponsored plans, they will allow employers to not be penalized under the “A” fine of $2,000 per employee less the first 30.

However, the lingering question remains about whether they meet minimum value. The plan that only covers preventive services definitely does not meet minimum value, even based on the calculator released by the Department of Health and Human Services (HHS). It returns a minimum value calculation of less than 12%, far below the required 60%.

There seems to be much confusion though, with plans that do not cover inpatient hospitalization services. If you are only basing their value on the HHS minimum value calculator, they barely pass with a 60.6% value, as seen below in Picture 1.  However, the Internal Revenue Service (IRS), who is tasked with enforcing the employer fines, has stated in IRS Notice 2012-31 that plans that do not cover the four core categories of coverage “would not satisfy any of the design-based safe harbors.” The four core categories they reference include physician and mid-level practitioner care, hospital and emergency room services, pharmacy benefits, and laboratory and imaging services.

Is it possible that there are technical issues with the HHS minimum value calculator? Quite likely. The first version of the calculator that was released did not calculate properly unless you ran the plan through a second time.

Actuaries believe that the skinny plans don’t pass the minimum value test. Using ClearPATH, a commercial grade actuarial value calculator developed by actuary Richard Burd, the same plan that passes the HHS calculator, fails the minimum value score with a mere 25.6% value. Pictures 2 and 3 show the details, using the same benefit design as shown in the HHS calculator. The ClearPATH input screen follows the benefits as outlined in a summary of benefits and coverages (SBC), with total transparency on cost assumptions, and is available from Contribution Health, in Lancaster, PA, or their software partner, Total Compensation Systems. It is interesting to note that other actuary models also place the value of these plans in the same range as ClearPATH.

Employers should approach these plans with extreme caution. Since the IRS is the agency that will levy the fines for those employers with more than 50 full-time equivalent employees that do not offer affordable, minimum value coverage, their own regulatory guidance should bear more weight.

Employers also should keep in mind they could be opening up potential liability for lawsuits under the Employee Retirement Income Security Act (ERISA). If HHS were to change, or in some views correct, their system, the employees would have made decisions based on not having all the correct information. They would have relied on their employer to supply them with that. If the employer did not perform their due diligence, not only would they be opening the door for potential lawsuits from employees, but IRS fines would also be levied. Unless the IRS also released transitional relief, these changes could occur in the middle of a plan year. With mandatory 60-day advance notice requirements of off-renewal changes, this could prove quite costly for an employer.

If faced with making that decision now, employers should always err on the side of caution.

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IRS RELEASES NOTICE 2014-55 PROVIDING FOR ADDITIONAL

MARKETPLACE ELECTIONS

September 21, 2014    

 Last week, the IRS released Notice 2014-55 which provides additional permitted election changes for health coverage under Code Section 125 cafeteria plans. This notice provides two specific situations in which a cafeteria plan participant may wish to revoke, during a plan year, the employee’s election for employer-sponsored health coverage under the cafeteria plan in order to purchase a Qualified Health Plan through a Marketplace.

The first situation involves a participating employee whose hours of service are reduced so that the employee is expected to average less than 30 hours of service per week but for whom the reduction does not affect the eligibility for coverage under the employer’s group health plan. This may occur, for example, under certain employer plan designs intended to avoid any potential assessable payment under Code Section 4980H. To be eligible for this situation, an individual must met two conditions:

1. The employee has been in an employment status under which the employee was reasonably expected to average at least 30 hours of service per week and there is a change in that employee’s status so that the employee will reasonably be expected to average less than 30 hours of service per week after the change, even if that reduction does not result in the employee ceasing to be eligible under the group health plan; and

2. The revocation of the election of coverage under the group health plan corresponds to the intended enrollment of the employee, and any related individuals who cease coverage due to the revocation, in another plan that provides minimum essential coverage with the new coverage effective no later than the first day of the second month following the month that includes the date the original coverage is revoked.

The second situation involves an employee participating in an employer’s group health plan who would like to cease coverage under the group health plan and purchase coverage through a Marketplace without that resulting either in a period of duplicate coverage under the employer’s group health plan and the coverage purchased through a Marketplace or in a period of no coverage. To be eligible for this situation, an individual must meet two conditions:

1. The employee is eligible for a Special Enrollment Period to enroll in a Qualified Health Plan through a Marketplace pursuant to guidance issued by the Department of Health and Human Services and any other applicable guidance, or the employee seeks to enroll in a Qualified Health Plan through a Marketplace during the Marketplace’s annual open enrollment period; and

2. The revocation of the election of coverage under the group health plan corresponds to the intended enrollment of the employee and any related individuals who cease coverage due to the revocation in a Qualified Health Plan through a Marketplace for new coverage that is effective beginning no later than the day immediately following the last day of the original coverage that is revoked.

In both situations, a cafeteria plan may rely on the reasonable representation of an employee who has an enrollment opportunity for a Qualified Health Plan through a Marketplace that the employee and related individuals have enrolled or intend to enroll in a Qualified Health Plan for new coverage that is effective beginning no later than the day immediately following the last day of the original coverage that is revoked.

This notice permits a cafeteria plan to allow an employee to revoke his or her election under the cafeteria plan for coverage under the employer’ s group health plan (other than a flexible spending arrangement (FSA)) during a period of coverage in each of those situations provided two conditions are met. The Treasury Department and the IRS intend to modify the regulations under Section 125 consistent with the provisions of this notice, but taxpayers may rely on this notice immediately.

For a copy of IRS notice 2014-55, please click on the link below:

http://www.irs.gov/pub/irs-drop/n-14-55.pdf

 

NEW CHIP DOCUMENTS FOR 2014

Remember to call our office if you did not receive our email with the updated information!!!

NEW MODEL COBRA NOTICES FOR 2014 – DID YOU UPDATE YOURS?

Remember to call our office if you did not receive our email with the updated information!!!

 

Changes to major Obamacare provisions progress

Feb 07, 2014
Some of Obamacare’s toughest requirements for small businesses looking to meet new healthcare mandates center on the change of “full time” status from 40 hours a week to 30 hours. And, if businesses cannot afford to insure all workers meeting that minimum, challenges may arise for those employees in finding affordable, in-network care on their own.

Of course, the troubles of small businesses and individuals are foremost on the minds of the insurance producers seeking solutions for their clients. Help may be on the horizon on both fronts, however.

David Shore, president of the Massachusetts Association of Health Underwriters, has found that many insurers provide just “limited network plans,” which makes it difficult for low-income and chronically ill employees to find and afford appropriate providers.

Indeed, a December study from consultant McKinsey & Co. found more than two-thirds of health plans offered on the exchange have assembled provider networks considered “narrow” or “ultra-narrow.” In these networks, as many as 70% of hospitals and other local health providers aren’t included.

Even when insurers boast a wide network, the sale is difficult, said Steven Hurd of Pacific Insurance Brokers in California.

“A lot of times, people go for name recognition and they don’t know that smaller regionals are actually able to offer excellent value,” Hurd said. “Down here in San Diego, Sharp offers a lot of value, but people aren’t used to them and don’t want to figure out where those directories are and the nuances of putting people in there.”

That’s why the Health and Human Services Department felt prompted to issue a letter to insurers, urging them to cover 30% of “essential community providers” come 2015. That’s an increase from the 20% required this year.

The HHS also said it would review insurers’ provider networks to ensure they provide “reasonable access” to healthcare, including federally funded health clinics, safety-net hospitals and other medical providers commonly used by low-income individuals. Robert Zirkelbach, a spokesman for America’s Health Insurance Plans (AHIP), told Bloomberg the nation’s insurers were willing to comply with the request.

“It is important to ensure patients can continue to bebefit from the high-value provider networks health plans have established, which are helping to improve quality and mitigate cost increases for consumers as the new healthcare reforms are taking effect,” Zirkelbach said.

As for the 30-hour work week, would-be ACA reformers on the House Ways and Means committee advanced a bill that would change the law’s definition of a full-time worker to those who work 40 hours per week.

The legislation, which was passed on a vote of 23-14, will be referred to the House for consideration.

Mark Brown of Illinois-based M. Brown and Associates said the current definition of full time work has several of his clients in a bind.

“The business needs to survive, so what do you do? I have a client who bought up a company a year ago who needs to insure 50 to 70 people and there is no money to do it,” Brown said. “I feel really bad—what do you do for a guy like this? Make all 70 employees under 30 hours? Then nothing would get done.”

The HHS proposal is still in draft form, while the House bill must now be scheduled for debate.

WINDSOR DECISION AND SAME-SEX GUIDANCE RELATING TO PRE-TAX, ENROLLMENT, FSA, HDHP’S, ETC.

VERY IMPORTANT INFORMATION IF YOU HAVE SAME-SEX MARRIED EMPLOYEES

 The following questions and answers provide further guidance on the application of the Windsor decision with respect to certain rules governing the federal tax treatment of certain types of employee benefit arrangements.

 With respect to the following guidance, references to “marriage” or “spouse” refer to individuals who at the relevant date or for the relevant period of time would be treated as married or as spouses under the holdings in Rev. Rul. 2013-17.

 Mid-Year Election Changes

 Q-1: If a cafeteria plan participant was lawfully married to a same-sex spouse as of the date of the Windsor decision, may the plan permit the participant to make a mid-year election change on the basis that the participant has experienced a change in legal marital status?

 A-1: Yes. A cafeteria plan may treat a participant who was married to a same-sex spouse as of the date of the Windsor decision (June 26, 2013) as if the participant experienced a change in legal marital status for purposes of Treas. Reg. § 1.125-4(c). Accordingly, a cafeteria plan may permit such a participant to revoke an existing election and make a new election in a manner consistent with the change in legal marital status. For purposes of election changes due to the Windsor decision, an election may be accepted by the cafeteria plan if filed at any time during the cafeteria plan year that includes June 26, 2013, or the cafeteria plan year that includes December 16, 2013.

 A cafeteria plan may also permit a participant who marries a same-sex spouse after June 26, 2013, to make a mid-year election change due to a change in legal marital status.

 Any election made with respect to a same-sex spouse (and/or the spouse’s dependents) must satisfy the requirements of the regulations concerning election changes generally, including the consistency rule under Treas. Reg. § 1.125-4(c)(3).

 Q-2: May a cafeteria plan permit a participant with a same-sex spouse to make a mid- year election change under Treas. Reg. § 1.125-4(f) on the basis that the change in tax treatment of health coverage for a same-sex spouse resulted in a significant change in the cost of coverage?

 A-2: A change in the tax treatment of a benefit offered under a cafeteria plan generally does not constitute a significant change in the cost of coverage for purposes of Treas. Reg. § 1.125-4(f). Given the legal uncertainty created by the Windsor decision, however, cafeteria plans may have permitted mid-year election changes under Treas. Reg. § 1.125-4(f) prior to the publication of this notice.

 As noted in Q&A-1 above, such an election change would have been permitted on the basis that the participant experienced a change in legal marital status. Accordingly, for periods between June 26 and December 31, 2013,a cafeteria plan will not be treated as having failed to meet the requirements of section 125 or Treas.Reg. § 1.125-4 solely

 Because the plan permitted a participant with a same-sex spouse to make a mid-year election change under Treas. Reg. § 1.125-4(f) as a result of the plan administrator’s interpretation that the change in tax treatment of spousal health coverage arising from the Windsor decision resulted in a significant change in the cost of health coverage.
 Q-3: When does an election made by a participant in connection with the Windsor decision take effect?  A-3: An election made under a cafeteria plan with respect to a same-sex spouse as a result of the Windsor decision generally takes effect as of the date that any other change in coverage becomes effective for a qualifying benefit that is offered through the cafeteria plan.  With respect to a change in status election that was made by a participant in connection with the Windsor decision between June 26, 2013 and December 16, 2013, the cafeteria plan will not be treated as having failed to meet the requirements of section 125 or Treas. Reg. § 1.125-4 to the extent that coverage under the cafeteria plan becomes effective no later than the later of (a) the date that coverage under the cafeteria plan would be added under the cafeteria plan’s usual procedures for change in status elections, or (b) a reasonable period of time after December 16, 2013.  The rules set forth in Q&A-1 through Q&A-3 are illustrated by the following examples:   Example 1. Employer sponsors a cafeteria plan with a calendar year plan year.  Employee A married same-sex Spouse Bin October 2012 in a state that recognized same-sex marriages. During open enrollment for the 2013 plan year, Employee A elected to pay for the employee portion of the cost of self-only health coverage through salary reduction under the cafeteria plan.  Employer permits same-sex spouses to participate in its health plan. On October 5, 2013, Employee A elected to add health coverage for Spouse B under Employer’s health plan, and made a new salary reduction election under the cafeteria plan to pay for the employee portion of the cost of Spouse B’s health coverage. Employer was not certain whether such an election change was permissible, and accordingly declined to implement the election change until the publication oft his notice.  After publication of this notice, Employer determines that Employee A’s revised election is permissible as a change in status election in accordance with this notice. Employer enrolls Spouse B in the health plan as of  December 20, 2013, and begins making appropriate salary reductions from the compensation of Employee A for Spouse B’s coverage beginning with the pay period starting December 20, 2013. The cafeteria plan is administered in accordance with this notice.  Example 2. Same facts as Example 1, except that Employee A submitted the  
election to add health coverage for Spouse B under Employer’s cafeteria plan on September 1, 2013. Prior to publication of this notice, Employer implemented the election change and enrolled Spouse B in the health plan as of October 1, 2013, and began making appropriate salary reductions from the compensation of Employee A for Spouse B’s coverage beginning with the pay period starting October 1, 2013. The cafeteria plan was administered in accordance with this notice.  Q-4: If a cafeteria plan participant has elected to pay for the employee cost of health coverage for the employee on a pre-tax basis through salary reduction under a cafeteria plan, and is also paying the employee cost of health coverage for a same-sex spouse under a health plan of the employer on an after-tax basis, when, and under what circumstances, must an employer begin to treat the amount that the employee pays for spousal coverage as a pre-tax salary reduction?  A-4  An employer that, before the end of the cafeteria plan year including December 16, 2013, receives notice that such a participant is married to the individual receiving health coverage must begin treating the amount that the employee pays for the spousal coverage as a pre-tax salary reduction under the plan no later than the later of (a) the date that a change in legal marital status would be required to be reflected for income tax withholding purposes under section 3402, or (b) a reasonable period of time after December 16, 2013.  For this purpose, a participant may provide notice of the participant’s marriage to the individual receiving health coverage by making an election under the employer’s cafeteria plan to pay for the employee cost of spousal coverage through salary reduction (as permitted under Q&A-1) or by filing a revised Form W-4 representing that the participant is married.  Q-5: How does the Windsor decision affect the tax treatment of health coverage for a same-sex spouse in the case of a cafeteria plan participant who had been paying for the cost of same-sex spouse coverage on an after-tax basis?  A-5: In the case of a cafeteria plan participant who elected to pay for the employee cost of health coverage for the employee on a pre-tax basis through salary reduction under a cafeteria plan and also paid for the employee cost of health coverage for a same-sex spouse under the employer’s health plan on an after-tax basis, the participant’s salary reduction election under the cafeteria plan is deemed to include the employee cost of spousal coverage, even if the employer reports the amounts as taxable income and wages to the participant.  Accordingly, the amount that the participant pays for spousal coverage is excluded from the gross income of the participant and is not subject to federal income or federal employment taxes.This rule applies to the cafeteria plan year including December 16, 2013 and any prior years for which the applicable limitations period under section 6511 has not expired.  In general, Q&A-4 and Q&A-5 provide that a cafeteria plan participant may choose to pay for the employee cost of same-sex spouse coverage on a pre-tax basis through the remaining pay periods in the current cafeteria plan year by providing notice of the participant’s marital status to the employer or the cafeteria plan, or to continue paying or these benefits on an after-tax basis. In either case, the participant may seek a refund of federal income or federal employment taxes paid on any amounts representing the employee cost of spousal health coverage that were treated as after-tax and may exclude these amounts from gross income when filing an income tax return for the year.
The rules set forth in Q&A-4 and Q&A-5 are illustrated by the following example: Example 3. Same facts as Example 1, except that starting January 1, 2013,  Employee A paid for the employee portion of health coverage for Spouse B under Employer’s group health plan on an after-tax basis. The value of Spouse B’s health coverage was $500 per month, and this amount was included as taxable income and wages to Employee A for payroll purposes with respect to all pay periods starting January 1, 2013.  On October 5, 2013, Employee A made a change in status election under the cafeteria plan electing to pay for the employee cost of Spouse B’s health coverage on a pre-tax basis through salary reduction. Employer implemented the change in status election on November 1, 2013, and excluded the cost of Spouse B’s coverage from Employee A’s gross income and wages with respect to all remaining pay periods in 2013 starting November 1, 2013.  Employee A and Spouse B file a joint federal income tax return for 2013. The value of Spouse B’s health coverage for the full 2013 taxable year (including the $5,000 of coverage ($500 per month for 10 months) that was initially reported by Employer as includable in gross income with respect to all pay periods from January through October) may be excluded f om gross income on the couple’s joint return for 2013. Employee A may also request a refund of any federal employment taxes paid on account of such coverage.  FSA Reimbursements  Q-6: May a cafeteria plan permit a participant’s FSA to reimburse covered expenses incurred by the participant’s same-sex spouse during a period beginning on a date that is no earlier than (a) the beginning of the cafeteria plan year including the date of the Windsor decision or (b) the date of marriage, if later? A-6: Yes. A cafeteria permit a participant’s FSA, including a health, dependent care, or adoption assistance FSA, to reimburse covered expenses of the participant’s same-sex spouse or the same-sex spouse’s dependent that were incurred during a period beginning on a date that is no earlier than (a) the beginning of the cafeteria plan year that includes the date of the Windsor decision or(b) the date of marriage, if later. For this purpose, the same-sex spouse may be treated as covered by the FSA (even if the participant had initially elected coverage under a self-only FSA) during that period.  For example,a cafeteria plan with a calendar year plan year may permit a participant’s FSA to reimburse covered expenses of the participant’s same-sex spouse or the same-sex spouse’s dependent that were incurred during a period beginning on any date that is on or after January 1, 2013 (or the participant’s date of marriage if later).
The rules set forth in Q&A-6 are illustrated by the following examples: Example 4. Same facts as Example 1, except that Employer’s cafeteria plan included a health FSA. For the plan year beginning January 1, 2013, Employee A elected $2,500 in coverage under the health FSA. On October 5, 2013, Employee A elected to add health coverage for Spouse B under Employer’s group health plan, and made a new salary reduction election under the cafeteria plan to pay for the employee cost of Spouse B’s health coverage. On October 15,2013, Employee A submitted a reimbursement request under the health FSA including a properly substantiated health care expense incurred by Spouse B on July 15, 2013. Employee A’s FSA may reimburse the covered expense. Example 5. Same facts as Example 4, except that Employee A did not elect to add health coverage for Spouse B under Employer’s group health plan. On October 15, 2013, Employee A submitted a reimbursement request under the health FSA including a properly substantiated health care expense incurred by Spouse B on July 15, 2013. The reimbursement request included a representation that Employee A was legally married to Spouse B on the date that the health care expense was incurred. Employee A’s FSA may reimburse the covered expense. Contribution Limits for HSAs and Dependent Care Assistance Programs Q-7: Is a same-sex married couple subject to the joint deduction limit for contributions to a HSA? A-7: Yes. The maximum annual deductible contribution to one or more HSAs for a married couple either of who m elects family coverage under a HDHP is $6,450 for the 2013 taxable year (as adjusted for cost of living increases). This deduction limit applies to same-sex married couples who are treated as married for federal tax purposes with respect to a taxable year (that is, couples who remain married as of the last day of the taxable year), including the 2013 taxable year. Q-8: If each of the spouses in a same-sex married couple elected to make contributions to separate HSAs that, when combined, exceed the applicable HSA contribution limit for a married couple, how can the excess contribution be corrected?
A-8: If the combined HSA contributions elected by two same-sex spouses exceed the applicable HSA contribution limit for a married couple, contributions for one or both of the spouses may be reduced for the remaining portion of the tax year in order to avoid exceeding the applicable contribution limit. To the extent that the combined contributions to the HSAs of the married couple exceed the applicable contribution limit, any excess may be distributed from the HSAs of one or both spouses no later than the tax return due date for the spouses, as permitted under section 223(f)(3). Any such excess contributions that remain undistributed as of the due date for the filing of the spouse’s tax return (including extensions) will be subject to excise taxes under section 4973.
The rules set forth in Q&A-7 and Q&A-8 are illustrated by the following example:  Example 6. Same-sex spouses C and D were married in a state recognizing same-sex marriages in December 2012. For the period beginning January 1, 2013, Spouse C elected family coverage under a HDHP and elected to make $6,000 in contributions to a HSA. For the same period, Spouse D separately elected family coverage under a HDHP and elected to make $4,000 in contributions to a HSA. As a result of the Windsor decision and Rev. Rul. 2013-17, Spouses C and D became recognized as legal spouses for federal tax purposes. The spouses remained married for the remainder of the 2013 taxable year. Under section 223(b) (as adjusted for increases in the cost of living), the maximum deductible contribution to a HSA for 2013 for a married couple either of whom elects family coverage under a HDHP is $6,450. The combined HSA contributions made by Spouses C and D for the 2013 taxable year totaled $10,000, which exceeded the allowable deduction limit by $3,550. On February 15, 2014, Spouse C receives a HSA distribution of $3,550, plus an additional $150 in income attributable to the $3,550 excess contribution. The $150 in income on the excess contributions is includable in Spouse C’s gross income for 2014, as provided in section 223(f)(3)(A). Because the distribution was made prior to the due date for Spouse C’s federal tax return, the $3,550 in excess contributions is not subject to excise taxes under section 4973. Q-9: Is a same-sex married couple subject to the exclusion limit for contributions to a dependent care FSA? A-9: Yes. The maximum annual contribution to one or more dependent care FSAs for a married couple is $5,000. This limit applies to same-sex married couples who are treated as married for federal tax purposes with respect to a taxable year (that is, couples who remain married as of the last day of the taxable year), including the 2013 taxable year.
Q-10: If each of the spouses in a same-sex married couple elected to make dependent care FSA contributions that, when combined, exceed the applicable exclusion limit for a married couple, how can the excess contribution be corrected?
A-10: If the combined dependent care FSA contributions elected by the same-sex spouses exceed the applicable contribution limit for a marriedcouple, contributions for one or both of the spouses may be reduced forthe remaining portion of the tax year in order to avoid exceeding the applicable contribution limit.To the extent that the combined contributions to the dependent care FSAs of the married couple exceed the applicable contribution limit, the amount of excess contributions will be includable in the spouses’ gross income as provided in section 129(a)(2)(B). The rules set forth in Q&A-9 and Q&A-10 are illustrated by the following example:  Example 7. Same-sex spouses E and F weremarried throughout 2013. For the period beginning January 1, 2013, Spouse E elected to make contributions to a dependent care FSA in the amount of $5,000. For the same period, Spouse F separately elected to make contributionsto a dependent care FSA in the amount of $2,500. As a result of the Windsordecision and Rev. Rul. 2013-17, Spouses E and F became recognized as legal spouses for federal tax purposes. On November 1, 2013, Spouse E made achange in status election under the cafeteriaplanelectingtoceasealldependentcare FSA contributions for the remainder of the year. By December31, 2013, the total amount of dependent care FSA contributions made by Spouse E was $4,000. Spouses E and F filed separate returns for the 2013 taxable year. Under section 129(b)(2)(A), the maximum exclusion relating to a dependent care assistance program is $2,500 in the case of a separate return by a married individual. Spouse F is permitted to claim the full $2,500 exclusion for contributions to Spouse F’s dependent care FSA. Spouse E made contributions to a dependent care FSA in the amount of $4,000, which exceeds the applicable exclusion limit by $1,500. Spouse E must include this $1,500 excess contribution in gross income. The amount of the excess contribution will remain credited to the FSA to reimburse allowable claims in accordance with plan terms (or be forfeited to the extent that allowable claims are not submitted). IV.WRITTEN PLAN AMENDMENT A cafeteria plan containing written terms permitting a change in election upon a change in legal marital status generally isnot required to be amended to permit a change in status election with regard to a same-sex spouse in connection with the Windsor decision. To the extent that the cafeteria plan sponsor chooses to permit election changes that were not previously provided for in the written plan document, the cafeteria plan must be amended to permit such election changes on or before the last day of the first plan year beginning on or after December 16, 2013. Such an amendment may be effective retroactively to the first day of the plan year including December 16,2013, provided that the cafeteria plan operates in accordance with the guidance under this notice.

 

More ACA-Related Delays as Uncertainty Grows: Several More States

Announce Follow-Up to Proposed Cancellation Fix by Administration

NOVEMBER 27, 2013 – 9:30 AM
According to several media outlets, federal officials have announced two more delays in implementing the Affordable Care Act (ACA) in the past week. First, the deadline to purchase coverage beginning January 1, 2014 was delayed by over a week, and second, the 2015 open enrollment period has been delayed a month. These two delays follow a string of postponements and adjustments to the law over the past several months. Delay for Those Seeking Coverage January 1 On November 22, the New York Times reported that a spokesperson for the Centers for Medicare and Medicaid Services (CMS) announced consumers would have an additional eight days to sign up for a plan that will go into effect on January 1, 2014. Until the announcement, consumers had until December 15 to choose a plan. Now, they will have until December 23. Following the difficulties that many people have had enrolling though the new Exchanges, the additional time may help some consumers comply with the Individual Mandate, which requires almost all Americans to have coverage by January 1. The spokesperson said “this extension will give consumers more time to review plan options, to talk with their families, providers or enrollment assisters and to enroll in a plan.” The delay could cause problems for carriers, however, since they will now have only nine days from when consumers sign up until they must be enrolled. Given the issues that the Exchanges have had transferring consumer information to insurance carriers, this short timeframe could prove difficult. A spokesman for America’s Health Insurance Plans (AHIP) said the delay “makes it more challenging to process enrollments in time for coverage to begin on January 1.” 2015 Open Enrollment Delay The New York Times also reports that White House spokesman Jay Carney announced a delay and extension of the planned 2015 open enrollment period for health plans offered on the insurance Exchanges. The initial plan was to hold open enrollment October 15-December 7, 2014 for the 2015 plan year. The new period will be November 15, 2014-January 15, 2015, allowing a full two months for consumers to enroll in the plan of their choice. The new enrollment availability is much shorter than the Exchanges’ inaugural 2014 period, which is lasting six months. Carney made clear that the open enrollment delay will allow insurance carriers more time to better plan for premium rates in 2015, giving them until late May 2014 to submit applications. Critics have been quick to point out that the new delay pushes the open enrollment period past the 2014 midterm elections. They argue that the delay is an attempt to avoid a repeat of the problematic 2014 open enrollment, and shield consumers from potentially high premium rates until after voters go to the polls. More Delays Possible These two delays follow several more consequential developments in the ACA’s implementation over the past two months. It is interesting to note that the announcement of these delays were informal, with the information emerging from press conferences and media inquiries. There has been no formal guidance related to the changes yet. Brokers should not be surprised by further changes of this kind. The ACA will continue to face challenges going forward and we will continue to keep you informed of the latest information and help anticipate any potential changes in the future.

IMPORTANT UPDATE ON INDIVIDUAL CANCELLATIONS

Update 11/26: Several states have announced their decisions regarding the “cancellation fix” that would allow insurers to continue to offer current plans (other than those that were previously grandfathered) through 2014. According to Kaiser Health Newsstates adopting the fix are: Arkansas, Colorado, Florida, Georgia, Hawaii, Iowa, Kentucky, Maryland*, Mississippi, Montana, North Carolina, Ohio, Oklahoma, Oregon, South Carolina, Texas, West Virginia, and Wyoming. *Maryland Insurance Commissioner Therese Goldsmith informed insurers that they can renew non-ACA-compliant policies, but only if they take effect before January 1, 2014. State law prevents these policies from being renewed after that date. States that will not adopt the fix are: California, Indiana, Massachusetts, Minnesota, New York, Rhode Island, Vermont, and Washington.  

 

HRA AND  90 DAY WAITING PERIOD CHANGES

 

Keeping Health Reimbursement Arrangements as a part of your benefit offerings [1] 
 
On Friday, September 13, 2013 Treasury published Notice 2013-54 (Notice) which preserves all health reimbursement arrangements (HRAs) that are integrated with an underlying group health plan but eliminates an employer’s ability to use a stand-alone or other tax-favored arrangements, including Premium Reimbursement Arrangements or cafeteria plans, to help employees pay for individual health policies on a tax-free basis. In addition, the Notice addresses a number of specific topicsrelated to flexible spending accounts (FSAs) and HRAs. As such, this Alert is the first of two covering Notice 2013-54 which spells out requirements for HRAs offered starting January 1, 2014.
 
What kind of HRAs may employers offer?
 
For HRAs to be offered in compliance with the new Affordable Care Act (ACA) requirements beginning January 1, 2014, there is an exhaustive list of plan types that are available.
Most HRAs reimburse all or a subset of eligible medical expenses as described under IRS Code Section 213(d) and can continue if those eligible for the HRA are also eligible for and enrolled in an employer-sponsored ACA-compliant group medical coverage. This is called an
integrated HRA. Employer-sponsored ACA-compliant group medical coverage may be provided by the employer that offers the integrated HRA or employees may certify they have coverage under a spouse’s ACA-compliant group medical plan.
However, there are a couple of new rules that go along with integrated HRAs. First, participants must be able to permanently opt out of and waive future reimbursements from the HRA annually and the plan should be designed such that remaining HRA amounts are forfeited upon termination of employment. This enables employees to obtain individual coverage on Exchanges and be eligible for premium tax credits.
 
 
Under a somewhat aggressive interpretation, HRAs that reimburse just vision or dental expenses may go forward into 2014. Under current regulations, limited-scope dental or vision benefits will be excepted from the ACA’s market reform provisions “if they are provided under a separate policy, certificate, or contract of insurance, or are otherwise not an integral part of a group health plan…” [2]
 
The regulation further provides that benefits are not an integral part of a group health plan unless (i) participants have the right to elect not to receive coverage for the benefits and (ii) if a participant elects to receive coverage for the benefit, the participant must pay an additional premium or contribution for that coverage.[3] Consequently, because an HRA is not an insured arrangement, in order for dental or vision benefits provided through an HRA to be excepted from the ACA employees that elect to have dental or vision coverage provided by the HRA must be charged a premium or contribution. This is problematic since an HRA must be “paid for solely by the employer and not provided pursuant to salary reduction election or otherwise under a [Code section] 125 cafeteria plan.” [4] 
 
Notice 2013-54 did not address this issue at all, but this seems like an area in which Treasury could provide relief by issuing guidance that an employee’s payment of a premium for dental or vision benefits on an after-tax basis under a stand-alone HRA would not result in the plan losing its status as an HRA.
 
What if an employer finds they have an ineligible HRA?
 
Unused amounts that were credited to the HRA may be used to reimburse medical expenses in accordance with the terms of the HRA with no additional employer funds added to the plan. This is called a spend-down option.
 
This spend-down option may apply to all participants in the ineligible HRA or apply to an individual participant that is no longer covered by an employer-sponsored ACA-compliant group medical plan.
 
HRAs may no longer reimburse individually-owned insurance policies [1] 
 
Employers sponsoring HRAs or who were planning to implement HRAs or other tax-advantaged plans to allow participants to pay their individually-owned policy premiums with pre-tax dollars can no longer do so. The IRS and Treasury Department made an important change in closing this option so that employers cannot easily eliminate group coverage or send their employees to the Public Exchange yet still offer tax-free reimbursement for the payment of non-group coverage.
 
Employers need to be aware that any reimbursement or payment of individual coverage, inside or outside of an Exchange, cannot be made with tax-advantaged funds.
 
 
90-day waiting period [5]
 
In order for active employee HRAs to retain their integrated status, they can only be made available to employees who are also eligible for and enrolled in underlying ACA-compliant health coverage. Thus, HRAs must assure that their waiting periods are not less than that of the underlying health coverage. Note the ACA requires that waiting periods for entry into the plan not exceed 90 days (60 days in California plus other states may vary).
 
If the HRA document does not currently reflect these terms, a simple amendment to the plan can be adopted that states the eligibility and entry dates into the HRA are the same as the underlying health insurance plan. This ensures no disconnect if the waiting period changes in the health insurance plan.
 
This table may help you assess your current HRA plan and next steps:
 
Plan Type
Subject to  
Annual  
dollar limit prohibition?
 
Subject to preventive services requirements?
Regulatory Status
 
 
Next Steps
Standalone HRA (i.e., reimburses individual market premiums) for active employees Yes Yes Fails to satisfy annual dollar limit prohibition and preventive services requirement Plan must be terminated. If it also pays for out-of-pocket §213(d) health care expenses, balances can be continued to be used until depleted.
Standalone retiree HRA (can be used for individual premiums and/or out-of-pocket §213(d) health care expenses No No A standalone retiree HRA provides minimum essential coverage (which renders participant ineligible for premium tax credits) Plan must be amended to allow for an annual and permanent opt out of reimbursements to enable eligibility for the premium tax subsidy.
HRA that is in conjunction with a group health plan that is ACA-compliant Yes, but satisfies the condition only if integrated with an underlying ACA-compliant health plan. Yes, but satisfies the condition only if integrated with an underlying ACA-compliant health plan. Satisfies the annual dollar limit prohibition and preventive services requirements  
HRA to comply with SFHCO or other government or tribal requirement Yes Yes Fails to satisfy annual dollar limit prohibition and preventive services requirement Plan must be terminated, however these can continue until the later of January 1, 2014 or the first day of the plan year following the close of a regular legislative session after September 13, 2013.
 

 

 

FSA, HSA AND POP PLANS

 
On Friday, September 13, 2013 Treasury published Notice 2013-54 (Notice) which preserves all health flexible spending accounts (health FSAs) that are considered excepted benefits but eliminates an employer’s ability to use a stand-alone health FSA or other tax-favored arrangements, including Premium Reimbursement Arrangements or health reimbursement arrangements (HRAs), to help employees pay for individual health policies on a tax-free basis. In addition, the Notice addresses a number of specific topics related to FSAs and HRAs. As such, this Alert is the second of two.
 
Keeping health FSAs as excepted benefits [1]
 
Prior to this guidance, assuring a health Flexible Spending Account (FSA) was classified as an excepted benefit for purposes of HIPAA was important for two primary reasons: so COBRA continuation was not offered when the account was “overspent” and to avoid HIPAA portability requirements. But now, in addition to assuring Health FSAs are not swept into the W-2 reporting rules, FSA plans must also meet HIPAA excepted benefit rules to be offered in compliance with the new Affordable Care Act (ACA) requirements.
 
Generally, this means health FSAs must meet two conditions to be offered:
  1. Only individuals eligible for employer-provided major medical coverage can be offered the health FSA. Employers with health FSAs must have an underlying ACA-compliant group health insurance plan. As an example, XYZ Co. offers a health FSA to full-time employees and part-time employees. However; the part-time employee population is not eligible to enroll in XYZ Co.’s major medical plan. Under this scenario, part-time employees can no longer enroll in an FSA. An amendment is required to XYZ Co.’s Plan Document to remove this group as eligible employees under the FSA.
  2. In addition, the health FSA must limit the maximum payable to 2 times the participant’s salary reduction or, if greater, the participant’s salary reduction plus $500. What does this mean? Simply that health FSAs can include employer contributions of $500 or up to a dollar for dollar match of each participant’s election.
If the health FSA fails either of these conditions, it is subject to ACA’s market reforms, such as no cost sharing for preventive services and the prohibition against annual and lifetime limits. By definition, the health FSA will not meet these ACA requirements.
 
Cafeteria plans may no longer reimburse individually-owned insurance policies [1]
 
This may not affect most employers – however for the few employers sponsoring cafeteria plans that allow for participants to pay their individually-owned policy premiums with pre-tax dollars – the IRS and Treasury just eliminated this as an option. The reason for the change is to discourage employers from eliminating group coverage and to make it impossible for employers to send their employees to the Public Exchange and perhaps reimburse them with tax-free dollars for their cost for Exchange coverage.
 
Employers need to be aware that any reimbursement or payment of individual health coverage, whether it be inside or outside of an Exchange, cannot be made with tax-advantaged funds.
 
Amendment for fiscal year cafeteria plans [2]
 
This may be one of the most misunderstood ACA provisions issued to date and applies only to employers with non-calendar year plans (Example: July 1 thru June 30 plans). Employees who wish to seek coverage on the Exchange, but would otherwise be prevented from doing so because their elections are generally irrevocable for the plan year, can be allowed to make a change if the employer amends their plan to allow this additional change-in-status event. A couple of points to remember: because of the employer shared responsibility rules, the guidance applies only to “applicable large” employers. These are employers who employed an average of at least 50 full-time employees, or full-time equivalents, based on hours of service during the preceding calendar year. Many industry experts, however, believe there may be relief to allow the same treatment for small employers.
 
It’s also only applicable to cafeteria plans that have a plan year beginning in 2013 and that run benefits on a fiscal plan year rather than a calendar year.
 
While the guidance came out before the “Employer Mandate” (shared responsibility or play or pay) was delayed until 2015, it allows employers to amend their plan and permit employees who enroll for Exchange coverage to drop their employer coverage – essentially providing an additional qualified change in status reason.
 
Why would this be a critical amendment? ACA was written to assure that employees and individuals could purchase insurance coverage through state Exchanges. Allowing employees to change cafeteria elections mid-year allows maximum flexibility for employees.
 
90-day waiting period [3]
 
Health plan years that start on or after January 1, 2014 may not contain a waiting period for entry into the plan that exceeds 90 days (60 days in California plus other states may vary). In order for health FSAs to retain their status as an excepted benefit, they can only be made available to employees who are also eligible for underlying ACA-compliant health coverage. Thus, Health FSAs must assure that their waiting periods are no less than that of the underlying health coverage.
Therefore, employers should be sure that the waiting period for the premium-only and the health FSA portion of employers’ cafeteria plans mirror the waiting periods for underlying health insurance plans or, in the case of the health FSA, may be longer.
 
If the cafeteria plan document does not currently reflect these terms, a simple amendment to the cafeteria plan can be adopted that states that the eligibility and entry dates into the cafeteria plan are the same as the underlying health insurance plan. This ensures no disconnect if the waiting period changes in the health insurance plan.
 
Amendment Action Steps
  
Plan Next Steps
Premium Only Plan – Fiscal Year Plans (example July 1 – June 30) Amend your Plan Documents to allow a one-time qualifying event giving permission for employees to enroll in the Exchange and opt out of their current health insurance plan and the premium only portion of the cafeteria plan.
January 1, 2014 Health FSAs and Premium Only Plans Amend your plan to adjust the waiting period so that it is not more than 90 days (in most states). The waiting period adopted should be the same as the underlying insurance plan or for FSAs can be longer but in no case a shorter waiting period than the underlying health insurance plan.
 
This table may help you assess your current FSA plan and next steps:
 
Plan Type Subject to  Annual  dollar limit prohibition? Subject to preventive services requirements? Regulatory Status Next Steps
Excepted benefit health FSA No No Not subject to the annual dollar limit prohibition and preventive services requirement, and does not provide minimum essential coverage (participant remains eligible for premium tax credits) Consider employer contributions to $500 or matching a maximum of $1 for every dollar elected by the participants.
Non-excepted benefit health FSA funded under a 125 cafeteria plan No Yes Fails to satisfy the preventive services requirement Plan must be terminated.
Non-excepted benefit health FSA not funded under a 125 cafeteria plan Not yet determined Yes Fails to satisfy the preventive services requirement; may also fail the annual dollar limit prohibition Plan must be terminated.
After-tax employee contributions which participant may use to purchase individual market coverage No No An arrangement under which after-tax employee contributions may be used to purchase individual market coverage and are structured as an employer payroll practice are permissible.  
Pre-tax employee contributions which participant may use to purchase individual market coverage Yes Yes Fails to satisfy annual dollar limit prohibition and preventive services requirement Plan must be terminated.
 

Change to FSA “Use It or Lose It” Provision

On Thursday, October 31, 2013, the Department of Treasury announced a major policy change that will impact Flexible Spending Account (FSA) plans. In what is being hailed as a hugely positive development for administrators, employers, and FSA participants, the Treasury has modified the “use it or lose it” provision to allow for a limited rollover of FSA funds.

Details are as follows:

  • Effective for the 2014 plan year, employers will have the option to allow FSA plan participants to roll over up to $500 of unused funds at the end of the plan year.
  • Effective immediately, employers with an FSA plan that does not include a grace period will have the option to allow current FSA plan participants to roll over up to $500 of unused funds at the end of the 2013 plan year.

The new guidance, as issued by the IRS, can be found here.

New Jersey FamilyCare (NJFC)

Managing AgencyNew Jerseyhttp://www.state.nj.us

Program Description

New Jersey FamilyCare (NJFC) is a federal and state funded health insurance program created to help New Jersey’s uninsured children to have affordable health coverage. It is not a welfare program. NJFC is for hard-working families who cannot afford to privately pay the high cost of health insurance. Eligibility is based on family size and monthly income. Assets are not considered when determining eligibility. NJFC is a comprehensive health insurance program that will provide many if not all of your child’s health care needs. A sample of the services provided by NJFC are: physician services, preventive health care, emergency medical care, inpatient hospital services, outpatient hospital services, laboratory services, prescription drugs, eyeglasses, dental services in most cases, emergency transportation, mental health services, plus many more.

For more information on New Jersey FamilyCare, please call 1-800-701-0710 or visit the following website: http://www.njfamilycare.org/index.html

 

 

Important Information about the Employee Notice of Coverage Options

The Department of Labor (DOL) has issued temporary guidance about the Employee Notice of Coverage Options, formerly the Notice of the Exchange. Additional information on the Notice is provided below. Employers are not required to provide Notices under this temporary guidance. If they prefer, employers can wait until formal guidance is provided later this year.

 Temporary Guidance Refresher and Self-Service Resources

According to the temporary guidance, the Notice is applicable to all employers that are subject to the Fair Labor Standards Act (FLSA). This includes most employers, regardless of size. Employers must submit the Notice to all current employees by October 1, 2013, and to new hires within 14 days of their employment start date, at least for 2014. The Notice must be provided free of charge, in writing and delivered either by mail or electronically, in accordance with ERISA standards for electronic delivery. It must be provided to all full-time and part-time employees, regardless of whether (1) the employer sponsors coverage, or (2) the employee is enrolled in an employer-sponsored medical plan. It does not need to be sent to dependents.
Among other requirements, which we outlined in our May 10 Health Care Reform News Alert, the Notice must inform employees that if their plan is not affordable or does not meet minimum value, they may be eligible for a subsidy on the Exchange, otherwise referred to as the Marketplace.

Employers must indicate on the Notice whether the plan meets these criteria by checking a box that states, “If checked, this coverage meets the minimum value standard, and the cost of this coverage to you is intended to be affordable, based on employee wages.

For purposes of the Notice, you can determine whether your plan provides “minimum value” by using the Health and Human Services (HHS) minimum value calculator, adhering to one of the “safe harbors�? identified in the rules, or by consulting with your actuarial advisor. The safe harbors are noted in our employer mandate fact sheet. At this point, it’s still our understanding that employers will need to include the minimum value information on the Notice. The recent employer mandate delay did not reference any impacts or changes for the Notice. Based on the HHS tools for plans effective January 1, 2014 and forward, an example of a plan that meets the Minimum Value standard would have a deductible of $5,000, coinsurance of 70%, and an Out of Pocket (OOP) maximum of $6,350. The plan would also need to include pharmacy coverage.
Please see our February 27 News Alert for additional information on the HHS tools.
 We are expecting the DOL to issue additional guidance on the Employee Notice of Coverage Options in late summer/early fall, and will be in touch again when that happens. ____________________________________________________________________________________________________________

 REQUIRED MODEL NOTICES UNDER PPACA FOR THOSE OFFERING AND NOT OFFERING EMPLOYEE HEALTH INSURANCE

Please be advised that the notices below MUST go out to ALL employees, whether or not you are offering health insurance. There is a notice for both, as per below. These are MODEL NOTICES, so please transcribe onto your letterhead and be sure each employee receives a copy. Many employers are putting a packet of mandates together and having each employee confirm receipt with a signature and date. For employers who offer a health plan to some or all employees http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf For employers who do not offer a health plan http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf ___________________________________________________________________________________________________________ Federal Labor Laws by Number of Employees 1-14 EMPLOYEES Fair Labor Standards Act (FLSA) (1938) Immigration Reform & Control Act (IRCA) (1986) Employee Polygraph Protection Act (EPPA) (1988) Uniformed Services Employment & Re-employment Rights Act (USERRA) (1994) Equal Pay Act (EPA) (1963) Consumer Credit Protection Act (1968) National Labor Relations Act (NLRA) (Wagner Act) (1935) Labor-Management Relations Act (Taft-Hartley Act) (1947) Employee Retirement Income Security Act (ERISA) (1974) Federal Insurance Contributions Act (FICA) (1935) Occupational Safety & Health Act (OSH Act) (1970) Note: Employers with 10 or fewer employees and business establishments in certain industry classifications are partially exempt from keeping OSHA injury and illness records. Health Insurance Portability and Accountability Act (HIPAA) (1996) Jury System Improvements Act (1978) Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) (1996) Fair Credit Reporting Act (FCRA) (1970) Fair and Accurate Credit Transactions Act (FACTA) (2003) 15+ EMPLOYEES ALSO NEED TO COMPLY WITH: Title VII, Civil Rights Act (Title VII) (1964) (1991) Title I, Americans with Disabilities Act (ADA) (1990) Pregnancy Discrimination Act (1978) Genetic Information Nondiscrimination Act (GINA) (2008) 20+ EMPLOYEES ALSO NEED TO COMPLY WITH: Age Discrimination in Employment Act (ADEA) (1967) Consolidated Omnibus Budget Reconciliation Act (COBRA) (1985) Note: Group health plans sponsored by employers with 20 or more employees, including both full and part-time employees, on more than 50% percent of their typical business days in the previous calendar year are subject to COBRA (each part-time employee counts as a fraction of an employee, equal to the number of hours the part-time employee worked divided by the hours an employee must work to be considered full time)