The Tax Bill And The Individual Mandate: What Happened, And What Does It Mean?

As has been widely reported, both houses of Congress have now voted to repeal the Affordable Care Act’s (ACA) individual shared responsibility penalty, effective for 2019, as part of the 2017 tax reconciliation act. The President has now signed this Act into law. This post discusses first what the repeal does and does not do. Second it discusses the repeal’s possible effects.

What The Repeal Does And Does Not Do

First, the tax cut act does not repeal the individual mandate as such. Rather it zeros out both the dollar amount and percentage of income penalties imposed by the mandate. Section 5000A remains in the statute and still provides:

An applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month.

The Congressional Budget Office (CBO) in its analysis of the effects of the individual mandate repeal assumed that as long as the requirement remained in the law, some individuals would continue to purchase individual coverage because it was legally required, even if the penalty was repealed. This no doubt explains why the CBO concluded that the repeal of the mandate would reduce federal expenditures over ten years by $338 billion, but opined that repeal of the penalty in the tax bill would reduce expenditures by only $318 billion. A majority of the Supreme Court in NFIB v. Sebelius, however, held that Congress did not have the constitutional authority to require individuals to purchase insurance under its authority to regulate interstate commerce, rather upholding the mandate as a tax. Without the penalty, therefore, any lingering authority of the mandate itself is presumably merely hortatory.

The fact that the bill repeals only the penalty and not the entire section that imposes it, however, is important for other reasons. Section 5000A of the ACA not only contains the individual mandate requirement and penalty, but also definitions of terms used in the mandate provisions. These include, for example, the term “minimum essential coverage, “eligible employer-sponsored plan,” and “modified adjusted gross income,” and are used elsewhere in the ACA, for example in the premium tax credit provision. These definitions remain.

Moreover, other provisions of the ACA that support the individual mandate remain in force. Section 6055 of the Internal Revenue Code, adopted through the ACA, requires anyone who provides “minimum essential coverage,” including insurers, employers, and government programs, to report specific information to the Internal Revenue Service (IRS) regarding covered individuals, and to provide covered individuals with a statement evidencing this coverage. It further imposes penalties on entities that fail to report. The tax bill repeals neither the reporting requirement nor the penalties.

The ACA requires exchanges and the IRS to accept applications for and to determine eligibility for exemptions from the mandate. These provisions remain in place, although it is unlikely that individuals will continue to apply for exemptions after the penalty is repealed. There is likely to be confusion about the need for an application, however, which the exchanges and IRS will have to sort out.

The Effect On The Employer-Sponsored Insurance Market And The Employer Mandate

The individual mandate penalty repeal has other ramifications. The ACA also imposes an employer responsibility requirement imposed on large employers. The employer mandate, the penalties that enforce it, and the reporting requirements that accompany it remain in place. There are two employer mandate penalties:

• a penalty imposed on employers who fail to offer minimum essential coverage to full-time employees if any employee receives premium tax credits to enroll in coverage through an exchange, calculated on a per-employee basis for all full-time employees; and
• a larger penalty imposed on employers who offer minimum essential coverage but fail to offer “minimum value” coverage, which applies for each full-time employee who in fact receives premium tax credits for exchange coverage.

While these requirements and penalties are not affected by the individual mandate penalty repeal, it is likely that fewer employees will enroll in employer-sponsored coverage in the absence of the mandate. The CBO predicts that over the next decade two to three million fewer individuals will have employer coverage in the absence of the mandate. If fewer individuals seek coverage through the exchange, moreover, it is likely that some employers will escape the employer mandate penalties, which are, again, only imposed if one or more employees receive premium tax credits through the exchange.

The mandate repeal may thus undermine the employer mandate as well (although it will not affect the reporting requirements, which are arguably the most burdensome feature of the employer mandate). On the other hand, 150 million Americans have employer-sponsored coverage, so any effects of the individual mandate repeal on the employer-sponsored market will be marginal.

Finally, the individual mandate penalty repeal only applies as of 2019. Individuals remain responsible for having insurance or paying the penalty for the 2017 filing season and for 2018. The IRS has announced that it will reject electronic filings of taxes for 2017 that do not claim coverage or an exemption, or include a payment of the penalty. The repeal is being widely publicized, however, and there will undoubtedly be widespread confusion as to when it will be effective. It is likely that many people will fail to apply for coverage or drop or fail to effectuate coverage that they already have. The effect of the mandate repeal will undoubtedly be felt before it goes into effect.

ACA IRS Penalties – Arriving Late 2017

After several years of ACA penalty inertia, the IRS recently announced updates to its FAQs, stating that non-complying Applicable Large Employers should expect to receive penalty letters by late 2017. While this is not welcome news for employers, those that did not comply really shouldn’t be too surprised as the IRS among other governmental agencies generally enforce rules, and ultimately collect the respective penalties they are due.

The IRS expects that billions of dollars of Affordable Care Act penalties are potentially available due to non-compliance with the ACA. The Treasury Department’s audit of the IRS and their ability to enforce the Employer Mandate (April 2017) noted it would be ready to start issuing penalty letters in 2017. In September 2016, the Congressional Budget Office (CBO) estimated approximately $9 billion in non-compliance penalty revenue would be available starting in 2017.

Penalty FAQs:

“In a recent update to the IRS’ Questions and Answers on Employer Shared Responsibility Provisions under the Affordable Care Act, the IRS has advised that it plans to issue Letter 226J informing applicable large employers (ALEs) of their potential liability for an employer shared responsibility payment for the 2015 calendar year, if any, sometime in late 2017. The IRS plans to issue Letter 226J to an ALE if it determines that, for at least one month in the year, one or more of the ALE’s full-time employees was enrolled in a qualified health plan for which a premium tax credit (PTC) was allowed (and the ALE did not qualify for an affordability safe harbor or other relief for the employee). The IRS will determine whether an employer may be liable for an employer shared responsibility payment, and the amount of the potential payment, based on information reported to the IRS on Forms 1094-C and 1095-C and information about the ALEs full-time employees that were allowed the premium tax credit.

If an ALE receives a Letter 226J from the IRS, the employer will have only 30 days from the date of the letter to dispute liability for a penalty payment. As provided on the model Letter 226J, employers that wish to dispute the liability assessment will need to:

• Complete, sign, and date a Form 14764, Employer Shared Responsibility Payment (ESRP) Response, and send it to the IRS by the due date along with a signed statement explaining why the employer disagrees with part, or all, of the proposed ESRP.
• Ensure that the statement describes changes, if any, the employer wants to make to the information reported on Form(s) 1094-C or Forms 1095-C.
• Make changes, if any, on the Employee PTC Listing using the indicator codes in the Instructions for Forms 1094-C and 1095-C for the tax year shown on the first page of this letter
• Include the revised Employee PTC Listing, if necessary, and any additional documentation supporting the employer’s changes with the Form 14764, ESRP Response, and signed statement

If the ALE responds to Letter 226J, the IRS will acknowledge the ALE’s response to Letter 226J with an appropriate version of Letter 227 (a series of five different letters that, in general, acknowledge the ALE’s response to Letter 226J and describe further actions the ALE may need to take). If, after receipt of Letter 227, the ALE disagrees with the proposed or revised employer shared responsibility payment, the ALE may request a pre-assessment conference with the IRS Office of Appeals. The ALE should follow the instructions provided in Letter 227 and Publication 5, Your Appeal Rights and How to Prepare a Protest if You Don’t Agree, for requesting a conference with the IRS Office of Appeals. A conference should be requested in writing by the response date shown on Letter 227, which generally will be 30 days from the date of Letter 227.

Employers should take the time to consider a self-audit of 1095-C reporting, as well as organization of documents that may be needed to prepare a response and/or appeal to the IRS. If the ALE does not respond to either Letter 226J or Letter 227, the IRS will assess the amount of the proposed employer shared responsibility payment and issue a notice and demand for payment, Notice CP 220J.”

Non-compliant employers should be concerned, especially those employers that neither furnished 1095-C forms to either eligible or enrolled employees nor submitted their respective 1094-C transmittal to the IRS. It is estimated that up to 40,000,000 employees nationally never received their 1095-C.

Assuming these 40,000,000 people work for employers with about 100 employees, this translates to 400,000 employers. Basically, each of these 400,000 non-filing employers could owe $520 for each non-issued/filed employee. ACA non-compliance revenue for the IRS could be increase by an additional $20 billion! 

If you have questions about whether your company is an ALE and needs to file, give us a call. Get your forms in! Submit your filing! Getting compliant could save you a lot in IRS penalties.

HR News Alert

DOL Adjusts Labor Law Penalties for 2017

The U.S. Department of Labor (DOL) has published a final rule adjusting for inflation the civil monetary penalties assessed for violations of a number of federal labor laws. The rule increases penalties for employers that do not comply with certain requirements under the federal Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), the Employee Retirement Income Security Act (ERISA), and the Occupational Safety and Health Act (OSH Act), among other laws. The increases generally apply to civil penalties assessed after January 13, 2017, whose associated violations occurred after November 2, 2015. 

Key Penalty Increases
Penalty increases that may be of particular interest to employers include:

• FLSA Requirements. Repeated or willful violations of the FLSA's minimum wage or overtime pay requirements are subject to a penalty of up to $1,925 per violation (formerly $1,894);
• FMLA Posting. Willful violations of the FMLA's posting requirement are subject to a penalty not to exceed $166 for each separate offense (formerly $163) (note: covered employers must post this general notice even if no employees are eligible for FMLA leave);
• Employer CHIP Notice. Failure to provide employees with an Employer Children's Health Insurance Program (CHIP) Notice is subject to a penalty of up to $112 per day per violation (formerly $110);
• SBCs. Failure to provide a Summary of Benefits and Coverage (SBC) is subject to a penalty of up to $1,105 per failure (formerly $1,087);
• Form 5500. Failure or refusal to file an annual report (Form 5500) with the DOL is subject to a penalty of up to $2,097 per day (formerly $2,063); and
• OSH Act Posting. Violations of the OSH Act's posting requirement are subject to a maximum penalty of $12,675 for each violation (formerly $12,471).

Click here to read the final rule, which features additional penalty increases, in its entirety. The DOL's summary chart also highlights many of the changes.   Review our Compliance by Company Size chart for a summary of key federal labor laws that may apply to your company.

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Health Care Reform Updates from Vanguard Benefits Group

Deadlines Extended for Furnishing Forms 1095-B and 1095-C in Early 2017

Good Faith Penalty Relief Also Extended

The IRS has extended the due dates for furnishing 2016 Forms 1095-B and 1095-C to covered individuals and full-time employees, respectively, from January 31, 2017, to March 2, 2017. In addition, the IRS is also extending good faith penalty relief to reporting entities who can show they made good faith efforts to comply with the calendar year 2016 information reporting requirements. 

Who is Required to Report

Applicable large employers (generally those with 50 or more full-time employees, including full-time equivalents or FTEs) must use Forms 1094-Cand 1095-C to report information to the IRS and to their full-time employeesabout their compliance with the employer shared responsibility provisions("pay or play") and the health care coverage they have offered in a calendar year. Alternatively, Forms 1094-B and 1095-B are used by insurers, self-insuring employers, and other parties that provide minimum essential health coverage (regardless of size, except for large self-insuring employers) to report information on this coverage to the IRS and to covered individuals. Employers subject to both reporting provisions (generally self-insured employers with 50 or more full-time employees, including FTEs) will satisfy their reporting obligations using Forms 1094-C and 1095-C.

Note: Reporting entities are required to report in early 2017 for coverage offered (or not offered) in calendar year 2016.   

Furnishing Deadline Extension

The IRS has extended the due dates for furnishing 2016 Forms 1095-B and 1095-C to covered individuals and full-time employees, respectively, from January 31, 2017, to March 2, 2017. However, the deadline to file 2016 Forms 1094-B, 1095-B, 1094-C, and 1095-C with the IRS was not extended, and remains February 28, 2017 (or March 31, 2017, if filing electronically). 

Good Faith Penalty Relief Extension

Internal Revenue Code sections 6721 and 6722 impose penalties for failing to file and furnish an accurate and complete information return, including Forms 1094 and 1095. However, the IRS is extending penalty relief to reporting entities that can show that they made good faith efforts to comply with the calendar year 2016 information reporting requirements. This relief applies to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other information required on the return or statement. 

In determining good faith, the IRS will take into account whether an employer made reasonable efforts to prepare for reporting the required information to the IRS and furnishing it to employees and covered individuals, such as gathering and transmitting the necessary data to an agent to prepare the data for submission to the IRS, or testing its ability to transmit information to the IRS. In addition, the IRS will take into account the extent to which the employer is taking steps to ensure that it will be able to comply with the reporting requirements for calendar year 2017.

Extensions Apply to Calendar Year 2016 Reporting Only

The extensions for furnishing Forms 1095-B and 1095-C apply to calendar year 2016 reporting only and have no effect on the requirements for other years or on the effective dates or application of the pay or play provisions. Specifically, the IRS does not anticipate extending due dates or good faith penalty relief to reporting for calendar year 2017.

What Repeal and Replace Should Look Like

Donald J. Trump is the next President of these United States and his pledge to “repeal and replace OBAMACARE” looms large for businesses, individuals and health care markets.

With a Republican Congress and US Senate, Trump will have ample opportunity to make wholesale changes to the “Affordable Care Act” healthcare law that was passed in 2010 under then complete Democrat control. But what will those changes be and will they further upset the availability of healthcare and its pricing to most Americans.

Republicans will be expected to act and act quickly to make reforms. With the closeness of numbers in the US Senate there will be some difficulty with making wholesale changes but some Democrats that face re-election in the next cycle may partner with Republicans to give them the votes they need for reform passage. So what can we expect and what can we hope for…

Keep the parts of the ACA that work

Americans and even healthcare insurers embraced some of the initial reforms included in the ACA such as allowing dependent children to be covered until age 26, the elimination of lifetime and even annual maximums for health plans and guaranteed insurability. Reformers would be wise to keep these provisions as they are not big cost drivers. The dependent age increase alleviated coverage problems for college students and the caps on plan maximums affected few individuals. Many states (including Oklahoma) and insurers already had only a 12 month wait for pre-existing conditions prior to the ACA and waived this if the individual applying for a plan had prior coverage.

Expect a move to repeal the mandates

Despite the opinions of Supreme Court Justice John Roberts, most Americans feel that being forced to buy a product such as healthcare is unconstitutional. Expect Republicans to include the repeal of the employer and individual mandate in their package of reforms. Encouraging healthcare purchase through tax credits seems a more likely path they will pursue.

Allow the states to implement their own reforms

One of the little known parts of the ACA is the Section 1332 Waiver that allows states to change or waive any provision of the Act including the employer and employee mandates. Under the Obama Administration the reform potential of this provision was diminished by the requirement that any changes by using these waivers could not reduce the population eligible for subsidies. If states were given broader authority to make changes then true reform could take place.

Steady the Health Care Market by separating those with exchange coverage into a different pool

Even though President Obama promised that “If you like your health care plan, you can keep it”, he didn’t say what the price would be.

Healthcare markets and insurers were promised new enrollees but the safeguards put in place to provide funding for new potential claims were removed or ignored. The dangers of continual open enrollment also led to exchange individuals enrolling, getting big ticket claims paid for and then lapsing their coverage. This provided little reimbursement to the insurance carriers which led to increased costs that were passed on to those who had prior health plans.

These problems could be solved by either separating the exchange individuals into a separate pool or by block granting funds to the states to cover these individuals. This would right the ship for health care insurers that have been saddled with billions in losses that they were forced to pass on to their other plans to stay solvent.

Use Block Grants to the states with limited federal oversight for reform efforts

Lower income individuals and employees could be given opportunities for coverage through encouraging state coverage reforms. Oklahoma’s Insure-Oklahoma program has been a huge success and could be a model for reforms in other states. The program succeeds because it leverages employer and employee money to provide major medical coverage to lower income populations. Unlike Obamacare, it doesn’t use a mandate but rather an incentive to encourage the purchase of health care coverage. If federal government block grants are successful this program could be expanded and its availability to other populations pursued.

These are the initial items that I see being immediately addressed but there could be others. The one thing certain is that there will be change and it will come quickly.

Final Health Reform Rule Prohibits Discrimination for Transgender-Related Services on Health Plans

Q&A with Wayne Pettigrew of Vanguard Benefits Groupon New Health Care Regulations

·         By Paula Burkes – The Daily OklahomanBusiness Editorial Page August 9, 2016

Q: Can you explain the recently issued final rule to Section 1557 of the Affordable Care Act?

A: On May 18, the U.S. Department of Health and Human Services published a final rule to implement Section 1557 of the Affordable Care Act, which prohibits discrimination in health coverage and care based on race, color, national origin, age, disability, and sex. These provisions incorporate existing federal nondiscrimination law and policy and also contain some new protections. The final rule specifically addresses discrimination against transgender individuals and established certain accessibility standards for individuals with limited English proficiency.

Q: What does this mean for insured group health plans?

A: Beginning with their plan years that occur after Jan. 1, insured group health plans no longer can have blanket exclusions for transgender related services when medically necessary. Self-insured groups must generally amend their plan documents and submit any limitations on such services to reinsurance carriers for approval.

Q: So does this mandate transgender services?

A: No. It does prohibit discriminatory exclusions or limitations from being placed on such benefits. Fully insured groups may not exclude gender reassignment surgery or other benefits based on a discriminatory factor, but they could be limited on a nondiscriminatory factor such as clinical criteria.

Q: Does the final rule include a religious exemption?

A: No. But the final rule doesn't displace existing protections for religious freedom and conscience.

Q: What other provisions are included in Section 1557?

A: The final rule requires entities with 15 or more employees to have a grievance procedure and compliance coordinator. The final rule also requires that entities post notices of nondiscrimination in at least the top 15 non-English languages spoken in the state in which an entity does business. The HHS Office of Civil Rights will provide sample notices in all languages.

PAULA BURKES, BUSINESS WRITER for THE DAILY OKLAHOMAN

EEOC Guidance Addresses Responsibilities Concerning the Employment of Individuals Who Are (or Are Perceived to Be) Muslim or Middle Eastern

Guidance Discusses Discrimination, Accommodations, and Other Topics

The U.S. Equal Employment Opportunity Commission (EEOC) has released guidance that explains responsibilities concerning the employment of individuals who are (or are perceived to be) Muslim or Middle Eastern.

Background
Among other things, Title VII of the Civil Rights Act (generally applicable to employers with 15 or more employees) prohibits workplace discrimination based on religion, ethnicity, country of origin, race, or color. Employers are prohibited from discriminating in all aspects of employment, including hiring, job assignments, pay, and termination. In addition, employers must reasonably accommodate religious practices or dress, unless it is an undue hardship. Employers also are responsible for preventing or promptly correcting illegal workplace harassment.  

New Guidance
Highlights of the new guidance are presented below:

·         Hiring and Other Employment Decisions. The guidance contains examples which illustrate that discrimination based on religion or national origin is prohibited by law in any aspect of employment (including hiring).

·         Harassment. In the aftermath of major terrorist attacks, workplace conversations and interactions related to these events may occur. In an atmosphere of heightened concern and apprehension, some employees may be more likely to make unguarded remarks, and others may be more afraid of harassment. The EEOC encourages employers to be proactive in such situations and to publicize (or re-publicize) their anti-harassment and anti-retaliation policies and procedures. The EEOC also encouragesemployees to review and become familiar with these policies and procedures.

·         Religious Accommodations. Employers should work closely with their employees to find an appropriate accommodation that meets employees' religious needs without causing an undue hardship for the employer. Whether a reasonable accommodation would impose undue hardship and therefore not be required depends on the particular workplace and the requested accommodation.

·         Background Investigations. A company may require an applicant to undergo the same pre-employment security checks that apply to other applicants for the same position. As with its other employment practices, an employer may not perform background investigations or other screening procedures in a discriminatory manner.

Insurers Expected To Raise 2017 Premiums Significantly

The AP  (6/12, Alonso-Zaldivar, Murphy) reports that healthcare insurance premiums are expected to increase next year “because major insurers have taken significant financial losses” under the Affordable Care Act due to lower than expected enrollment, new customers requiring more care than anticipated, “and a government system to stabilize the markets had problems.” The article says some 10 million consumers will receive subsidies through the ACA, but those who earn “more than $47,520 for an individual and $97,200 for a family of four” will not qualify. In addition, those who obtain private insurance “outside of HealthCare.gov or a state marketplace” are not eligible for subsidies, regardless of their income.

Insurers Having Difficulties Profiting From ACA Exchanges.

The AP (2/26, Murphy) reported that many insurers are losing money in the health insurance exchanges created by the Affordable Care Act, threatening its future. UnitedHealth Group Inc. “may not participate in 2017” and Aetna “has questioned the viability of the exchanges.” That said, “enrollment is growing and appears to getting younger in some markets, a crucial factor for stability.” Meanwhile, insurers are “adjusting their coverage to do better financially” even as they learn more about their new customers. Part of the profitability issue for insurers is that those who first signed up were “people who couldn’t get coverage previously due to a condition.” However, they have also been dealing with “customers who appear to be waiting until they become sick to buy coverage.” While there is supposed to be a limited time for signing up, exchanges have not been asking for documentation when a customer claims to have had a life-changing event that allows an exception. 

Understanding the Difference between Minimum Essential Coverage, Essential Health Benefits, Minimum Value, and Actuarial Value

Written by Susan Grassli, J.D. and Lisa Klinger, J.D.            January 27, 2014  

There are several terms in the Affordable Care Act that sound similar and therefore cause some confusion. Each term has a different meaning and different ramifications—for employers and individuals—in terms of penalties, taxes and subsidies.    This article defines four such terms and explains how each applies to individuals and to employers.   The four terms are “Minimum Essential Coverage,” “Essential Health Benefits,”  “Minimum Value” and “Actuarial Value.” 

Brief Comparison of Similar Terms 

Minimum Essential Coverage (MEC) and Essential Health Benefits (EHB):  Minimum Essential Coverage is a lower threshold than Essential Health Benefits (EHB).  MEC is the coverage an individual must have to comply with the individual mandate and avoid the individual mandate penalty tax – and that large employers may be required to offer to avoid the “non-offering employer” penalty.  Essential Health Benefits are the 10 core benefits that “qualified health plans” (QHPs) must cover.  Even if a group health plan does not provide EHB, the coverage still will likely meet MEC, and an individual who has MEC will not be subject to the individual mandate tax. 

Minimum Essential Coverage (MEC) and Minimum Value (MV):  Minimum Essential Coverage is a lower threshold than Minimum Value (MV).  MV is the 60% Actuarial Value and is met when a plan pays on average at least 60% of the actuarial value of allowed benefits under the plan.  Even if the coverage offered by a large employer does not meet Minimum Value (and “Affordability”), it still will likely meet MEC, so an individual who has such coverage will not be subject to the Individual Mandate penalty tax.  (“Affordability” is the requirement that the employee cost for self-only coverage cannot be more than 9.5% of the employee’s income.) 

Minimum Essential Coverage (MEC)  (IRC section 5000A(f)(1)) 

What it is: Minimum essential coverage (MEC) is defined by the ACA as most group health plans offered by a large or small employer, or health coverage provided by the government.  However, a plan consisting solely of “excepted benefits” is not MEC.   (Excepted benefits are certain limited-scope health benefits that are exempt from many requirements under the ACA and HIPAA.) Additionally, guidance designates certain other plans as MEC, such as certain refugee medical assistance and Medicare advantage plans.  (See our January 2014 article entitled: Minimum Essential Coverage: Guidance Update; and our December 2013 article entitled: Excepted Benefits: Newly Proposed Rule Expands Definition.) 

Why it matters: Effective January 1, 2014, the Individual Mandate requires most individuals to obtain and maintain Minimum Essential Coverage for themselves and their dependents or pay a tax.  Individuals can obtain MEC through their employer’s plan, through the Marketplace or through some other means to comply with the Individual Mandate and not be subject to a tax. 

Effective January 1, 2015, the Employer Mandate (Employer Shared Responsibility) will create potential penalties for large employers if they do not offer to at least 95% of their full-time employees coverage that is at least Minimum Essential Coverage.  To avoid all Employer Mandate penalties, large employers must offer coverage that is not only Minimum Essential Coverage but provides Minimum Value and is Affordable. 

Essential Health Benefits (EHB)  (PPACA section 1302(b)) 

A plan that does not cover Essential Health Benefits can still be considered Minimum Essential Coverage. 

What it is: Essential Health Benefits (EHB) is the term used by the ACA to describe the items and services in 10 categories of core benefits that qualified health plans (QHPs) are required to cover.  (Some examples of the 10 EHBs include hospitalization, prescription drugs, and maternity and newborn care.)  Specifically, non-grandfathered small group and individual policies must cover EHBs as of the first day of the 2014 policy year, unless they are policies that are subject to the transition rule as explained below.  The Essential Health Benefitspackage, is a package that includes the 10 listed benefits and services that should be included as well as specific cost sharing, minimum value and adjusted community rating. 

Why it matters:  All non-grandfathered plans sold to individuals or small employers must be Qualified Health Plans (QHPs), whether they are sold in the state or federal Marketplaces, or sold outside the Marketplaces.  The only small group or individual policies that are notrequired to be QHPs are grandfathered policies sold outside the Marketplaces.  The original effective dateof this requirement was the first day of the 2014 plan year; however, in November 2013, President Obama announced a transition rule under which states could allow carriers to continue to offer certain individual and small employer non-ACA-compliant policies for one additional year.  (See our November 2013 article entitled: Health Insurers Providing Individual and Small Employer Plans May Elect to Continue Non-ACA Compliant Policies for One Year.) 

Another reason the concept of Essential Health Benefits matters is because the ACA prohibits all sizes and types of plans from imposing annual or lifetime dollar limits on EHB.  Although self-insured plans of any size and large insured plans are not required to cover EHB, to the extent they do, they cannot impose annual or lifetime dollar limits on EHB.  Most such plans do cover at least eight of the 10 categories of EHB. 

Minimum Value (MV)  (IRC section 36B(c)(2(C)(ii)) 

A plan that does not meet Minimum Value often will still be considered Minimum Essential Coverage. 

What it is:  Minimum Value is an ACA requirement that ensures health insurance policies and plans provide meaningful coverage at or above a threshold level. Minimum Value is met when a plan pays on average at least 60% of the actuarial value of the total allowed cost of benefits under the plan.  This means that enrollees pay—via deductibles, coinsurance, copayments and other out-of-pocket amounts— on average no more than 40% of the total allowed cost of benefits. Minimum Value does not take into account the amount paid for premium.  An example of an employer plan that might not meet the 60% requirement is a “mini-med” or catastrophic coverage only plan. 

Why it matters:  Minimum value affects large employers because the health plans they offer must meet Minimum Value (and Affordability) in order to avoid possible penalties under the Employer Shared Responsibility provisions of the ACA.  Individual and small employer plans (unless grandfathered) also must provide at least Minimum Value and additionally must meet specified Actuarial Values, as explained below. 

Most employers are already offering plans that meet Minimum Value (i.e., 60% Actuarial Value).  In fact, HHS estimated (in the Preamble to the November 2012 Proposed Regulations on Essential Health Benefits and Actuarial value), that only 1.6-2% ofparticipants in employer-sponsored group health plans are in plans that do not have an Actuarial Value of at least 60%. 

Actuarial Value (AV) 

What it is:  Actuarial Value is defined as the proportion of covered medical expenses an insurance policy is expected to pay on average for a standard population, as compared to the percentage the insured is expected to pay via deductibles, coinsurance, copayments and other out-of-pocket expenses.    An Actuarial Value of 100% means the plan would pay all medical expenses.  As noted above, all non-grandfathered health plans are required to provide at least “minimum value” – defined as the 60% actuarial value.  In other words, actuarial value measures the relative generosity of a health insurance plan. 

Actuarial Value does not take premiums into account.  Nor does itreflect other plan features that may be important for consumers who are choosing plans, such as how broad or narrow a plan’s provider network is, the quality of the provider network, or the plan’s customer service and support. 

Why it matters:  Issuers of small group and individual policies must specify the Actuarial Value of each policy. These are often referred to as the “precious metal” levels, because the ACA requires Qualified Health Plans sold on or outsidea Health Insurance Marketplace to sell plans that are either “bronze” (60% actuarial value), “silver” (70% actuarial value), “gold” (80% actuarial value) or “platinum” (90% actuarial value). Plans must meet their “metal level” within 2 percentage points. For example, a silver plan must pay 68%-72% of Actuarial Value. The bronze level plan will have the lowest premium cost, but if an enrollee uses medical services, the enrollee will have to pay a higher share of the cost. Conversely, the platinum level plan will have the highest premium cost, but if an enrollee uses medical services, the enrollee will have to pay a lower percentage of incurred claims. 

President Signs Deal to Delay Cadillac/Excise Tax

NAHU is pleased to share with you that President Obama has now signed legislation that will delay theCadillac/excise tax for two years. The provision was included in a $1.8 trillion omnibus government spending and tax-break package. 

The Cadillac tax calls for a 40% excise tax on the amount of the aggregate monthly premium of each primary insured individual that exceeds the year's applicable dollar limit, which will be adjusted annually to the Consumer Price Index (CPI) plus 1% initially and then CPI. Given that the pace of medical inflation is well beyond that of general inflation, the tax is destined to outgrow itself in short order and many employers will be impacted by the cost of the tax and the enormous compliance burden that the tax creates. Mercer estimated that a third of employers would be subjected to the tax by 2018 when it was originally set to kick in, and that 60% of employers could be hit by 2022. Because of the projected wide reaching effect of the tax, many employers may be deterred from offering coverage. 

The delay of the Cadillac/excise tax is effective for 2018 and 2019, meaning that without further legislative adjustment or repeal, the tax will now be scheduled to take effect beginning in January 2020. Language in the package also permanently makes the tax deductible to employers and calls for a study by the comptroller on appropriate age and gender adjustments in consultation with the National Association of Insurance Commissioners (NAIC). NAHU supports the delay of the Cadillac/excise tax as a short-term measure, but we remain fully committed to a complete repeal of the tax given its projected widespread impact on employer-provided insurance coverage, and will continue to work with the Department of Treasury as they develop regulations to implement the tax in 2020. Inclusion of these delays can be an important first step to achieve complete repeal, but in the short term, we hope the delays will bring some relief to your clients. 

Proposed Regulations Implement Supreme Court's Same-Sex Marriage Decision for Federal Tax Purposes

Rules Clarify and Update Prior Guidance

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) recently issued http://www.treasury.gov/press-center/press-releases/Pages/jl0227.aspx proposed regulations providing that a marriage of two individuals, whether of the same sex or the opposite sex, will be recognized for federal tax purposes if that marriage is recognized by any state, possession, or territory of the United States.

Proposed Regulations The proposed regulations implement the Supreme Court's 2015 decision inhttp://www.supremecourt.gov/opinions/14pdf/14-556_3204.pdf Obergefell v. Hodges. Specifically, the proposed regulations:

. Interpret the terms "husband" and "wife" to include same-sex spouses as well as opposite-sex spouses.

. Clarify and strengthen https://www.irs.gov/pub/irs-drop/rr-13-17.pdf previous IRS guidance from 2013, which implemented the Supreme Court's 2013 decision in http://www.supremecourt.gov/opinions/12pdf/12-307_6j37.pdf United States v. Windsor and provided that same-sex couples legally married in jurisdictions that authorize same-sex marriage will be treated as married for federal tax purposes. The proposed regulations update these rules to reflect that same-sex couples can now marry in all states and that all states will recognize these marriages.

The proposed regulations will apply to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA, and claiming the earned income tax credit or child tax credit.

However, the proposed regulations would not treat registered domestic partnerships, civil unions, or similar relationships not denominated as marriage under state law as marriage for federal tax purposes. These individuals can retain their status as single for federal tax purposes.

Effect on Prior Guidance Taxpayers may continue to rely on guidance related to the application ofhttps://www.irs.gov/pub/irs-drop/rr-13-17.pdf IRS Revenue Ruling 2013-17 to employee benefit plans and the benefits provided under such plans, including https://www.irs.gov/pub/irs-drop/n-13-61.pdf Notice 2013-61 (establishing special procedures for correcting overpayments with respect to employee benefits provided to same-sex spouses),https://www.irs.gov/pub/irs-drop/n-14-37.pdf Notice 2014-37 (addressing mid-year amendments to certain "safe harbor" qualified retirement plans), https://www.irs.gov/pub/irs-drop/n-14-19.pdf Notice 2014-19 (application of the Windsor decision to qualified retirement plans), and https://www.irs.gov/pub/irs-drop/n-14-01.pdf Notice 2014-1 (regarding the participation by same-sex spouses in cafeteria plans, HSAs, and health FSAs).

The proposed rules will apply to taxable years ending on or after October 23, 2015. Employers with questions on how to proceed regarding the administration of employee benefits for same-sex couples (or other applicable employment laws) are advised to review the http://www.gpo.gov/fdsys/pkg/FR-2015-10-23/pdf/2015-26890.pdf proposed rules in their entirety and contact a knowledgeable employment law attorney.

Insure Oklahoma Now Accepting Larger Businesses

Insure Oklahoma Now Accepting Larger Businesses

State's Health Underwriters Lobbied for the Program to be Expanded

OKLAHOMA CITY - Governor Mary Fallin and the Oklahoma Health Care Authority (OHCA) announced today that the Insure Oklahoma program is increasing its employer size limit from 99 to 250 employees. The change is effective immediately.

Insure Oklahoma is the state's premium assistance program that helps businesses and their middle- to low-income employees afford health insurance coverage. Insure Oklahoma's funding levels can support premium assistance for about 30,000 individuals. Increasing the employer size limit to 250 employees, which is authorized under the program's federal waiver, would allow Insure Oklahoma to maximize program usage.

Governor Mary Fallin said increasing the eligibility limit to 250 employees is part of the state's efforts to be more business-friendly, improve health outcomes and responsibly expand access to health care.

"Raising the eligibility cap allows the state to partner with more businesses to provide affordable health insurance to their employees," said Fallin. "The money that Insure Oklahoma saves employers can be reinvested in more jobs and other employee benefits."

OHCA Chief Executive Officer Nico Gomez said the Insure Oklahoma program has the capacity and funding in place to serve more businesses.

"Insure Oklahoma has the capacity to serve more businesses and thousands more working Oklahomans," said Gomez. "We are ready to accept applications from newly-qualified businesses and employees and look forward to serving them."

The Oklahoma State Association of Health Underwriters (OSAHU) met with the Oklahoma Health Care Authority in August to ask that the program be expanded. The state's underwriters are the principal marketers of the plan through individual coverage and group medical plans offered through employers.

Current OSAHU President Wayne Pettigrew was an original author of the bill that requested the federal waiver to create the Insure Oklahoma program when he served in the state legislature.

"To see this program expanded to cover employers of up to 250 employees was the original intent of the legislature at the time we passed the enabling legislation", Pettigrew said.

"With the ACA and its impact on small to mid-size employers we have needed the availability of a small employer offset to help employers with working employees and their dependents afford the new mandates. This is happening at a crucial time", Pettigrew added.

Insure Oklahoma launched in 2005 with an initial employer size limit of 25 employees. This is the third time the size limit has been increased.

Insure Oklahoma currently has both employer-based and individual health insurance options. The employer-sponsored insurance (ESI) option of Insure Oklahoma pays at least 60 percent of the premiums for private market health insurance policies. Participating employers pay at least 25 percent of the qualified employee's monthly premiums, and the employee pays no more than 15 percent of their health premium. The program also assists with premiums for the employee's spouse and children.

Insure Oklahoma's Individual Plan (IP) is for working Oklahomans who do not have access to group coverage and earn less than the federal poverty level, as well as those who are temporarily unemployed and seeking work.

The program currently serves 17,098 Oklahomans with more than 3,500 businesses participating. Insure Oklahoma is funded by the state tobacco tax matched by federal Medicaid dollars. Funding is secured through 2016, while state leaders continue to discuss a long-term funding agreement.

The Oklahoma Health Care Authority (OHCA) administers Oklahoma's Medicaid program, known as SoonerCare, and Insure Oklahoma, a premium assistance program funded by tobacco tax revenue. SoonerCare works to improve the health outcomes of Oklahomans by ensuring that medically necessary benefits and services are responsive to the health care needs of our members. Qualifying Oklahomans include low-income children, pregnant women, seniors, the disabled, those being treated for breast or cervical cancer and those seeking family planning services. All must meet income guidelines. Insure Oklahoma assists qualifying adults and small business employees in obtaining health care coverage for themselves and their families. OHCA works with our current 829,561 members, our statewide network of 43,652 health care providers and numerous state and local partners to promote responsible health care service utilization, healthy behaviors and improved health outcomes. For more information, visit http://www.okhca.org/ www.okhca.org orhttp://www.insureoklahoma.org/ www.insureoklahoma.org.

CMS Approves Composite Rating Option for Small Group Market in Oklahoma

The Centers for Medicare and Medicaid Services (CMS) has approved optional composite rating for small group market plans in Oklahoma for 2016 according to a news bulletin issued by the Oklahoma Department of Insurance. The determination allows insurers in the small group market to utilize composite premium rating rather than per member premium rating provided insurers make such premium development methodology available to each small group employer in the market. The allowance for such rating was urged by members of The Oklahoma State Association of Health Underwriters (OSAHU) in a meeting with the Oklahoma Department of Insurance in April of this year. The Oklahoma Department of Insurance received approval from CMS in August. "This is a huge development for small group plans with 50 to 99 employees in that they can have one employee rate for all employees on their health plan rather than a different rate for each employee by age", said OSAHU President Wayne Pettigrew. Groups of 50 to 99 employees were to be moved to the individual rating methodology effective with their renewals occurring in 2016 had the option not been approved. The Oklahoma tiered-composite rating methodology will now be available to all small employer groups regardless of size. The option to have individual rates if the employer desires them is still allowed. Federal regulations require that the group health plan's sum of composite premiums equal the sum of per-member premiums based on final census and plan selection up to such time as the effective date of issuance or renewal of coverage. Once the insurer establishes a small group's aggregate premium, it is not subject to change during the plan year. Many agents had feared that age discrimination could have occurred if the individual rating methodology had been required which could have put groups with over 50 employees in a bind as they attempt to comply with the Affordable Care Act. "If you are an employer that is struggling to comply with the ACA and you have the option of hiring a 25 year old employee with a $250 per month health premium or a 50 year old employee with a $500 per month health premium, which one are you going to hire", asked Pettigrew. "Now the employer has the option of spreading that risk among all of his employees while maintaining easier accounting of their health plan", Pettigrew added. An American Academy of Actuaries issue brief in March 2015 raised concerns that the move to required individual rating in the small group market could have caused adverse selection and market disruption due to the new more restrictive rating rules and requirements.

IRS Releases Final Forms 1094 and 1095 for Reporting Employer Health Coverage Information and New Publication Offering Further Guidance

Thomson Reuters Tax & Accounting News

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

The “B forms” consist of the Form 1094-B transmittal and the Form 1095-B information return (which also serves as the required statement to individuals). Although some employers and other entities will be required filers, health insurers will be the primary users of the B forms, which report individuals enrolled in minimum essential coverage (MEC). The final B forms and instructions make few changes to the drafts.

The “C forms” consist of the Form 1094-C transmittal (which also reports important information relative to employer penalties) and the Form 1095-C information return (which also serves as the required statement to employees). Filed by applicable large employers (ALEs), the final C forms themselves are largely unchanged from the drafts (except for some modifications to the recipient instructions in the 1095-C). But the final C form instructions contain noteworthy clarifications and changes. Following are some highlights:

·         Enrollment Information for Non-Employees. The draft instructions proposed combined reporting for ALEs sponsoring self-insured health plans by allowing them to satisfy both Code §§ 6055 and 6056 reporting obligations using the C forms. But the proposed instructions would have required use of B forms for non-employees enrolled in the ALE’s plan. The final instructions allow ALEs to use either the B forms or the C forms for enrolled non-employees. [EBIA Comment: ALEs are likely to welcome this change, since they will be able to focus just on the C forms and will not have to bother with B forms if they extend coverage to non-employees (such as non-employee directors, retirees, and COBRA qualified beneficiaries). Whether ALEs decide to use B forms or C forms for non-employees, the instructions emphasize that all family members with coverage due to the non-employee’s enrollment must be included on the same form as the non-employee. This same rule—all covered individuals must be reported on the same form—also applies to family members of an enrolled employee.]

·         Authoritative Transmittal. Like the draft instructions, the final instructions allow an ALE to file more than one Form 1094-C transmittal (e.g., one for each operating division) so long as one of the transmittals is designated as the “authoritative transmittal.” The final instructions clarify that only the authoritative transmittal reports detailed information for the ALE (such as full-time employee counts and eligibility for transition relief); the “non-authoritative transmittals” leave this information blank. The final instructions also elaborate on how governmental employers can designate a related governmental agency to report on their behalf and include an example involving a school district.

·         Controlled Groups. Each of the ALEs in a controlled group (known as ALE members) must file an authoritative transmittal. If an employee works for more than one ALE member during a calendar month, the employee is treated as the employee only of the ALE member for which the employee has the greatest number of hours for the month. The final instructions clarify that only the ALE member treated as the employer for the month reports Form 1095-C information for that employee for that month. [EBIA Comment: This treatment is consistent with Code § 4980H final regulations (see our article), which assess employer penalties separately for each ALE member.]

·         Counting Employees. The final instructions require ALEs to report their total number of employees. In addition to the two counting methods in the draft instructions (first or last day of each calendar month), the final instructions allow counting on the first or last day of the first payroll period starting in the calendar month. [EBIA Comment: Some have questioned the need for a total employee count, since only full-time employees can trigger Code § 4980H penalties, but this requirement remains under the final forms. Full-time employees must also be reported, and ALEs will want to read the instructions carefully since the full-time employee counting rules have been modified. For example, employees in a limited non-assessment period are excluded from the full-time employee count but are included in the total employee count.]

·         Deemed vs. Actual Offer of Coverage. For purposes of showing on the Form 1094-C transmittal that they offered MEC to enough full-time employees (70% in 2015; 95% thereafter), ALEs can take advantage of transition relief under which they are deemed to offer coverage to certain employees even if actual coverage is not offered. (This transition relief may apply to ALEs contributing to multiemployer plans, to non-calendar-year plans, and to plans taking steps to add dependent coverage.) However, on the Form 1095-C information return, only actual offers of coverage are reported. [EBIA Comment: The instructions explain that information regarding actual offers of coverage is required on Form 1095-C to facilitate administration of the Exchange tax credit. This result may be disappointing for ALEs contributing to multiemployer plans as they often do not receive actual eligibility information from the multiemployer plans and may struggle to report offers of multiemployer plan coverage accurately.]

·         Employee Contributions. The final instructions remind ALEs that employee contribution information is based on the lowest-cost, self-only coverage providing minimum value that is offered to the employee; thus, the reported contribution is not necessarily the amount that the employee pays (e.g., the employee may be enrolled in more expensive family coverage).

·         Other Changes. The final instructions to the C forms also include details on reporting for employees in limited non-assessment periods and using an alternative method of furnishing statements to employees. [EBIA Comment: While the preamble to the Code §§ 6055 and 6056 final regulations contemplates third parties (including service providers) facilitating reporting by ALEs and had indicated that further details would be provided in forms and instructions, the final forms and instructions do not shed any further light on how reporting will work when an ALE member contracts with a third party to assist with reporting. Further guidance would be welcome.]

IRS Publication 5196, a two-page brochure, summarizes the reporting requirements and is intended to help ALEs get ready for monthly tracking of offer and coverage information. The brochure summarizes the purposes of the C forms and provides a checklist of information ALEs will need to complete the forms.

SCOTUS Strikes Down Ruling On ACA's Contraceptive Mandate

SCOTUS Strikes Down Ruling On ACA’s Contraceptive Mandate. In a decision that revives a legal challenge filed by Catholic ministries in Michigan and Tennessee against the ACA’s contraceptive mandate, the Supreme Court has struck down a ruling by the 6th Circuit Court of Appeals in favor of the government’s stance on the mandate. Reutershttp://mailview.bulletinhealthcare.com/mailview.aspx?m=2015042801nahu&r=6107073-b14a&l=018-977&t=c [Share to Facebook] http://mailview.bulletinhealthcare.com/mailview.aspx?m=2015042801nahu&r=6107073-b14a&l=019-551&t=c [Share to Twitter]http://mailview.bulletinhealthcare.com/mailview.aspx?m=2015042801nahu&r=6107073-b14a&l=01a-caa&t=c (4/28, Hurley) reports that the High Court has asked the 6th Circuit to reconsider its decision in the wake of last year’s Supreme Court ruling in the “Hobby Lobby” case, which permitted certain privately owned corporations to seek exemptions from the mandate. The Hillhttp://mailview.bulletinhealthcare.com/mailview.aspx?m=2015042801nahu&r=6107073-b14a&l=01b-fc5&t=c[Share to Facebook] http://mailview.bulletinhealthcare.com/mailview.aspx?m=2015042801nahu&r=6107073-b14a&l=01c-c41&t=c [Share to Twitter] http://mailview.bulletinhealthcare.com/mailview.aspx?m=2015042801nahu&r=6107073-b14a&l=01d-294&t=c (4/28, Ferris) notes that Monday’s ruling in Michigan Catholic Conference v. Burwell “marks the sixth time that the court has thrown out decisions that upheld Obama administration policies, sending the cases back to the lower courts for reconsideration.” It reports that groups can apply to the Health and Human Services Department for an exemption from the mandate, but the Michigan Catholic Conference and other Catholic ministries have argued that the extra steps involved “created an ‘unjustified substantial burden’ and called for the same kind of across-the-board exemption that houses of worship received under the law.”

Insure Oklahoma Funded Through 2016

Insure Oklahoma Funded Through 2016 OKLAHOMA CITY - Governor Mary Fallin and the Oklahoma Health Care Authority (OHCA) announced today that federal funding for the Insure Oklahoma program has been secured through the end of 2016.

Insure Oklahoma is the state's premium assistance program that helps businesses and their modest and low-income employees afford health insurance coverage. The program, which has been in operation since November 2005, currently serves 17,923 Oklahomans with more than 3,700 businesses participating.

"This funding extension is great news for the thousands of working Oklahomans and small businesses that rely on Insure Oklahoma for affordable health insurance options," said Fallin. "Our goal moving forward continues to be securing a permanent extension for this successful, Oklahoma-based program."

Insure Oklahoma is funded by state tobacco tax matched by federal Medicaid dollars. OHCA received notificationhttp://www.ok.gov/governor/documents/7-10-15%20OK%20SoonerCare%20Extension%20STCs_7.9.2015.pdffrom the Centers for Medicare & Medicaid Services (CMS) advising that federal funding for the program would continue through 2016. Compass Benefits Solutions Partner and Senior Consultant Wayne Pettigrew helped write the federal waiver request for the Insure Oklahoma program when he served in the legislature in 2004. "This is an important program that helps small businesses afford major medical coverage for their employees and it needs to continue as a state program outside the Affordable Care Act" said Pettigrew. "We want Oklahomans to know that Insure Oklahoma is open for business and we stand ready to help with their insurance needs," said OHCA Chief Executive Officer Nico Gomez. "I appreciate our Insure Oklahoma and other OHCA employees for keeping this program moving forward and available for many working Oklahomans." Insure Oklahoma currently has two options. The employer-sponsored insurance (ESI) part of Insure Oklahoma pays at least 60 percent of the premiums for private market health insurance policies. Participating employers pay at least 25 percent of the qualified employee's monthly premiums, and the employee pays no more than 15 percent of their health premium. The program also assists with premiums for the employee's spouse.

Insure Oklahoma Individual Plan (IP) is for Oklahomans working for small businesses that do not have access to group coverage and who earn less than the federal poverty level, as well as those who are temporarily unemployed and seeking work.

The secured funding for an additional year will provide state leaders time to continue the discussion for a long-term funding agreement. More information about Insure Oklahoma is available at www.insureoklahoma.orghttp://www.insureoklahoma.org/.

Passing an ERISA Compliance Audit

WHAT IS ERISA AND DOES IT APPLY?

ERISA, which stands for the Employee Retirement Income Security Act, is a federal law regulating employer-sponsored group benefits. Nearly every employer, regardless of their size, is subject to ERISA if they offer even one employer-provided group benefit such as health, dental, vision, accidental death & dismemberment, disability, or group term life insurance; medical flexible spending account or health reimbursement account; wellness and employee assistance program; or any other benefit for which the employer contributes to the cost. The only exempt employers are churches and government entities.

Besides requiring certain plan features, the law also mandates detailed reporting requirements, both to the Department of Labor and other government agencies and to employees and covered members under your policies. While ERISA was first enacted in 1974, recent changes under the Patient Protection and Affordable Care Act (PPACA) have added additional requirements and changed reporting deadlines.

REQUIREMENTS UNDER ERISA & PPACA If you offer any of the above-mentioned health and welfare benefits, you must meet specific requirements, specifications, and deadlines for plan documents under ERISA as well as under PPACA. 

The key ERISA and PPACA provisions are listed here and details of each follow:

1. Distribute a written plan document and Summary Plan Description (SPD) for every health and welfare benefit and any voluntary benefit pre-taxed under a 125 plan to all plan participants including spouses and COBRA enrollees, 

2. Distribute ERISA benefit notices to all eligible employees on enrollment and re-enrollment of your health plan, 

3. Notify participants of any change to a plan that materially affects the design or pricing, 

4. File Form 5500 and all applicable schedules within 7 months after the plan year ends for each plan that has more than 100 participants (not just employees) on the first day of the plan year, 

5. Meet all fiduciary standards and plan terms, 

6. Establish a trust fund that holds the plan’s assets, if applicable, 

7. Establish a recordkeeping system to track contributions, benefit payments, maintain participant and beneficiary information, and to prepare reporting documents, 

8. Provide a summary of benefits and a coverage explanation (SBC) and documentation of how and when it was distributed each year, 

9. Verify fiduciary bonding needs for individuals handling funds and other property of employee benefit plans like a 401(k) plan, if applicable. 

The deadline for each requirement varies, depending on when your plan was enacted, whether it is grandfathered under PPACA, whether material changes have been made, and other exceptions. Copies of certain plan documents must be also available to participants and beneficiaries on written request. 

SPD and Wrap Requirements

An employer must have a written Summary Plan Description (SPD) for each separate welfare benefit plan, informing participants of eligibility requirements, benefits, claims and appeals procedures, and rights under ERISA. Your insurers may provide some but not all information required for SPD compliance. It is a common mistake by employers to think the summary insurance information they receive from their insurance provider meets the SPD requirements.

A common approach is to combine all SPDs into one overall SPD Wrap notice, tying in the required ERISA language and simplifying the SPD notice process. A customized SPD Wrap must include the name of the plan, plan sponsor, plan administrator, plan year, employer tax identification number, type of welfare plan, type of administration, summary of the benefits, detailed description of plan benefits for group health plans, provider network availability for group health plans, procedures for Qualified Medical Child Support Orders (QMCCOS), COBRA rights, plan contributions, and claims procedures. A Statement of ERISA Rights is also required.

The SPD and Wrap must be distributed to newly-enrolled participants within 90 days of when coverage started, or within 120 days of a new plan being established.

ERISA Benefit Notices All eligible employees must receive ERISA Benefit Notices upon enrollment and re-enrollment of your health plan. Depending on company size and other criteria, you may be required to provide employees with the following employee notifications:

· Medicare Part D Notice 

· CHIP (if applicable in your state) 

· Wellness Program Disclosure 

· Women’s Health & Cancer Rights 

· Hospital Stay Rights for Childbirth 

· Mental Health & Parity Act 

· HIPAA Notice 

· Disclosure of Grandfathered Status 

· COBRA Rights – Initial Notice 

In the event of certain Qualifying Events, additional required notices may include:

· COBRA Qualifying Event Letter 

· HIPAA Breach Notice 

· Medical Child Support Order Notice (MCSO) 

· National Medical Support Notice (NMS) 

Form 5500 and Summary Annual Report

ERISA further requires employers with 100 or more participants to annually report certain information to the DOL on Form 5500.

Form 5500 returns ask for information about the plan, including plan name, plan year, plan sponsor, plan number, participants, insurance costs, and financial data. Employers who set up an SPD Wrap can file one 5500 report for the SPD Wrap covering all health and welfare plans. Once a Form 5500 is completed and filed, you must prepare a Summary Annual Report (SAR) for each of your welfare benefit plans subject to ERISA reporting, or just one if done under an SPD Wrap. The SAR summarizes Form 5500 information and notifies participants Form 5500 has been filed and a copy is available to those who request a copy. SARs must be distributed to covered participants within nine months after the end of the plan year. A SAR is not required for plans that are not required to file a Form 5500.

AUDITS AND ENFORCEMENTS The Department of Labor’s Employee Benefits Services Administration (EBSA) routinely conducts audits of group health benefit plans to investigate or audit the plan’s compliance. In addition, the Health Benefits Security Project (HBSP) was recently established under PPACA to add to EBSA’s compliance and enforcement initiatives. It has been reported that smaller groups of fewer than 100 are being particularly targeted since the DOL does not have the ability to monitor them through a Form 5500 filing. Audits are anticipated to increase significantly, given increased audit budgets and concerns over ERISA and PPACA violations.

If your company is selected for a DOL audit, a letter will be sent to the Plan Sponsor containing the list of documents the DOL would like to review. The request for information typically goes back three to six years.

AUDIT TRIGGERS AND PENALTIES

Every audit is unique. However, reported trends show the following are typical areas of concern, in recent audits: 

· Summary Plan Descriptions 

· HIPAA compliance, particularly notices to employees about special enrollment rights 

· PPACA Grandfathered Plan notices and documentation of coverage for adult children 

· PPACA lifetime and annual limit requirements 

· inadvertently excluding people who may be eligible to participate in the plan, including dependents up to age 26 

The DOL reports common audit triggers include: 

· the Department’s internal audit initiatives 

· employee complaints 

· press tips and public visibility of a company or its third-party vendors 

· the Department’s Memorandum of Understanding with the IRS 

· form 5500 filings inconsistencies or suspect information 

· an audit of a plan’s auditor (if 100+ group) 

· randomly selected 

In the future, DOL audits will also likely focus on: 

· employer communications and documentation 

· employer reporting requirements 

· coverage of essential health benefits, cost-sharing and out-of pocket limits for applicable plans 

· annual limits, on non-essential health benefits only 

· structure of group health benefit plans and offers of coverage 

· waiting period limitation of 90 days 

· exchange notice documents 

· adherence to PPACA requirements 

The employer is solely responsible for ERISA compliance. Penalties may be enforced for failure to comply with ERISA regulations, including DOL enforcement actions and penalties as well as employee lawsuits. Certain infractions can entail up to $100/day penalty for every employee that is affected by a violation until the violation is corrected. The penalty for late delivery of SPD or Wrap can be as much as $110/day per plan. Late filing of form 5500 can result in fines as high as $1,100 per day.

AUDIT PREPARATION

Knowledge and familiarity of compliance requirements, complete documentation, and policies that show good faith efforts to comply are the best way to be prepared for an audit (as well as to avoid one in the first place).

Below is a summary of the items you should have in place to ensure ERISA compliance.

1. ERISA & PPACA requirements mentioned above 

2. Written ERISA plan document 

3. SPDs or the combined SPD Wrap prepared and distributed to all plan participants within 90 days of first day of coverage 

4. Summary of Material Modification (SMM) for any amendments such as carrier change, eligibility change, benefit structure change, etc. to your plans 

5. Form 5500 and SAR filed annually (only if you have over 100 enrolled participants in any benefit) 

An organized employer with meticulous records who has a health insurance broker who helps review all of the company’s compliance materials annually will be in much better shape, if faced with a DOL audit than an employer who isn’t prepared.  

• NAHU Webcasts: http://www.nahu.org/education/programs/webcasts.cfm