The Affordable Care Act exchanges/marketplaces are required to notify employers of any employees who have been determined eligible for advance payments of the premium tax credit or cost-sharing reductions (i.e., subsidy) and enrolled in a qualified health plan through the exchange.
A few weeks ago the U.S. Department of Health and Human Services (HHS) began issuing these notices to employers for 2016. If you received such a notice, this means that at the time of applying for health care coverage through the exchange, the employee indicated that:
- you made no offer of health coverage;
- you offered health coverage, but it either wasn’t affordable or didn’t offer minimum value; or
- he or she was unable to enroll in the health coverage due to a waiting period.
Now, receipt of such a notice does not mean that you are liable for the play-or-pay employer mandate penalty. In fact, HHS is required to notify all employers, whether or not they are subject to the employer mandate, so small employers (i.e., less than a total of 50 full-time employee and full-time equivalents) have also received notices. The subsidy eligibility determination by an exchange and the IRS penalty assessment are entirely separate programs.
Employers do not have to appeal a determination of an employee’s eligibility for a subsidy and the grounds for an appeal are limited. As described in the HHS exchange subsidy notice, an employer should consider appealing if there is reason to believe the employee’s receipt of a subsidy is wrong. Therefore, an employer can only really appeal if the coverage it offered was affordable and provided minimum value or if the employee actually enrolled in the coverage. More information about appeals for the federally-facilitated exchanges (and the eight state exchanges utilizing the same appeal form as the federally-facilitated exchanges) is available here. For example, if the employee was offered affordable, minimum value coverage, the employee is actually enrolled in the employer’s plan.
If an appeal is appropriate, some employers may decide to submit an appeal in an effort to correct any misinformation and to potentially “head off” the imposition of the pay-or-play penalty tax by the IRS. Other employers may view an appeal as a way to help employees avoid an unexpected tax liability at year-end since any advanced premium tax credit that was erroneously received must be repaid. Regardless of the employer’s reason for appealing, the impacted employee may construe such action as adversarial. To minimize any potential resentment, an employer should consider notifying a current employee that it plans to submit an appeal and explain the potential adverse tax consequences to the employee if the employee receives a subsidy that he or she is not entitled to.
The IRS is not expected to start assessing play-or-pay penalties until after its receipt of employees’ individual tax returns for 2016 and employer information returns (i.e., Forms 1094-C and 1095-C). Since the details of the IRS penalty assessment and appeal processes have yet to be revealed, there is no guarantee that successfully appealing the HHS subsidy determination will automatically avoid the imposition of the penalty tax by the IRS. However, if you are an applicable large employer, the HHS appeal process affords you an opportunity to establish an administrative record of the correct facts. In addition, the information you submit as part of the HHS appeal process will likely be the same information and documents that will be necessary to challenge any IRS assessment of a play-or-pay penalty tax.
In some cases, an employer may choose not to appeal. Additionally, in other cases, the individual may have provided incorrect information to the exchange, but not of a type that an employer can appeal. For example, an individual may state that he or she was an employee of the employer, when in fact, he or she was an independent contractor. Employers who opt not to appeal the subsidy determination or for whom an appeal is not appropriate should consider gathering and retaining the necessary documentation showing why the individual was not offered coverage. That way, it will be readily accessible in the event the IRS subsequently seeks to impose the penalty tax.
Additional information on the subsidy notice program for the federally-facilitated exchanges is available here.
In Zubik v. Burwell, the justices vacated and remanded six federal appellate judgements on whether an accommodation (described below) for employers with religious objections to providing coverage for some or all contraception under the Affordable Care Act’s (ACA) preventive services coverage mandate violated the Religious Freedom Restoration Act (RFRA). The Court took no position on the merits and stated that the parties should have the opportunity to find an approach that accommodates the petitioners’ religious exercise and ensures that women covered by the petitioners’ health plans receive full coverage for preventive care. Essentially, as the Court awaits confirmation of a 9th justice they decided to kick the can down the proverbial road.
Enter the Departments of Health and Human Services (HHS), Labor, and Treasury, the agencies responsible for implementation of the ACA. On July 21, 2016, they released a “request for information” (RFI) intended to provide all interested stakeholders an opportunity to comment on several specific issues raised by the supplemental briefing and Supreme Court decision in Zubik v. Burwell. Broadly, the RFI asks for suggestions on ways to further accommodate objections by religious non-profits to furnishing their employees coverage for some or all contraceptive services in their health plans.
Under the current accommodation, employers that object to providing contraceptives to their employees for religious reasons may either:
- Self-certify their objection (EBSA Form 700) to their insurer or third-party administrator, or
- Inform HHS of their objection and identify their insurer or third-party administrator so the government can authorize the insurer or third-party administrator to provide coverage.
The petitioners argued that the accommodation made them parties to the provision of the objectionable contraceptive services and burdened their religious exercise in violation of RFRA.
The RFI seeks comments in three general areas:
- The procedure for invoking the accommodation, including whether using a particular form , stating that the employer is objecting on religious grounds, or giving a notice in writing raises any objections under RFRA.
- Procedures for insured plans, including whether the alternative procedure suggested by petitioners in their supplemental brief (upon a request for a plan without coverage for the objectionable contraceptives, the insurer would be required to provide the coverage separately) would resolve the issues under RFRA, what impact the approach would have on women’s ability to receive contraceptive coverage seamlessly, whether the approach raises issues under state insurance law, are there any other procedures that would not raise issues under RFRA.
- Procedures for self-insured plans, which both the government and the petitioners agree were not addressed in the Court’s order. Including whether there are reasonable means under existing law to ensure that women covered by self-insured plans can receive contraceptive coverage and whether there are alternative methods for a third party administrator to provide the coverage without raising issues under RFRA.
Responses to the RFI are due by September 20, 2016. Although HHS asserts that the current accommodation remains consistent with RFRA, responses for this RFI may support objecting employers’ claims that new regulations need to be proposed. Of course, there is always a possibility the RFI will not result in any movement and litigation will return again to the Supreme Court for resolution (by that time surely with a 9th justice).
The Department of Labor (DOL), along with several other federal agencies, recently released adjusted penalty amounts for various violations. The amounts had not been adjusted since 2003, so there was some catching up to do, as required by legislation passed late last year.
These new penalty amounts apply to penalties assessed after August 1, 2016 for violations that occurred after November 2, 2015 (which was when the legislation was passed). Therefore, while the penalty amounts aren’t effective yet, they will be very soon and they will apply to violations that may have already occurred. Additionally, per the legislation, these amounts will be subject to annual adjustment going forward, so they will keep going up.
- For a failure to file a 5500, the penalty will be $2,063 per day (up from $1,100).
- If you don’t provide documents and information requested by the DOL, the penalty will be $147 per day (up from $110), up to a maximum penalty of $1,472 per request (up from $1,100).
- A failure to provide reports to certain former participants or failure to maintain records to determine their benefits is now $28 per employee (up from $10).
Pension and Retirement
- A failure to provide a blackout notice will be subject to a $131 per day penalty (up from $100).
- A failure to provide participants a notice of benefit restrictions under an underfunded pension plan under 436 of the tax code will cost $1,632 per day (up from $1,000).
- A payment in violation of those restrictions will be $15,909 per distribution (up from $10,000).
- A failure of a multiemployer plan to provide plan documents and other information or to provide an estimate of withdrawal liability will be $1,632 per day (up from $1,000).
- A failure to provide notice of an automatic contribution arrangement required under Section 514(e)(3) of ERISA will also be $1,632 per day (also up from $1,000).
Health and Welfare
- Employers who fail to give employees their required CHIP notices will be subject to a $110 per day penalty ($100, currently).
- Failing to give State Medicaid & CHIP agencies information on an employee’s health coverage will also cost $110 per day (again, up from $100).
- Health plan violations of the Genetic Information Nondiscrimination Act will also go up to $110 per day from $100. Additionally, the following minimums and maximums for GINA violations also go up:
- minimum penalty for de minimis failures not corrected prior to receiving a notice from DOL: $2,745 (formerly $2,500)
- minimum penalty for GINA failures that are not de minimis and are not corrected prior to receiving a notice from the DOL: $16,473 (up from $15,000)
- cap on unintentional GINA failures: $549,095 (up from $500,000)
- Failure to provide the Affordable Care Act’s Summary of Benefits and Coverage is now $1,087 per failure (up from $1000).
The above penalty amounts are usually maximums (the penalties are “up to” those amounts), which means the DOL has the discretion to assess a smaller penalty. Employers and plans should be mindful of these and the other penalty increases described in the fact sheet. These increased penalties give the DOL additional incentive to pursue violations and assess penalties. They also give the DOL greater negotiating leverage in any investigation. For these reasons, it pays to be aware of the various compliance obligations (and any associated timing requirements) and make sure your plans’ operations are consistent with those obligations.
On April 20, the “Big Three” agencies (DOL, Treasury/IRS, and HHS) released another set of FAQs (the 31st, for those of you counting at home). Consistent with earlier FAQs, the new FAQs cover a broad range of items under the Affordable Care Act, Mental Health Parity and Addiction Equity Act, and Women’s Health Cancer Rights Act. The authors are admittedly curious about how “Frequently” some of these questions are really asked, but we will deal with all of them in brief form below.
1. Bowel Preparation Medication – For those getting a colonoscopy, there is good news. (No, you still have to go.) But the ACA FAQs now say that medications prescribed by your doctor to get you ready for the procedure should be covered by your plan without cost sharing. Plans that were not already covering these at the first dollar will need to start.
2. Contraceptives – As a reminder, plans are required to cover at least one item or service in all the FDA-approved contraceptive methods. However, the FAQs also hearkened back to earlier FAQs reminding sponsors that they could use medical management techniques to cover some versions of an item (such as a generic drug) without cost sharing while imposing cost sharing on more expensive alternatives (like a brand name drug). However, plans must have an exception for anyone whose provider determines that the less expensive item would be medically inappropriate. None of this is news. However, the FAQs did acknowledge that plans can have a standard form for requesting these kinds of exceptions. They referred issuers and plan sponsors to a Medicare Part D form as a starting point. While the Medicare Part D form is a useful starting point, it would likely need significant customization for anyone to use it properly for these purposes.
3. No Summer Recess for Rescission Rules – As most people know by now, ACA prohibits almost all retroactive cancellations of coverage. The FAQs confirm that school teachers who have annual contracts that end in the summer cannot have their coverage retroactively cancelled to the end of the school year (unless one of the limited circumstances for allowing rescissions applies, of course).
4. Disclosure of the Calculation of Out-of-Network Payments is Now Required – The ACA requires that plans generally provide a certain level of payment for out-of-network emergency services that is designed to approximate what the plan pays for in-network emergency services. The regulations provide three methods a plan may choose from to determine the minimum it has to pay. Out-of-network providers are permitted to balance bill above that. The FAQs confirm that plans are required to disclose how they reached the out-of-network payment amount within 30 days of a request by a participant or dependent and as part of any claims review. The penalties associated with failing to provide such information on request (up to $110/day) are steep. Additionally, failing to strictly follow the claims procedures can allow a participant or dependent to bypass the process and go straight to court or external review. Given these consequences, insurers and plan sponsors should make sure they have processes in place to provide this information.
5. Clinical Trial Coverage Clarifications – The FAQs confirm that “routine patient costs” that must be covered as part of a clinical trial essentially include items the plan would cover outside the clinical trial. So, if the plan would cover chemotherapy for a cancer patient, the plan must cover the treatment if the patient is receiving it as part of a clinical trial for a nausea medication, for example. In addition, if the participant or dependent experiences complications as a result of the clinical trial, any treatment of those complications must also be covered on the same basis that the treatment would be covered for individuals not in the clinical trial.
6. MOOPing Up After Reference-Based Pricing – Non-grandfathered plans that use a reference-based pricing structure are generally required to make sure that participants and dependents have access to quality providers that will accept that price as payment in full. However, the FAQs say that if a plan does not provide adequate access to quality providers, then any payment a participant or dependent makes above the reference price has to be counted toward the maximum out-of-pocket limit that the participant or dependent pays.
7. Mental Health Parity and Addiction Equity Analysis Must be Plan-by-Plan – The Mental Health Parity and Addiction Equity Act (MHPAEA) tries to put mental health and substance abuse benefits on par with medical/surgical benefits by providing that the cost-sharing and other types of treatment limitations must be the same across particular categories of benefits. Where these types of limitations vary, the MHPAEA rules look at the “predominant” financial requirement that applies to “substantially all” medical/surgical benefits in a particular category. For purposes of determining which limitations are “predominant” and apply to “substantially all” the benefits, the rules generally require that a plan look at the dollars spent by the plan on those benefits. In other words, the determination is not based on how many types of services a particular cost-sharing requirement or limitation (like a copayment) applies to, but how much money is spent on the various services. These types of analysis require looking at claims experiences. The FAQs confirm that an issuer may not look at its book of business to make these determinations. Instead, the determinations must be made plan-by-plan. As a practical matter, most plans that provide mental health and substance abuse benefits try to apply as uniform of levels of cost sharing and treatment limitations as they can to help simplify this analysis.
8. Playbook for Authorized Representatives Requesting Information about MHPAEA Coverage – The FAQs also provide a list of items that a provider may request in an effort to determine a plan’s compliance with the MHPAEA provisions or in trying to secure treatment for an individual. Plan sponsors and issuers would be well-advised to peruse the FAQs to look at the types of documents since these will likely find their way into a form document request that plan sponsors and issuers are likely to see. The FAQs also list items that the agencies say a plan must provide. Plans and issuers should review their processes to determine if all the relevant information is being provided in response to these types of requests.
While not relevant for group plan sponsors, the FAQs also confirm that individuals applying for individual market coverage are required to receive a copy of the medical necessity determination the issuer uses for mental health and substance abuse benefits on request.
9. Going to the MAT – The FAQs confirm that Medication Assisted Treatment (MAT) for opiod use disorder (think: methadone maintenance) is a substance use disorder benefit that is subject to the MHPAEA limitations on cost-sharing, etc. described above.
10. Nipple/Areola Reconstruction Coverage Required to Be Covered – Under the Women’s Health Cancer Rights Act, health plans and health insurance coverage must cover post-mastectomy reconstruction services. The FAQs confirm that this includes reconstruction of the nipple and areola, including repigmentation.
Hullabaloo: noun: a commotion, a fuss.
In recent years, almost every change to health care has caused a hullabaloo. Today, we thought you might enjoy reading about a few recent and proposed changes that, although important, have not caused quite the uproar to which we have become accustomed.
The Department of Health and Human Services has finalized the annual in-network out-of-pocket maximums for non-grandfathered health plans for 2017:
An enrollee in self-only coverage may not pay more than $6,850 for essential health benefits in 2016; for 2017, that number has increased to $7,150.
An enrollee in any coverage other than self-only may not pay more than $13,700 for essential health benefits in 2016; for 2017, that number has increased to $14,300.
Section 1411 of the Patient Protection and Affordable Care Act requires federally facilitated marketplaces (but not state facilitated marketplaces) to provide notice to employers when it is determined that an employee is eligible to receive a subsidy. The final rule, however, only requires these marketplaces to provide notice to employers when an employee actually enrolls in coverage.
And, the Departments of Labor, Health and Human Services, and the Treasury will be working together to finalize the updated requirements of the Summary of Benefits and Coverage (SBC) after the comment period closes March 28, 2016. The proposed changes to the SBC include a revised template, instructions, and an updated uniform glossary (see here). The new SBC requirements must be satisfied by the first day of the first open enrollment period for plan years beginning on or after April 1, 2017 (or, the first day of the first plan year beginning on or after April 1, 2017 if the plan does not use an open enrollment period).
The next health care hullabaloo may be just around the corner. For now, enjoy the calm!
A few weeks ago, the President released his proposed budget for the fiscal year 2017. As usual, it is dense. However, the President has suggested some changes to employee benefits that are worth noting. While they are unlikely to get too much traction in an election year, it is useful to keep them in mind as various bills wind their way through Congress to see what the President might support.
- Auto-IRAs. Stop us if you’ve heard this one before. The proposal would require every employer with more than 10 employees that does not offer a retirement plan to automatically enroll workers in an IRA. No employer contribution would be required and, of course, individuals could choose not to contribute. (In case you’ve forgotten, we’ve seen this before.)
- Tax Credits for Retirement Plans. Employers with 100 or fewer employees who “offer” an auto-IRA (note the euphemistic phrasing in light of the first proposal) would be eligible for a tax credit up to $4,500. The existing startup credit for new retirement plans would also be tripled. Small employers who have a plan, but add automatic enrollment would also be eligible for a $1,500 tax credit.
- Change in Eligibility for Part-Timers. The budget would require part-time workers who work 500 hours per year for three consecutive years to be made eligible for a retirement plan.
- Spending Money to Help Save Money. The President proposes to set aside $6.5 million to encourage State-based retirement plans for private sector workers.
- Opening Up MEPs. To help level the playing field with the State-run plans, the budget proposes to remove the requirement that employers have a common bond to participate in a multiple employer plan (MEP). This is a proposal that has already been floated by Sen. Orrin Hatch, so there’s some possibility that, even in an election year, this might get passed (probably, if not mostly, because it would be hard for anyone to have a vote for open MEPs used against them on the campaign trail given that so few outside the retirement space even know what they are).
- More Leakage For Long-Term Unemployed. The budget also proposes to allow long-term unemployed individuals to withdraw up to $50,000 per year for two years from tax-favored accounts. This proposal, if implemented, would be interesting to study empirically. Obviously, it would lead to more leakage from retirement plans, but would people be more apt to contribute knowing that they could withdraw if they really needed to do so?
- Double-tax of Retirement Benefits? In what appears to be a repeat of a prior proposal, page 50 of the budget summary states that the value of “Other Tax Preferences” (not specified) would be limited to 28 percent. This would seem to describe the President’s proposal from prior years that to the tax benefit of retirement plan contributions (among other items). However, such a proposal is, in our view, counter-intuitive given the other proposals to expand retirement access.
- Cadillac Tax Would Get a Tune-Up. The ACA tax on high-cost coverage would change the thresholds that determine when the tax applies. Currently, there is one threshold for self-only coverage and another for coverage other than self-only coverage. The budget would propose to change the thresholds to the higher of those amounts or the average premium for a gold plan in the ACA Marketplace in each state. This is designed to help address geographic variations in the cost of coverage. There is also a mention in the summary of making it easier for employers with flexible spending arrangements to calculate the tax, but it is not clear what form that would take.
- Miscellaneous. In the budget tables, there are also a few benefits items, such as:
- Expanding and simplifying the small employer tax credit for employer contributions to health insurance (page 148).
- Simplifying the required minimum distribution rules (page 152).
- Taxing carried interests / profits interests as ordinary income (page 153).
- Requiring non-spousal beneficiaries of deceased IRA owners and retirement plan participants to take inherited distributions over no more than five years (page 153).
- Capping the total accrual of tax-favored retirement benefits (which seems like another repeat of prior proposals – page 153).
- Limiting Roth conversions to pre-tax dollars (page 153).
- Eliminating the deduction for dividends on stock in ESOPs of publicly-traded companies (page 153).
- Repealing the exclusion of net unrealized appreciation for certain distributions of employer securities from qualified retirement plans (page 153).
A summary of these changes from the Administration is available here (along with a few other items). More on the overall budget is available here. Do you have additional details, other information, or a point of view on these proposals? Post it in the comments!
Well, we’ve toyed with your emotions enough on this subject…. the deadlines for ACA reporting have not changed. Truth be told, unless this law is repealed by a Republican President taking office next term, we’re likely stuck with the ACA reporting rules as they stand (as modified by further informal guidance). So, what if you encounter this situation under the current legal landscape? You’ve made it through information compilation and data entry processes, you’ve poured over the instructions on the Forms 1094 and 1095s (or better yet, hired a consultant to do that) and you’re now ready to submit your returns electronically to the IRS – maybe even “on time” under the initial deadlines before they were extended. Congratulations! But, what happens when you receive a dreaded “error” message in connection with that submission?
First and foremost, please stay calm!
We know you’re at your wits end with this whole endeavor, but that IRS is actually poised to help (we hope). Last week, the IRS held a webinar concerning how to deal with rejection. And while they cannot help you with rejection in the dating world (sorry us ERISA nerds are left to search the galaxy for someone who loves us for who we are and our “humor”), they may be able to assist with submission rejection errors. Slides from the presentation entitled “Things to Know, Overview of Rejection Triggers, Tax Year 2015 Lessons Learned, Form 1094/5-C Q&A” attempt to answer many questions on various types of errors filers may encounter (including differing types of errors at the Transmission level: (i.e., the entire Transmission is rejected) or Submission level (i.e., one or more but not all of the Submissions in a Transmission are rejected) and how to address these errors.
These slides also address a series of more general Q&As on how to complete the forms. For example, two Q&As state that Line 15 on Form 1095-C (which lists the employee share of lowest cost monthly premium for self-only MV coverage) should be completed if an offer of coverage (other than a qualifying offer for all 12 months of the calendar year) is reported on Line 14 whether or not the employee enrolled in the coverage offered. Stated simply, unless you’re entering Code 1A in the All 12 Months box in Line 14, then something should be listed on Line 15.
This latest publication is just one in a series of presentations hosted by IRS working groups and posted on IRS.gov. If you’re interested in reviewing prior releases, that information can be found here. Less technical and more legal ACA guidance issued by the IRS for applicable large employers is also all posted here.
Signed into law in December 2014 and effective January 1, 2016, the Small Business Efficiency Act (“SBEA”) provides welcome federal statutory recognition of Professional Employer Organizations (“PEOs”). PEOs, who act as “co-employers”, are becoming popular for many small to mid-size businesses struggling to maintain compliance with an ever-increasing volume of regulations impacting human resources and benefits compliance.
In the past, many states individually recognized PEOs through licensing or registration statutes, and there were only a handful of pieces of federal guidance concerning how PEOs should be treated under federal law. The SBEA changes the federal legal landscape by instituting a voluntary certification process for PEOs. By completing this voluntary certification process, a PEO has clear statutory authority to collect and remit taxes on behalf of their clients. Businesses can breathe a sigh of relief as certified PEOs will also assume sole liability for the collection and remission of federal taxes.
In order to become certified, the SBEA requires PEOs to meet a number of financial standards, including bonding and independent financial audit requirements. The IRS has been working to determine the exact procedures and information system changes necessary to implement the new law, and the window for submitting comments on this process just closed earlier this month. At this point, it seems aggressive, but the IRS claims that it will begin accepting applications for certification on July 1, 2016 (only a year after it was directed under the terms of the statute).
The parameters of this certification process is particularly important as PEOs are seeing ever-increasing interest these days as many businesses require assistance with the Affordable Care Act (“ACA”) requirements. Small and midsize employers are also looking to access large-group benefits as PEOs can leverage their size to negotiate more favorable rates with insurers.
One question for businesses that remains to be fully addressed is whether a PEO (certified or not) can take over sole liability for ACA’s “play-or-pay” employer mandate under Section 4980H? Since its enactment in 2010, the ACA has cast uncertainty on its impact with third-party staffing arrangements. Additionally, the final rule and preamble implementing the employer mandate uses the term “professional employer organization” in a manner that may not be reflective of the IRS-stamp of approval PEOs we now have in 2016.
The final rule attempted to address this issue by indicating that, when the PEO client organization (i.e., the employer engaging the PEO) is the “common law employer” but wants to have the offer of coverage made by the PEO treated as the offering having been made by the PEO client organization, then the PEO client organization must pay a higher fee for those employees who enroll in the health coverage (as compared to those employees who do not so enroll).
Under the “common law employer” standard, whether a common law employment relationship exists is a facts and circumstance analysis which requires consideration of “the right to control and direct the individual who performs the services.” Language found in the SBEA specifically tip-toes around this issue, stating “nothing in this section shall be construed to affect the determination of who is an employee or employer.” Nonetheless, it is generally understood that under most arrangements PEOs treat employees as the PEO client organization’s common law employees. In cases where a PEO is not the common law employer of the employee (either in place of or in addition to the PEO client organization), however, the PEO has another path to offer coverage on behalf of a client and satisfy the client’s employer mandate obligation so long as the client pays the PEO an extra fee for individuals who enroll in the PEO’s health plan.
Additional guidance from the IRS in relation to these certified PEOs and how, if at all, they will impact the employer mandate would certainly be welcome and may help clear up some of these issues, but until that time companies should remain diligent and be aware of the potential legal risks.
Congress’s recent $1.8 trillion holiday shopping spree (aka The Consolidated Appropriations Act, 2016, which became law on December 18, 2015) included a few employee benefit packages. We recently unwrapped the packages. Here is what we found.
1. Cadillac Tax Delayed. The largest present under the employee benefits tree is a delay in the so-called “Cadillac” tax, which as originally enacted imposed a 40% nondeductible excise tax on insurers and self-funded health plans with respect to the cost of employer-sponsored health benefits exceeding statutory limits. The tax is now scheduled to take effect in 2020 rather than 2018. Once – or if – the delayed tax provision becomes effective, it will be deductible. The cost of this gift is $17.7 billion.
Since the Cadillac tax is basically unadministrable in its current form, we can’t imagine there is even one person at Treasury who would champion it. Expect a full repeal of the tax shortly after a new administration, whether Republican or Democrat, takes office in January 2017.
2. Medical Device Excise Tax Suspended for 2016 and 2017 and Health Insurance Tax Suspended for 2017. The Affordable Care Act, as adopted in 2010, imposes an excise tax equal to 2.3% of the sales price of certain medical devices. Opponents of the medical device tax argued that it has been a drain on the economy and has halted investment in research and development for life-saving technologies. Many members of Congress agreed. Thus, a two-year suspension, with a price tag of $3.3 billion, became part of the holiday appropriations law.
The health insurance tax (again, as originally imposed under the 2010 ACA) imposed a tax on insurance companies based on net premiums written for health insurance. This tax has been passed through to employers and insureds by the carriers. Accordingly, it has drawn criticism and a one-year moratorium on the tax was approved. The $12.2 billion price tag associated with this moratorium should lead to a corresponding decrease in health insurance premiums in 2017.
3. Parity Between Transit and Parking Benefits. The monthly limit on commuter vehicle and transit benefits which may be excluded from an employee’s income has been permanently increased to equal the same amount as qualified parking benefits. This added parity was made effective retroactive to January 1, 2015. As a result, the monthly exclusion limit on both commuter vehicle/transit benefits and qualified parking benefits is $250 for 2015 and $255 for 2016. Note that the qualified bicycle commuting reimbursement limitations remain at $20 per month.
The Act’s retroactive increase of the commuter vehicle and transit benefit limit causes administrative issues with respect to employees who have utilized this benefit in 2015 in monthly amounts above $130 (the previously-applicable 2015 limit) on an after-tax basis. Expect IRS guidance this month regarding how employers should deal with the retroactive increase in the exclusion limits.
We have been shouting the ACA reporting compliance deadlines from the rooftops for months now. Well, I guess it is a case of the “boy who cried wolf”. At the eleventh hour, the IRS has caved to a slew of complaints, concerns and continuing questions about the new (and complex) ACA reporting requirements and given employers a post-holiday present in the form of IRS Notice 2016-4. But is it too little too late? The Notice relaxes the current deadlines for those who are not ready to file (or still have unanswered questions preventing them from filing). Specifically, the Notice provides:
- an automatic 60-day extension for furnishing Forms 1095-C and 1095-B to employees, and
- an automatic three-month extension for filing the required forms with the IRS.
By “automatic”, we mean that no action is required (and nothing needs to be sent to the IRS) to avail yourself of the extension. The newly extended deadlines (for this year only) are as follows:
- The 2015 Form 1095-B and Form 1095-C (which were originally required to be provided to the insured and/or employees by February 1, 2016 (paralleling the W-2 timeframe)) are now not due to be furnished until March 31, 2016.
- The 2015 Forms 1095-B and Form 1095-C (which were originally required to be filed with the IRS by February 29, 2016) are now not due to be filed with the IRS until May 31, 2016 (for filings other than electronic filings).
- For health coverage providers and employers filing electronically, the filing date with the IRS is extended from March 31, 2016, to June 30, 2016. As a reminder, groups that file 250 or more returns are required to file electronically.
In the recent guidance, the IRS strongly encouraged those who are ready to meet the deadlines (without availing themselves of the transition relief/extensions of the Notice) to file and furnish the forms on time. The IRS remains poised to accept filing beginning in January 2016. Note that since this relief provides automatic extensions for those who need it, no further extensions will be granted by the IRS (i.e., no extensions will be granted beyond the extensions described above). Any previously filed extension will not be formally addressed (or granted).
Those who cannot meet the newly extended deadlines are still encouraged to file and furnish ASAP. The IRS will consider “reasonable cause” when determining whether to abate any otherwise applicable penalties for late filing or furnishing.
A little breathing room for employers… Phew. Now back to work.