Health Care Reform
2015 Archive

December 22, 2015

President Obama Signs Omnibus Appropriations Bill Delaying Cadillac Tax, Suspending HIT and Medical Device Tax; Adopting Changes to Parking and Transit Benefits and Mammogram Screenings

On Dec. 18, 2015, President Obama signed HR 2029, which served as the vehicle for both the Consolidated Appropriations Act, 2016 (House Amendment #1) and the Protecting Americans from Tax Hikes Act of 2015 (House Amendment #2). While the legislation primarily served as a general omnibus bill addressing appropriations and tax policies, the two amendments contain several items of importance to employers sponsoring employee benefit plans.

Consolidated Appropriations Act, 2016 (House Amendment #1)

Cadillac Tax
House Amendment #1 includes a two-year delay of the so called “Cadillac tax,” which is a 40 percent excise tax on the high cost of health plans, found in IRS Code Section 4980I. Specifically if the monthly cost of an employee’s applicable employer-sponsored health coverage exceeds a threshold of $850 ($10,200 annually) for self-only coverage, or $2,292 ($27,500 annually) for coverage other than self-only, the excess benefit amount will be taxed at 40 percent. The tax was previously scheduled to be effective in 2018, but this amendment delays the effective date of the Cadillac tax to 2020. Importantly, the tax was previously a nondeductible expense to employers but the amendment makes the tax deductible to employers.

The amendment also includes a provision allowing potential adjustments to the age and gender parameters outlined in the law. Congress will study and hear reports on other possible benchmarks for the Cadillac tax’s age and gender adjustment, rather than the current reference to the Federal Employees Health Benefit Plan. To that end, the legislation includes a requirement that the Comptroller General of the United States provide a report within 18 months to Congress on appropriate age and gender adjustments in consultation with National Association of Insurance Commissioners (NAIC).

While employers don’t need to take immediate action as a result of this delay, it’s welcome relief for many employers who expected to be impacted by the tax in 2018 when it was originally effective. NFP’s Benefits Compliance team will continue to monitor and report on future developments with respect to the Cadillac tax.

HIT Tax
A second provision within House Amendment #1 provides for a one-year moratorium on the annual fee on health insurance providers, known as the HIT tax. The tax, enacted through Section 9010 of PPACA, will be suspended from Jan. 1, 2017, through Dec. 31, 2017. This tax applies only to insurers and excludes self-insured plans, although it does apply to limited-scope dental, vision and retiree-only plans. While the delay of this tax doesn’t require any employer action, employers may see a decrease in costs since most insurers passed the fee onto the plan through rate increases.

Mammogram Screenings
House Amendment #1 also suspends implementation of the 2009 recommendations made by the United States Preventive Services Task Force (USPSTF) with respect to breast cancer screening, mammography and prevention until Jan. 1, 2018. As a reminder, recommendations by the USPSTF with an A or B rating must be covered with zero cost-sharing for participants in a non-grandfathered employer-sponsored health plan. Therefore, employers sponsoring non-grandfathered group health plans would follow the 2002 recommendations related to breast cancer screening, mammography and prevention until Jan. 1, 2018.

Protecting Americans from Tax Hikes Act of 2015 (House Amendment #2)

Medical Device Tax
Section 4191 of the IRS Code imposed an excise tax on the sale of certain medical devices by the manufacturer or importer of the device. The tax applied to sales of taxable medical devices beginning Jan. 1, 2013. The tax was 2.3 percent. House Amendment #2 suspends this provision for two years, which means that the tax will not apply to sales beginning Jan. 1, 2016, through Dec. 31, 2017.

Parking and Transit Passes
Finally, House Amendment #2 includes a provision to restore parity to the tax exclusion for parking and mass transit benefits. Under current law, the qualified parking exclusion limit is $250 per month and the transit pass limit is $130 per month. In 2016, the qualified parking exclusion limit increases to $255 per month, but there was no similar increase for transit passes. This amendment provides for indefinite parity for parking and transit passes, setting both limits at $250 per month for 2015 and increasing both to $255 per month in 2016, rather than the short-term fixes provided in prior years. The effective date for this provision is Jan. 1, 2015.

In order for the extension to be effective retroactive to Jan. 1, 2015, expenses incurred for months beginning after Dec. 31, 2014 by an employee for employer-provided vanpool and transit benefits may be reimbursed (under a bona fide reimbursement arrangement) by employers on a tax-free basis to the extent they exceed $130 per month and are no more than $250 per month.

Questions about any of these legislative developments should be directed to your advisor.

HR 2029 »
House Amendment #1 »
House Amendment #2 »
White House Press Release »

IRS, DOL and HHS Issue Important Guidance for Employers Covering Wide Range of Issues

On Dec. 16, 2015, the Departments of the IRS, DOL and HHS jointly issued guidance in the form of Notice 2015-87, addressing a variety of important issues affecting employers sponsoring group health plans. The notice includes 26 questions and answers divided into six parts. Part II of the notice contained guidance jointly issued by the three departments, while Parts III-VI address provisions only under the jurisdiction of the Treasury and IRS. A brief summary of each section, along with effective dates of the issues discussed in the notice is provided below.

Part II: HRAs and Coordination with Individual Coverage, Group Health Plans and Employer-Funded Health Care Arrangements

Six questions and answers are included within this section, which provide additional clarity on Health Reimbursement Arrangements (HRAs).

Question 1 states that if an HRA is only available to retirees or former employees, and fewer than two current employees are covered on the plan, then the HRA will be considered an excepted benefit and may be used to purchase individual coverage. However, the availability of the HRA will preclude a participant from receiving a premium tax credit in the exchange.

Question 2 explains that an HRA that covers two or more participants who are current employees (a nonexcepted benefit) cannot reimburse individual coverage premiums for individuals once they terminate employment and cease to be covered by the employer-sponsored group plan. Since the HRA is not an excepted benefit (it is available to current employees) then it will fail to be integrated with another group plan if it is available to be used to purchase individual coverage.

Question 3 discusses the ability of a participant to use funds previously credited in an HRA before Jan. 1, 2014 to reimburse medical expenses under the terms of the HRA in place prior to Jan. 1, 2014 without causing the HRA to fail the market reforms. Since the reimbursement of individual coverage was prohibited effective Jan. 1, 2014, this FAQ is essentially allowing the reimbursement of individual policy premiums using HRA funds credited before Jan. 1, 2014.

Question 4 is a new development, as the Departments are taking the approach that an HRA is only available to individuals who are enrolled in both the HRA and the employer’s group health plan. In other words, an employee who has self-only coverage cannot request reimbursement for medical expenses for a spouse or dependents since the employee does not have family coverage through the employer. The Departments suggest designing eligibility for the HRA to be continuously tied to individuals covered under the employer’s group health plan, so that eligibility for expense reimbursement will automatically adjust when an employee makes a mid-year election change for coverage. Since this is a change from prior guidance, the IRS is allowing a transition period to comply with this provision. As such, the IRS will allow HRAs to continue to reimburse expenses of family members not enrolled in the employer’s other group health plan based on the terms of the plan as of Dec. 16, 2015 (the date of the notice) for plan years beginning before Jan. 1, 2017. However, the notice clarifies that the employer is responsible under Section 6055 to report the coverage as minimum essential coverage for each individual who received reimbursements from the HRA but was not enrolled in the employer’s group health plan.

Question 5 further expands on previous guidance issued in IRS Notice 2013-54 and clarifies that HRAs and employer payment plans may reimburse individual market coverage consisting solely of excepted benefits such as limited purpose dental or vision coverage. Two examples illustrate the application of this. In the first example, the HRA is designed to only reimburse excepted benefit coverage. However, in the second example, the HRA is not designed to only reimburse excepted benefit coverage, but the employee is reimbursed for a policy consisting of only excepted benefits. Under this second example, the plan design would violate market reforms. Thus, the HRA or any employer payment plan reimbursing premiums for individual coverage for active employees must include limitations such that reimbursements are only available for individual market coverage for excepted benefits.

Question 6 clarifies that an employer arrangement reimbursing the cost of individual market coverage under a cafeteria plan is an employer payment plan, which as previously clarified under IRS Notice 2013-54 is a group health plan for purposes of market reforms and is expressly prohibited.

Part III: Employer Mandate Considerations When Employer Offers HRAs, Flex Credits, Cash-out, or Fringe Benefit Payments under McNamara-O’Hara Service Contract Act or Davis-Bacon (Questions 7-17)

Question 7 discusses how contributions to an HRA are taken into account for purposes of whether an applicable large employer (ALE) has made an offer of affordable, minimum value coverage. The FAQ also clarifies that employer contributions to an HRA which can be counted towards affordability should be determined ratably for each month of the period to which it relates.

The guidance states that if the employee can use the HRA to pay premiums for an eligible employer-sponsored plan, or can use the HRA to pay premiums and receive reimbursements for cost-sharing, then amounts made available under the current plan year are counted towards the employee’s required premium contribution towards the eligible employer-sponsored plan.

However, if the employee cannot use the HRA to pay premiums for an eligible employer-sponsored plan, but can only receive reimbursements for cost-sharing, then the amount available under the HRA is not counted towards premium contribution towards the eligible employer-sponsored plan, but rather is counted towards minimum value.

Question 8 discusses how flex contributions to a cafeteria plan are taken into account for purposes of determining whether an ALE has made an offer of affordable, minimum value coverage. Whether employer flex contributions may be taken into account depends on the nature of the contribution.

  1. If the amount cannot be received as a taxable benefit, the employee may use the amount to pay for minimum essential coverage, and the employee may use the amount exclusively to pay for medical care, then it will be considered a health flex contribution and the amount will reduce the employee’s required contribution for affordability purposes.
  2. If the amount can be cashed out (received as cash or a taxable benefit) or used for non-health care benefits such as group term life insurance or dependent care, then it is not considered a health flex contribution and the amount cannot be used to reduce the employee’s required contribution for affordability purposes.

Therefore, employers who have a flex credit arrangement in their cafeteria plan design must carefully determine whether they will be able to apply the health flex contribution towards the employee’s affordability calculation. Employers who offer a cash-out arrangement within their cafeteria plan should see the discussion for Q/A-9, below.

Question 9 discusses arrangements where an employer provides for a cash-out/opt-out payment if an employee declines participation in the employer-sponsored group plan. Importantly, the IRS is clarifying what NFP Benefits Compliance has suspected, which is that the amount of the cash-out available to the employee must be added to the amount of the employee’s contribution for health coverage for purposes of determining whether coverage is affordable to the employee.

  • Example: An employer offers employees group health coverage through a cafeteria plan and requires employees who elect self-only coverage to contribute $200 per month toward the cost of that coverage and offers an additional $100 per month in taxable wages to each employee who declines the coverage. The offer of $100 in additional compensation has the economic effect of increasing the employee’s contribution for the coverage. In this case, the employee contribution for the group health plan would effectively be $300 ($200 + $100) per month, because an employee electing coverage under the health plan must forgo $100 per month in compensation in addition to the $200 per month in salary reduction. As such, the full $300 employee contribution would be used when determining if coverage is affordable for this employee.

The IRS intends to propose regulations addressing situations like this where there is an unconditional opt-out payment conditioned solely on the employee declining coverage under the plan. It is anticipated that the proposed regulations will also address and request comments on the treatment of opt-out payments that are conditioned not only on the employee declining employer-sponsored coverage but also on satisfaction of additional conditions (such as the employee providing proof of having coverage provided by a spouse’s employer or other coverage). The IRS expects any regulations will be effective prospectively, following the issuance of regulations.

However, if an employer does not currently offer a cash-out option for declining coverage, if they put one in place after Dec. 16, 2015, then they will need to include the mandatory opt-out amount as part of the employee’s required contribution when calculating affordability of coverage. For this purpose, an opt-out arrangement is treated as adopted after Dec. 16, 2015 unless:

  1. The employer offered the opt-out arrangement for a plan year including Dec. 16, 2015
  2. A board, committee or similar body or an authorized officer of the employer specifically adopted the opt-out arrangement before Dec. 16, 2015, or
  3. The employer previously provided written communications to employees on or before Dec. 16, 2015 indicating that the opt-out would be offered to employees in the future.

If an employer satisfies these requirements and previously had an opt-out payment in place, then the opt-out payment will not be treated as increasing the employee’s required contribution for affordability purposes.

Question 10 addresses employer payments for fringe benefits made pursuant to the McNamara-O’Hara Service Contract Act, the Davis-Bacon Act, or the Davis Bacon Related Acts (the “Acts”). Because of the unique nature in the way these workers may be paid under these Acts, the IRS recognizes that there are difficulties complying with the employer mandate affordability requirements. As such, the IRS will continue to consider how the requirements under these Acts and the employer mandate will be coordinated. In the meantime and until further guidance is issued (and for plan years beginning before Jan. 1, 2017) employer fringe benefit payments (including flex credits or flex contributions) that are available to employees covered by the Acts to pay for coverage under an eligible employer-sponsored plan (even if alternatively available to the employee in other benefits or cash) will be treated as reducing the employee’s required contribution for participation in that eligible employer-sponsored plan for purposes of Penalty B, but only to the extent the amount of the payment does not exceed the amount required to satisfy the requirement to provide fringe benefit payments. In addition, for these same periods an employer may treat these employer fringe benefit payments as reducing the employee’s required contribution for purposes of reporting under Section 6056 (Form 1095-C), subject to the same limitations that apply for purposes of Penalty B. Employers are, however, encouraged to treat these fringe benefit payments as not reducing the employee’s required contribution for purposes of reporting under Section 6056.

Question 11 encourages employers using relief from Questions 8 through 10 (described above), to notify employees that they may need updated information about their required contributions and should contact the employer using the telephone number provided on the Form 1095-C. Because the amount reported by the employer as the employee’s required contribution will be a lower amount, the employee may actually need further information and could be eligible for a premium tax credit.

Question 12 clarifies that the IRS intends to amend the employer mandate regulations to reflect that the applicable percentage in the affordability safe harbors should be adjusted so that employers may rely upon the 9.56 percent for plan years beginning in 2015 and 9.66 percent for plan years beginning in 2016.

Question 13 provides the adjusted amounts of the employer mandate penalties for 2015 and 2016.

2015
Penalty A is $2,080, Penalty B is $3,120

2016
Penalty A is $2,160, Penalty B is $3,240

Question 14 discusses the definition of “hour of service” and clarifies that there is no 501-hour limit on the hours of service required to be credited to an employee. It also clarifies whether to count hours of service if an individual is receiving short-term or long-term disability payment. It will depend on how the payments are made and whether the employee contributed directly or indirectly towards those payments.

Question 15 extends the rules concerning rehired employees of educational institutions to employees of staffing agencies, when the employee is primarily performing services for one or more educational institutions. The IRS felt this rule was needed due to educational institutions attempting to avoid application of the existing rules by using a third-party staffing agency for certain services such as bus drivers and cafeteria workers. Because the staffing agency is not an educational organization subject to the special rule, the staffing agency could apply the lookback measurement method or the rules on new hires to treat some or all of these individuals as failing to be full-time employees or as new employees after a break in service of less than 26 weeks. However, the IRS intends to amend the employer mandate regulations to expand the special rules related to educational institutions to also apply to any employee providing services primarily to one or more educational organizations.

Questions 16 and 17 discuss treatment of AmeriCorps members and offers of coverage under TRICARE for purposes of the employer mandate.

Part IV: Employer Mandate Application to Governmental Entities, Information Reporting for Large Employers under Section 6056 and Impact of Recent Law Changes to HSA Eligibility for Persons Eligible for VA Benefits
(Questions 18-20)

Relating to governmental entities, Question 18 clarifies that the aggregation rules for determining whether employers are a single employer do not specifically address application to governmental entities. The IRS clarifies that governmental entities must apply a reasonable, good faith interpretation of the employer aggregations rules for purposes of determining whether a government entity is an ALE or ALE member, subject to the employer mandate and information reporting requirements. The IRS does state that if a government entity is subject to the reporting requirement, either as an ALE or because it has employees receiving self-insured health coverage, then each separate employer entity must use its own EIN for purposes of the reporting requirements. Accordingly, Question 19 states that separate Forms 1094-C (Transmittal of Employer Provided Health Insurance Offer and Coverage Information Returns), must be filed by each employer that is an ALE member of an applicable large employer group, and each Form 1094-C must have a separate EIN that is the EIN of the ALE member filing the form.

With respect to individuals who are eligible to receive medical benefits administered by the Department of Veterans Affairs (VA), the recent Surface Transportation Act made changes to the eligibility of these individuals to contribute to an HSA. Question 20 provides for administrative simplification by stating that any hospital care or medical services received from the VA by a veteran who has a disability rating from the VA will be considered to be hospital care or medical services for service-connected disability. As such, an individual who has actually received this care, or preventive care or disregarded coverage from the VA will not be disallowed from making HSA contributions.

Part V: Application of COBRA Continuation Coverage Rules on Unused, Carryover Amounts in a Health FSA
(Questions 21-25)

With respect to COBRA participants, first, any carryover amount must be included in determining the amount of benefit that a qualified beneficiary is entitled to receive during the remainder of the plan year in which the qualifying event occurs. Second, the COBRA premium maximum of 102 percent does not include unused health FSA amounts carried over from prior years. The applicable premium for COBRA is based solely on the employee’s salary reduction for the year, plus any nonelective employer contribution. Third, if similarly situated non COBRA beneficiaries are able to carryover unused amounts from the health FSA, COBRA participants must be allowed to do the same. The difference is that COBRA beneficiaries do not need to be allowed to elect additional salary reduction amounts.

A Health FSA may be designed such that an individual is only permitted to carry over unused amounts if they also participate in the health FSA the following plan year. A health FSA may also be designed to limit the ability to carry over unused amounts to a maximum period, subject to the $500 limit. For example, the limit could be one year.

Part VI: Relief from Penalties for Employers showing a Good Faith Effort under Section 6056 Reporting (Question 26)

This Q/A provides relief from penalties for employers who file an incomplete or incorrect return or furnish an incomplete or incorrect return to employees in 2016 for the calendar year 2015. The key is that the ALE must be able to show a good faith effort to comply with the information reporting requirements.

If you have questions about any of the newly released guidance, please contact your advisor.

Notice 2015-87 »

IRS Finalizes Regulations Related to Premium Tax Credits and Minimum Value

On Dec. 18, 2015, the IRS released final regulations related to premium tax credit eligibility and minimum value for employer-sponsored plans. The regulations were released simultaneously with IRS Notice 2015-87 and address many of the same issues. For example, the regulations clarify that new amounts contributed to an HRA reduce an employee’s required contribution for coverage if the employer sponsors both the medical plan and the HRA and that the employee may use the funds to pay premiums for a primary medical plan. An example of this would be an HRA that is integrated with a major medical plan, but the employer does not permit employees to make premium contributions on a pre-tax basis through a Section 125 cafeteria plan. This is an important clarification for an employer who sponsors an HRA and is trying to determine whether its offer of coverage is considered affordable for employer mandate purposes.

Also in conjunction with IRS Notice 2015-87 (see related article above), the final regulations clarify that an employer’s flex contributions to a Section 125 cafeteria plan will not reduce an employee’s required contribution for affordability purposes if the employee is able to choose to receive the flex contribution as taxable compensation.

Further, the final regulations provide guidelines regarding premium tax credit eligibility. As a reminder, an individual is eligible for a premium tax credit if they have household income between 100 percent and 400 percent of the federal poverty line and are not eligible for minimum value, affordable coverage from an employer. The regulations clarify that a parent’s modified adjusted gross income (on which premium tax credit eligibility is based) includes a child’s gross income, tax-exempt interest and nontaxable Social Security income.

With regard to wellness program rewards, the regulations finalize the proposed regulations without significant changes. If the wellness program is related to cessation of tobacco use and the reward is provided in the form of reduced premium contributions, the plan may use the lower employee required contribution amount to determine affordability for all full-time employees. If the plan is not related to cessation of tobacco use, the employer must determine affordability for all full-time employees based on the higher contribution amount.

The regulations are effective Dec. 18, 2015 and generally applicable to taxable years ending after Dec. 31, 2013.

Final Regulations »


December 15, 2015

IRS Provides Guidance Related to Obergefell Ruling

On Dec. 9, 2015, the IRS issued Notice 2015-86, which provides guidance related to the tax treatment of same-sex spouses following the June 2015 Supreme Court ruling in Obergefell v. Hodges. As background, the Obergefell case requires a state’s civil marriage laws to apply to same-sex spouses on the same terms and conditions as opposite-sex spouses. Prior to this ruling, in June 2013, the Supreme Court ruled in U.S. v. Windsor that same-sex spouses who were married under applicable state law would be recognized for federal tax purposes.

While a group health plan is not required to offer coverage to spouses, if it does the employer plan sponsor should review the terms of eligibility. The notice states that if the plan defines an eligible spouse based on applicable state law and the state has expanded the definition to include same-sex spouses, the plan must offer coverage to same-sex spouses as of the date that the state law changed.

In regards to Section 125 cafeteria plans, if the plan began offering coverage to same-sex spouses in the middle of a plan year, this is considered a change in coverage due to a significant improvement in coverage, which is an optional qualifying event. An employee is permitted to change his/her election mid-year based on this event. Please note that like many Section 125 qualifying events, this event is optional for employers and must be provided for in the Section 125 plan document.

If the cafeteria plan did not previously provide for this qualifying event (changes following a significant improvement in coverage), the plan may be amended. The amendment must be adopted by the last day of the plan year in which same-sex spouses became eligible for coverage or the last day of the plan year which included Dec. 9, 2015, whichever is later.

The notice further clarifies that a qualified retirement plan is not required to make additional changes to its terms or operation as a result of the Obergefell ruling. The plan should have already been amended following the Windsor ruling to recognize same-sex spouses. A plan may be amended to provide new rights or benefits to participants with same-sex spouses. An amendment must be adopted by the end of the plan year in which it is effective. In the case of a government plan, the deadline for an amendment is the end of the plan year in which it is effective; or the last day of the next regular legislative session beginning after the amendment is effective, whichever is later.

IRS Notice 2015-86 »

Proposed Notice of Benefit and Payment Parameters for 2017 Released

On Dec. 2, 2015, HHS released the Proposed Notice of Benefit and Payment Parameters for 2017. The notice, published in the Federal Register, includes proposed changes which would have wide-sweeping effects on health insurance plans offered both through and outside of the health exchange marketplace. Topics addressed in the proposed regulations include:

  • Marketplace Open Enrollment. The open enrollment period for the individual marketplace would be from Nov. 1, 2016 through Jan. 31, 2017.
  • Network Adequacy (Cost Sharing). The regulations propose that issuers must count the cost sharing charged to the enrollee for certain out-of-network services (provided at an in-network facility) toward the enrollee’s annual limitation on cost sharing. The exception to this requirement would be if the issuer provides 10 days’ notification to the enrollee that the provider may be out-of-network and that the enrollee may incur additional costs. This proposal aims to limit “surprise bills” to consumers.
  • SHOP. The proposed regulations add a third option for employees using SHOP coverage. Under this third option, employers would have the option of offering all plans across all actuarial value levels from one issuer, known as “vertical choice.” The SHOP currently offers employers a “horizontal choice” of all plans available at a selected actuarial coverage level. Comments are also sought on whether states with a federally facilitated SHOP should have the opportunity to decide whether additional models of employee choice should be made available in their state. SHOPs in all states would continue to be required to permit employers to offer a choice of all QHPs at a single level of coverage.
  • Small Employer Definition. Consistent with the PACE Act, the proposed regulations revise the definition of small employer to 50 employees, with an option for states to extend the cutoff to 100 employees. This definition applies for small/large group market delineations and establishes eligibility for the SHOP, which is open only to small employers until 2017 when states can choose to extend SHOP eligibility to large employers.
  • Special Enrollment Periods (SEP). The proposed regulations seek comment on whether special enrollment periods are subject to abuse. An amendment is also proposed that would allow the health insurance marketplace to cancel or retroactively terminate enrollment if it is determined that the enrollment was made due to fraudulent activity.
  • State Exchange Hybrid. The proposed regulations introduce a new hybrid exchange model, referred to as a “State-Based Exchange on the Federal Platform (SBE-FP),” under which a state exchange would enter into an agreement to use the eligibility and enrollment platform and information technology infrastructure of the federally facilitated exchange.
  • Student Health Insurance Plans. The regulations propose to subject issuers of student health insurance plans to the single risk pool index rating methodology, although they may establish one or more separate risk pools for each college or university, provided the risk pools are based on a bona fide school-related classification and not based on a health status related factor. Also, the regulations propose to eliminate the requirement for student health insurance plans to offer coverage within specific metal levels, and instead would require student health insurance plans to offer an actuarial value of at least 60 percent.
  • Minimum Participation and Contribution Rules. The regulations propose eliminating the enrollment window for small employers (November 15-December 15) in states which choose to expand the small group market to include employers with up to 100 employees. The concern is that in such states, many employers would be subject to the employer mandate requirements but unable to purchase coverage for their employees on a guaranteed issue basis outside of the enrollment window. In recognition of this dynamic, the proposed rule would allow states to prohibit small group issuers from restricting the availability of small group coverage based on employer contribution or group participation rules. Comments are requested on this issue.
  • Notice of Employee Enrollment in Subsidized Exchange Coverage. Exchanges are currently required to notify an employer when one of its employees is determined to be eligible for advance premium tax credits. The proposed regulations would change that requirement so notice is given only when an employee actually enrolls in this type of subsidized coverage. As a reminder, employer shared responsibility penalties are triggered when a full-time employee enrolls in subsidized coverage through an exchange, so being notified only that an employee is eligible for subsidized coverage does not provide employers with all the information they need.
  • Out-of-pocket (OOP) Maximum. For 2017, the proposed OOP maximum is $7,150 for self-only coverage and $14,300 for family coverage. This is an increase from the 2016 OOP maximums of $6,850 for self-only and $13,700 for family.
  • Transitional Reinsurance Contributions. The transitional reinsurance program is ending, as it was only intended to operate from 2014 through 2016. However, the proposed regulations decrease the attachment point for the 2016 benefit year in order to pay out any remaining contribution amounts in an equitable manner for the 2016 benefit year. HHS believes it is necessary to expend all remaining reinsurance contribution funds in order to promote nationwide premium stabilization and market stability.

This is a brief summary of major topics discussed within the proposed regulations which may be of interest to employers. The rule also discusses many topics of interest to issuers, navigators, brokers and others working with exchanges which are not discussed in detail in this article. HHS is accepting comments on the proposed regulations through Dec. 21, 2015.

Proposed Regulations »
HHS Fact Sheet »

IRS Publishes Health Care Tax Tips

The IRS occasionally publishes Health Care Tax Tips to help employers and individuals understand how PPACA may affect their taxes. There have been multiple tips published since our last edition of Compliance Corner. Here is a brief listing of those tips and the information conveyed.

  • Health Care Tax Tip 2015-77, Understanding the Different Types of 2015 Transition Relief Under the Employer Shared Responsibility Provisions – Released Nov. 24, 2015, this tax tip described the transition relief available for 2015 for applicable large employers who met certain requirements.
  • Health Care Tax Tip 2015-78, Health Care Law: Tax Considerations for Employers with Fewer than 50 Employees – Released Dec. 1, 2015, this tax tip discussed how various provisions of PPACA apply to employers with less than 50 employees.
  • Health Care Tax Tip 2015-79, Answers to Five of Your Questions about the Premium Tax Credit – Released Dec. 3, 2015, this tax tip answers five questions that the IRS frequently hears from taxpayers concerning the premium tax credit. This tip provides excellent information for employees looking to receive a premium tax credit.
  • Health Care Tax Tip 2015-80, Eight Things ALEs Should Know about Information Reporting and Health Coverage offers – Released Dec. 8, 2015, this tax tip provides broad information on reporting offers of coverage under Section 6056, including links to the Forms 1094-C and 1095-C, their instructions, and FAQs.
  • Health Care Tax Tip 2015-81, Why the Number of Your Employees Matters – Released Dec. 10, 2015, this tax tip offers a brief reminder of how the size of an employer is important when determining the provisions of PPACA that are applicable to that employer. The tip also provides a link to information for employers of all sizes.

Health Care Tax Tips – Current Month »


November 17, 2015

U.S. Supreme Court Grants Certiorari on Birth Control Opt Out; HHS Refines Process

On Nov. 6, 2015, the U.S. Supreme Court agreed to review the accommodation that the government offered nonprofit religious organizations to excuse them from complying with the regulatory requirement to provide contraceptive coverage without cost-sharing to their employees. As background, several lawsuits were filed claiming that the accommodation violates the Religious Freedom Restoration Act (RFRA). The U.S. Court granted certiorari (meaning they will review the decision) for seven lawsuits in which federal courts of appeal had previously rejected claims that the accommodation violates the RFRA. The cases come from the U.S. Court of Appeals for the Second, Third, Fifth, Sixth, Seventh, Tenth and District of Columbia Circuits.

Under the religious organization accommodation, self-insured religious nonprofits (including universities, hospitals and charities) that object to covering contraceptives must notify HHS or their TPA of their objection. In turn, at the direction of the DOL, the TPA becomes liable to provide the contraceptives at no cost to covered individuals. The process for the TPA to be reimbursed for that cost is somewhat convoluted. Specifically, to receive payment for the contraceptive coverage provided, the TPA must contract with an insurer that markets coverage through the federally facilitated marketplace (FFM). The insurer pays the TPA, and then the FFM reduces the user fee that the insurer would otherwise pay. The insurer also receives an additional 15 percent administration fee for the service, which it can share with the TPA. Thus, the federal government—via the FFM, insurer and TPA—pay the cost of contraceptive coverage for employees of religious organizations.

Following the U.S. Supreme Court’s grant of certiorari, on Nov. 9, 2015, HHS released a series of FAQs regarding the operation of the existing accommodation at www.regtap.info (which requires a user name and password registration). Specifically, the FAQs clarify that Pharmacy Benefit Managers (PBMs) are treated the same as TPAs. That means a PBM can also—through insurers that participate in the FFM—obtain reimbursement for providing contraceptive coverage to participants of self-insured religious organization plans. TPAs and PBMs that covered contraceptives in 2014 were generally required to submit a “Notice of Intent Disclosure Form” by Jan. 1, 2014 (or by the 60th day after the TPA/PBM received a self-certification from a religious nonprofit or a notification from the DOL). However, to provide additional time, the FAQ gives TPAs and PBMs until Nov. 13, 2015, to submit the form. Further, although FFM-participating insurers were supposed to submit forms and information to receive the user fee adjustments for 2014 by Jan. 1, 2015, the FAQ states that insurers can submit the forms and information until Dec. 11, 2015.

The remaining FAQs discuss the specifics of the reimbursement and information collection requirements which primarily apply to insurers, PBMs and TPAs. NFP Benefits Compliance will continue to report on this issue as it evolves. Self-insured religious nonprofit groups currently offering benefits to employees should consult with legal counsel concerning the possible implications of the Supreme Court’s decision.

Certiorari Granted »
CMS Fact Sheet »
HHS Frequently Asked Questions »

Departments Publish Final Regulations on Several PPACA Provisions

On Nov. 13, 2015, the IRS, DOL and HHS (the departments) jointly published final regulations on several PPACA provisions, including grandfathered plans, pre-existing condition exclusions, coverage rescissions, lifetime and annual limits, dependent coverage, appeals processes and other patient protections. The departments previously issued interim final or other regulatory guidance on these provisions. The final regulations adopt most of the previous guidance without substantial change. Below is a short overview of the changes and clarifications made by the final regulations.

On grandfathered plans, the regulations confirm that grandfathered status is determined separately with respect to each benefit package available under a group health plan. The regulations also provide the example (outlined in a previously published DOL FAQ) of a group health plan that offers three benefit package options (PPO, POS and HMO): each of those options is treated as a separate benefit package and if any one of them ceases grandfathered status, it will not affect such status of the other benefit packages. The regulations also codify other previously published DOL FAQs, including those relating to grandfathered status disclosure notices (for which the DOL has model language), anti-abuse rules and changes that will cause a loss of grandfathered status.

On pre-existing condition exclusions and coverage rescissions, the final regulations retain the approaches taken in interim final regulations and codify other guidance without substantial change.

On annual and lifetime limits, the regulations clarify some issues relating to the definition of “essential health benefits” (EHB) (to which the annual and lifetime limit prohibitions apply). First, the regulations re-emphasize that annual and lifetime limits on EHBs are generally prohibited, regardless of whether such benefits are provided on an in-network or out-of-network basis. In determining the definition of EHB itself, previous guidance suggested that plans can use a state’s benchmark plan as a guide and that they may use a reasonable interpretation of the term “EHB.” For self-insured and large group plans (not required to provide EHB but required to eliminate annual/lifetime limits on the EHBs they do provide), the regulations state that the departments’ interpretation that a reasonable interpretation includes only those EHB base-benchmarks that in fact have been selected (as opposed to all those that have been authorized). In addition, the regulations state that three base-benchmark plans (the three largest Federal Employee Health Benefits Program (FEHBP) available to all federal employees nationally) may also be used (which can be helpful for plans that have employees spread out across the country and not situated only in a single state). So, self-insured and large group plans may select among any of the 51 EHB base-benchmark plans selected by a state (or the District of Columbia) and the FEHBP base-benchmark plan in determining which benefits cannot be subject to annual/lifetime limits.

The final regulations also codify the general exemption from annual/lifetime limits prohibitions for health FSAs and for HRAs and other account-based plans that are integrated with group coverage. The regulations codify the ways in which an HRA may be ‘integrated’ with group coverage. In addition, the regulations confirm and codify that stand-alone HRAs (those not integrated with group coverage) are subject to the prohibitions, and will generally not satisfy them.

On dependent coverage, the final regulations confirm that a plan cannot impose a surcharge or provide different coverage to older children (up to age 26). In addition, although many plans (primarily HMOs) restrict eligibility to participants who live or work within the plan’s service area, such plans cannot impose such a restriction on dependent children. That said, the plan does not have to cover services outside the service area. Also, although some hoped that the departments would clarify whether ‘dependent’ in this context includes foster or stepchildren, the regulations do not address the issue. Finally, since they are no longer applicable, several provisions were removed from the final regulations: the special enrollment opportunity for previously aged-out dependent children and the special rule that allows grandfathered plans to exclude eligibility for dependent children with other coverage available.

On appeals processes, most of the changes are very technical, and too detailed to cover here. But at a high level, on internal reviews, the regulations emphasize that the DOL claims procedure continues to apply and describe several rules relating to providing evidence relating to a claim. On the culturally and linguistically appropriate standard, the regulations confirm that plan notices related to benefit decisions must include a one sentence statement in a non-English language if at least 10 percent of a county’s residents have literacy in the same non-English language (and once a participant requests a notice in a non-English language, all subsequent notices must be provided automatically in that language). On external reviews, the regulations also outline the federal review process and describe prohibited fees.

On patient protections, the regulations clarify that plans may impose geographical limitations on which a doctor or participant chooses as a primary care physician. And, women of all ages may receive obstetrical and gynecological care without prior authorization or referral. On out-of-network cost sharing, the regulations address balance billing. Specifically, when determining the amount to be paid on out-of-network emergency claim, the plan must pay the median amount negotiated with in-network providers for the emergency service, the amount calculated using the same method the plan uses to determine payments for out-of-network services, or the amount that would be paid under Medicare (whichever is greatest). However, if a state prohibits balance billing, the plan does not have to comply with those payment guidelines.

Lastly, the final regulations apply for plan years beginning on or after Jan. 1, 2017. Until then, plans may rely on previous guidance.

Final Regulations »
Federal Register »


November 3, 2015

CMS Publishes FAQs on PACE Act

On Oct. 19, 2015, CMS issued FAQs addressing the impact of recent legislation that amended the definition of “small employer” for purposes of health care reform’s insurance market. As covered in the Oct. 20, 2015 and Oct. 6, 2015 editions of Compliance Corner, the Protecting Affordable Coverage for Employees (PACE) Act was signed into law Oct. 7, 2015, defining “small employer” as one that employed an average of 1-50 employees during the preceding year. The law includes a provision allowing states the option to extend the definition of “small employer” to 1-100. Without the legislation, the definition of small employer would have been 1-100 in all states beginning Jan. 1, 2016.

The FAQs released by CMS attempt to clarify how some market provisions will be affected by the change, and outlines certain actions that may be required of states. For example, states electing to extend the small employer definition to up to 100 must do so uniformly, to all health insurers in the state, including those in the SHOP. States electing this option must have notified CMS by Oct. 30, 2015 for a Jan. 1, 2016 effective date.

CMS also clarifies the breadth of the PACE Act, stating that the definition of small employer is relevant for many purposes, including MLR, risk corridors and risk adjustment reporting. The guidance states that a transition period is in place allowing insurers to use a 1-100 definition of small employer for 2015 MLR purposes, but the 1-50 definition must be used in subsequent years. Importantly, the legislation does not affect employee counting methods which apply for these purposes.

Due to the fact that the SHOP enrollment began Nov. 1, 2015, CMS did not have enough time to change the eligibility screens on healthcare.gov to incorporate instances where a state has elected to extend the small group size up to 100. As a result, the SHOP eligibility questions will prompt an employer to answer whether they have 1-50 employees, and CMS will work to update the questionnaire as quickly as possible once the state elections are made. Insurers are asked to notify CMS if they believe an employer group with too many employees has incorrectly enrolled in the SHOP.

Finally, please note that the implementation of the PACE Act does not in any way alter the PPACA employer mandate that requires an employer with 50 or more full-time equivalent employees to offer an affordable, minimum value plan or face penalties.

FAQs »

DOL Publishes FAQs on PPACA and MHPAEA Implementation

On Oct. 23, 2015, the DOL published FAQs about Affordable Care Act Implementation (Part XXIX) and Mental Health Parity Implementation which provide guidance on the coverage of preventive services, testing for the breast cancer susceptibility gene (BRCA), wellness programs and the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).

Questions 1-8 address various issues related to the coverage of preventive services. As background, PPACA requires non-grandfathered group health plans to provide in-network preventive services without cost sharing. Clarifications made by the FAQs include:

  • Network information, including which lactation counseling providers are in-network, needs to be provided in the applicable SBC and SPD
  • Cost-sharing cannot be assessed for out-of-network lactation counseling if no in-network option is provided
  • Licensing of a lactation specialist cannot be an in-network requirement if the state does not require such licensing
  • Plans cannot limit lactation services without cost-sharing to inpatient services only
  • Plans are required to cover the rental or purchase of breastfeeding equipment (without cost-sharing) for the duration of breastfeeding (meaning there is not a specified time period by which the equipment must be procured)
  • A plan subject to the preventive services provision cannot contain an exclusion for weight management services
  • Specialist consultations prior to a colonoscopy and pathology exams following the colonoscopy must be covered without cost-sharing

Question 9 also relates to the coverage of preventive services and outlines the methods for employers utilizing the religious accommodation related to the provision of contraceptive services. For qualifying non-profit or closely held for-profit employers with sincerely held religious objections to providing contraceptive services, two methods may be used to relieve the employer from providing such coverage:

  • Complete the EBSA Form 700 (accessible here) and provide it to the plan’s third party administrator; or
  • Provide appropriate notice of the objection to HHS (model notice available here).

Question 10 addresses which women must receive coverage without cost sharing for genetic counseling and, if indicated, testing for harmful BRCA mutations. As background, one of the preventive services required to be provided without cost sharing is screening for women who have a family history of breast, ovarian and other cancers that predispose them to harmful mutations of the breast cancer susceptibility genes BCRA 1 or BCRA 2. The FAQ clarifies that women found to be at an increased risk due to family history must receive coverage without cost sharing for genetic counseling and, if indicated, testing for harmful mutations. This is true whether or not the woman has previously been diagnosed with cancer, as long as she is not currently symptomatic or receiving cancer care.

Question 11 addresses wellness programs and establishes that non-financial incentives (i.e. gift cards, thermoses and sports gear) are subject to the wellness program regulations. In other words, if a plan provides a reward (even one that is non-financial in nature) based on an individual satisfying a health standard, then the wellness program regulations are implicated, including the requirement to provide a reasonable alternative standard for those not able to meet the health standard.

Questions 12 & 13 relate to disclosures associated with MHPAEA. As background, MHPAEA requires group health plans and health insurance issuers to ensure that financial requirements such as co-pays, deductibles and treatment limitations such as visit limits applicable to mental health or substance use disorder (MH/SUD) benefits are no more restrictive than the predominant requirements or limitations applied to substantially all medical/surgical benefits. These FAQS clarify that a plan, upon request, can provide a summary description of the medical necessity criteria for both MH/SUD benefits and medical/surgical benefits that is written to be understandable to a layperson.

FAQs »

Automatic Enrollment Repealed

On Nov. 2, 2015, President Obama signed HR 1314, the Bipartisan Budget Act of 2015. The bill includes the repeal of PPACA’s automatic enrollment provision which was to apply to employers who sponsor a group health plan and have more than 200 full-time employees. Those employers were to implement a procedure to automatically enroll full-time employees in the group health plan with an opportunity to subsequently opt out of coverage. PPACA did not include an effective date. The provision had been on hold since PPACA’s passage in March 2010.

The repeal of the automatic enrollment requirement is expected to generate $7.9 billion in revenue based on the assumption that fewer employees will enroll in group health plan coverage, which leads to a higher amount of employee wages subject to taxes. Additionally, some who would have been automatically enrolled may go without coverage and therefore be responsible for an individual mandate penalty.

HR 1314 »
White House Press Release »


October 20, 2015

President Signs PACE Act into Law

On Oct. 7, 2015, President Obama signed HR 1624, the Protecting Affordable Coverage for Employees (PACE) Act, into law, creating Public Law No. 114-60. As reported in the Oct. 6, 2015 edition of Compliance Corner, the PACE Act repeals the mandated small group expansion from groups of up to 50 employees to groups of up to 100 employees. Now that the President has signed this legislation, it is up to the states to determine how to respond.

Some states have adopted the proposed PPACA definition of small employer as up to 100 employees into their state insurance codes. For those states, it will be difficult to revert to the 50 employee definition without state legislative action. Other states did not amend their state insurance code, but looked at the issue as a regulatory matter, with many state insurance departments issuing bulletins regarding the transition to small group status for 51-100 employers. As a result of the PACE Act, some states are rescinding their bulletins, issuing new clarification, or posting FAQs to clarify the state’s position. State action as a result of the PACE Act will be reported in the state section of this and future Compliance Corners).

Further, it remains to be seen whether insurance carriers, who have already filed rates for 2016, will be able to react quickly enough for employers in the 51-100 category who wish to continue to buy coverage as a large group (and not subject themselves to certain health care reform requirements, such as community rating and covering essential health benefits). Thus, both action from state regulators and carriers will have a big impact on the actual implementation of the law, which is effective immediately.

Just before publication of this edition of Compliance Corner, CMS released a set of FAQs on the PACE Act and its effect on the states. We’ll report on the FAQs in more detail in the next edition of Compliance Corner. The FAQ is linked below.

CMS FAQs »
Public Law No. 114-60 »
White House Press Release »

PCOR Fee Increased for 2015-2016 Plan Years

On Oct. 13, 2015, the IRS released Notice 2015-60, which announces that the adjusted applicable dollar amount for PCOR fees for plan and policy years ending on or after Oct. 1, 2015 and before Oct. 1, 2016 is $2.17. This is a $.09 increase from the amount in effect for plan and policy years ending on or after Oct. 1, 2014 but before Oct. 1, 2015.

As a reminder, PCOR fees are payable by insurers and sponsors of self-insured plans (including sponsors of HRAs). The fee does not apply to excepted benefits such as stand-alone dental and vision plans or most health FSAs. The fee is, however, required of retiree-only plans. The fee is calculated by multiplying the applicable dollar amount for the year by the average number of lives. The fee is reported and paid on IRS Form 720, which has not yet been updated to reflect the increased fee. It is expected that the Form will be updated prior to July 31, 2016, since that is the first deadline to pay the increased fee amount for plan years ending between October and December 2015.

IRS Notice 2015-60 »

HHS Provides Reinsurance Contribution Filing Guidance for 2015

On Oct. 1, 2015, CMS announced that the 2015 reinsurance contribution submission form is now available, as well as the revised manual. As a reminder, sponsors of self-insured group health plans must submit their 2015 annual enrollment count and schedule their reinsurance contribution payments through www.pay.gov by Nov. 16, 2015. Self-insured plans administered in-house by the employer with no third party administrator are exempt from the fee.

The contribution amount is $44 and may be made in two installments, due Jan. 15, 2016 and Nov. 15, 2016. Alternatively, an employer may make a single payment by Jan. 15, 2016.

A welcome change for 2015 is that those filing for a single employer plan are not required to complete and submit the CSV supporting documentation file.

CMS has released a 12-page Quick Start Guide, which will be a helpful first step for employers seeking information on how to file. Web-based training is also available.

Lastly, in a recent FAQ (ID 13662), CMS clarified that once a submission is completed, an employer cannot cancel the filing and resubmit because they discover that an alternative counting method yields a lower enrollment count. An employer may use any of the available methods to determine the annual enrollment count, but may not change methods after the filing deadline.

CMS Annoucement »
2015 ACA Transitional Reinsurance Program Submission Form Manual »
CMS Quick Start Guide to the 2015 Transitional Reinsurance Form »
2015 Reinsurance Contributions Form Completion and Submission Interactive Web-based Training »
REGTAP FAQ ID: 13662 »


October 6, 2015

Congress Passes Legislation to Keep ‘Small Employer’ Definition at 50 or Fewer Employees

On Oct. 1, 2015, the US Congress passed HR 1624, called the “Protecting Affordable Coverage for Employees (PACE) Act.” The PACE Act repeals the mandated small-group expansion from groups of up to 50 employees to groups of up to 100 employees. As background, many of PPACA’s insurance mandates, including certain restrictions on insurance premium rating, apply to ‘small’ employers, a term that has traditionally been defined by the states. However, PPACA included a provision to change the definition of small employer from 1-50 to 1-100 employees effective Jan. 1, 2016. PACE repeals that PPACA-mandated definition, meaning states can continue to define small employers and groups as they see fit. Thus, unless a state has expanded its definition of small employer, PPACA’s insurance mandates would not apply to employers in the 51-100 group in that state.

Practically speaking, passage of the PACE Act creates new questions. For example, many employers in the 51-100 group, in an attempt to delay PPACA’s rating restrictions (and associated premium increases), are contemplating or are already proceeding with an early renewal in 2015. CMS previously blessed early renewal (prior to Oct. 1, 2016) as a way to delay PPACA’s small group mandates, so long as state regulators and carriers allowed it. Employers that chose early renewal may no longer be subject to PPACA’s small group restrictions.

In addition, while some states have adopted the new PPACA definition into their state insurance codes, others have not. Many state insurance departments have also issued bulletins on transition to small group status for 51-100 employers. It remains to be seen whether adoption states will also repeal the new definition and whether state regulators will react. Importantly, the PACE Act has not yet been signed by President Obama, and is therefore not yet officially law. Because the law had major bipartisan support, most anticipate the president will sign it. Assuming he does, action from state regulators and carriers will have a big impact on its actual implementation.

Once the PACE Act is signed, small group employers should work with carriers and advisors in determining appropriate next steps.

HR 1624 »

IRS Publishes New Webpage for ALEs with Information on Employer Mandate and Reporting

On Sept. 17, 2015, the IRS released a new webpage entitled “ACA Information Center for Applicable Large Employers (ALEs)” which provides ALEs with information and resources to assist with informational returns required under IRC Sections 6055 and 6056.

As a reminder, self-insured employers with fewer than 50 full-time employees (including equivalents) are required to file Forms 1094-B and 1095-B to comply with Section 6055 (meant to assist the government in enforcing the individual mandate). ALEs (including
self-insured, fully insured and uninsured) for the current calendar year are employers with 50 or more full-time and full-time equivalent employees on average during the prior year and must file Forms 1094-C and 1095-C to comply with Section 6056 (meant to assist the government in enforcing the employer mandate). Employers filing 250 or more forms must file with the IRS electronically. Employers filing fewer than 250 forms may either file by paper or electronically. Those filing electronically must report 2015 data by March 31, 2016.

The new webpage includes the following sections:

  • What’s Trending for ALEs
  • How to Determine if You are an ALE
  • Resources for Applicable Large Employers Outreach Materials

The new webpage also includes links to:

  • Detailed information about tax provisions, including information reporting requirements for employers
  • Questions and answers
  • Forms, instructions, publications, health care tax tips, flyers and videos

ALEs should be taking steps now to prepare for reporting in early 2016. Understanding the complex employer mandate and reporting requirements is important and NFP has resources to assist. Ask your advisor for more information.

ALE Webpage »

D.C. Federal Court Enjoins Enforcement of MEC Requirement Related to Fixed Indemnity Insurance

On Sept. 11, 2015, the US District Court for the District of Columbia, in Central United Life v. Burwell (2015 WL 5316779 (D.D.C. 2015)), enjoined HHS from enforcing a requirement that fixed indemnity insurance is only an excepted benefit if the purchaser attests they have MEC.

As background, fixed indemnity plans are generally exempt from PPACA’s mandates, including the requirement to cover preventive-services at zero cost-sharing and the prohibition on annual/lifetime dollar limits for essential health benefits. To qualify for the exemption (i.e., to be considered an ‘excepted benefit’), the benefits must be provided under a separate policy, certificate or contract of insurance (meaning it must be fully insured). Further, there cannot be coordination between the provision of benefits and an exclusion of benefits under any group health plan maintained by the same plan sponsor. Finally, the benefits must be paid without regard to whether benefits are provided under any group health plan. Under regulations issued in 2014, HHS also provided that fixed indemnity insurance would only be considered ‘excepted’ if the individual recipient attests that they have MEC. In this case, the attestation requirement was challenged by the insurer plaintiff as exceeding HHS’s authority.

In deciding the case, the court noted that the term ‘fixed indemnity insurance’ is not defined by the statute and that the legislative history provides no guidance. While HHS has authority to interpret the statute and develop regulations in support of the statute, the court stated that HHS cannot introduce “wholly foreign concepts” in its regulations. The court concluded that the attestation clause has no basis in the statutory text and, therefore, enjoined HHS from enforcing that requirement.

Excepted benefit status is essential for fixed indemnity policies because they are designed to avoid PPACA’s mandates and insurers want to be able to sell these types of policies to individuals who have no other coverage (i.e., no other MEC). On the other hand, HHS is concerned that the public might incorrectly believe the purchase of a fixed indemnity plan will be enough to get them out of PPACA’s individual mandate penalty. Considering these competing interests, this issue is likely far from resolved.

Central United Life v. Burwell »

CMS Issues FAQs Regarding Employer Notifications of Advance Payment of Premium Tax Credit

On Sept. 18, 2015, CMS released guidance that describes the process federally facilitated exchanges and partnership exchanges using the federal platform will use to notify employers that an employee was determined to be eligible for a premium tax credit (PTC) through the exchange. Eligibility for a PTC is reserved for individuals who are neither enrolled in employer-sponsored coverage nor eligible for affordable minimum value coverage. After receipt of these notifications, employers may appeal the determinations of eligibility by asserting that either the individual was enrolled in employer-sponsored coverage or eligible for affordable minimum value coverage (assuming that is the case).

As background, PPACA requires exchanges to notify employers when an individual has been determined eligible for a PTC. Some state-based exchanges have already begun sending notifications. As a result of the CMS guidance, exchanges using the federal platform (federally facilitated and partnership exchanges) will be phasing in the employer notice requirement. In 2016, notices will be sent to employers (for whom the exchange has a complete address) whose employees received a PTC. However, they will not notify employers if an employee terminates coverage supplemented by a PTC. State-based exchanges have the same flexibility in phasing in their employer notice process. These notices will identify the specific employee and include a statement that the employee is enrolled in exchange coverage with a PTC.

The guidance clarifies that employers will still be liable for potential employer mandate penalties related to 2015 whether the exchange sent out notices or not. This is because those penalty determinations are independently made by the IRS.

An employer can appeal the eligibility determination within 90 days by mailing an appeal request to:

Health Insurance Marketplace
465 Industrial Blvd.
London, KY 40750-0061

Employers may also fax their appeal request to a secure fax line: 1-877-369-0129. The appeal request form will be available here: https://www.healthcare.gov/marketplace-appeals/.

If the appeal is successful, the exchange will send a notice to the employee encouraging them to correct their exchange coverage application. The notice will also explain that failure to update the application may result in tax liability.

CMS FAQs »

IRS Publishes Q&As on Forms 1094-C and 1095-C

On Sept. 18, 2015, the IRS issued a new set of questions and answers (Q&As) providing additional guidance on reporting using Forms 1094-C and 1095-C.

As background, PPACA requires applicable large employers to report offers of health coverage and enrollment in health coverage under IRC Sections 6055 and 6056. Under those Sections, employers must file certain forms (1094-C & 1095-C) with the IRS and distribute to employees/covered individuals either a copy of the forms or a substitute form (1095-C).

In the new Q&As, the IRS provides the following guidance on Forms 1094-C and 1095-C:

  • Basics of Employer Reporting (Questions 1-5)
  • Reporting Offers of Coverage and other Enrollment Information (Questions 6-13)
  • Reporting for Governmental Units (Questions 14-15 )
  • Reporting Offers of COBRA Coverage (Questions 16-18)

In discussing the basics of reporting, the IRS addresses the forms that must be used and the employees that must be reported on, as well as the information that must be provided to those employees.

In the section on reporting offers of coverage, the IRS details which lines on the forms should be used to reflect an offer of coverage in addition to giving guidance on which lines should be used to reflect employees who have been hired or terminated during the year. They also address how an employer will complete their authoritative transmittal if they are eligible for one of the alternative reporting methods.

The IRS also answers questions on how a governmental unit that has been designated to report on behalf of other governmental units will complete the Forms 1094-C and 1095-C.

The last section of Q&As confirms information on reporting offers of COBRA coverage, including specific information on various scenarios where COBRA is offered. This section verifies some of the COBRA reporting information that we reported on in the last edition of Compliance Corner (see the Sept. 22, 2015 edition).

Since the reporting forms are due in early 2016, employers should be tracking information now and preparing to complete the forms. NFP has resources to assist. Ask your advisor for more information.

New IRS Q&As on Forms 1094-C and 1095-C »

IRS Releases Final Guidance On Substitute Forms under IRC Sections 6055 and 6056

In September 2015, the IRS released the final version of Publication 5223 outlining rules and specifications related to the use of substitute forms under IRS Sections 6055 and 6056. (We reported the release of the draft version in the Aug. 25, 2015, edition of Compliance Corner.) As background, larger employers (those subject to the employer mandate) and employers that sponsor self-insured plans are subject to certain informational reporting requirements under IRC Sections 6055 and 6056. Under those sections, those employers must file certain forms (1095-B and 1095-C) with the IRS and distribute to employees/covered individuals either a copy of the forms or a substitute form. The reporting requirements first apply in January 2016 (reporting on the 2015 calendar year), and will continue annually going forward. Publication 5223 provides guidance for employers that want to use a substitute form to satisfy that distribution requirement.

The final version largely replicates the draft version, with a few notable exceptions. According to the final version, all data fields must be included on a substitute form. For example, it is not acceptable to furnish a Form 1095-C that does not include Part III. Furthermore, while filers are allowed to truncate identification numbers of recipients of the recipient statement and are allowed to truncate the identification number of the employer in Part II of Forms 1095-B provided to recipients, the filer’s EIN may not be truncated on the recipient statement. Furthermore, truncation is not allowed on any documents filed with the IRS. Lastly, maximum penalties associated with the filing of unacceptable substitute forms were increased.

Employers should review the publication to understand how the IRS views the requirements related to distribution of substitute forms under IRC Sections 6055 and 6056.

Publication 5223 »


September 22, 2015

IRS Finalizes 2015 Forms 1094, 1095 and Instructions

The IRS recently finalized the 2015 versions of Forms 1094-B, 1095-B, 1094-C, 1095-C and related instructions.

There were no changes to Forms 1094-B and 1095-B compared to the 2015 draft versions. However, the instructions clarify the Section 6055 reporting requirements for individuals who are covered under more than one type of MEC. Employers who sponsor a group medical plan along with an HRA should understand their reporting responsibility, as follows:

  • An employer who sponsors a fully insured medical plan and an HRA has no Section 6055 reporting requirement for those employees that have elected coverage under both. If an employee has waived coverage under the medical plan and elected the HRA (for example, because they are enrolled in a spouse’s medical plan), the employer would still have a Section 6055 reporting requirement for the HRA coverage for that employee. An employer with fewer than 50 full time employees (FTEs), including equivalents, would report the coverage on Form 1095-B, while an employer with 50 or more FTEs (including equivalents) would report the coverage on Part III of Form 1095-C.
  • An employer who has a self-insured medical plan and an HRA has a Section 6055 reporting requirement for any employee who elected coverage under either plan. Obviously, they have a reporting requirement for any employee who elected coverage under the self-funded medical plan. But they would need to remember to report any employee who waived the medical, but elected the HRA (for example, because they are enrolled in a spouse’s medical plan). An employer with fewer than 50 FTEs (including equivalents) would report on Form 1095-B, while an employer with 50 or more FTEs (including equivalents) would report on Part III of the Form 1095-C.

There were no changes to the Forms 1094-C and 1095-C compared to the 2015 draft versions. The instructions, however, contain several changes.

The biggest change relates to the reporting of COBRA coverage. The IRS had previously reported, through guidance posted to their website, that an employer with 50 or more FTEs had Section 6056 reporting obligations for a terminated FTE who elected COBRA coverage. The COBRA coverage was to be reported on Line 14 of Form 1095-C as an offer of coverage. The new guidance changes this requirement significantly. An employer has no Section 6056 reporting requirement for employees who have terminated employment and elected COBRA. For the months following the termination of employment, the employer will use code 1H on Line 14 of Form 1095-C to indicate no offer of coverage and code 2A on Line 16 to indicate that the employee was not employed during the month. If an active employee is on COBRA (for example- a part time employee who is no longer eligible for coverage but still employed), the employer will still need to report the COBRA continuation as an offer of coverage by completing Lines 14 through 16 accordingly.

Other changes include a clarification that when determining size, an employer should disregard an employee for any month in which the employee has coverage under TRICARE or the Veterans Administration. This is to comply with previously enacted legislation.

Lastly, when determining the count of total employees for Column (c) of Form 1094-C, employers now have a fifth option. They can determine the number of employees on the 12th of each month. This is in addition to the four existing counting methods: The first day of the month, the last day of the month, the first day of the first pay period of the month and the last day of the first pay period of the month.

2015 Form 1094-B »
2015 Form 1095-B »
2015 Instructions for Forms 1094-B and 1095-B »
2015 Form 1094-C »
2015 Form 1095-C »
2015 Instructions for Forms 1094-C and 1095-C »

IRS Publishes Guidance on IRC Section 6055 Informational Reporting of MEC

On Sept. 16, 2015, the IRS published Notice 2015-68. The notice announces the IRS’s intent to propose regulations under IRC Section 6055 addressing several different issues, and also invites comments on those issues. As background, PPACA’s individual mandate requires all U.S. citizens to be enrolled in MEC or pay a tax. “MEC” is defined to include an employer-sponsored plan, a government-sponsored plan (such as Medicare, CHIP and TRICARE) and any individual plan (such as a qualified health plan offered via a state health insurance exchange). To assist the federal government in enforcing the individual mandate, IRC Section 6055 requires any entity that provides MEC to report to the IRS listing all individuals (including taxpayer identification numbers (TINs) and months of coverage) covered under the MEC plan. In addition, such an entity must provide a copy of the report to the covered individual (which the individual files with the IRS in order to show they have MEC).

Generally speaking, responsibility for Section 6055 reporting falls on the insurer in the fully insured context and on the employer in the self-insured context. Section 6055 reporting is performed on a calendar year basis, with the first reports due in early 2016 (reporting on 2015 compliance). It will be completed using Forms 1094-B and 1095-B (except for a large self-insured employer, which would complete its reporting using Forms 1094-C and 1095-C). The IRS previously released those forms and instructions.

Notice 2015-68 indicates that the IRS plans to propose regulations that would clarify several issues relating to the Section 6055 reporting requirements. Among the clarifications that apply to employers, the IRS intends to propose that statements (i.e., copies of the forms filed with the IRS that are distributed to covered employees) reporting coverage under an expatriate health plan may be furnished in electronic format unless the recipient affirmatively refuses to consent or requests a paper statement. That rule would apply for expatriate coverage issued or renewed on or after July 1, 2015. In addition, with respect to supplemental coverage, the notice states that reporting will not be required for MEC that supplements or provides benefits in addition to other MEC, so long as the primary and supplemental coverage have the same plan sponsor or the coverage supplements government-sponsored coverage (such as Medicare).

Lastly, the notice states that self-insured employers will not be subject to penalties for failure to report a TIN, so long as the employer makes appropriate requests (called ‘solicitations’) for the TIN. The initial solicitation must be made at an individual’s first open enrollment or, if already enrolled on Sept. 17, 2015, the next open enrollment period. The second solicitation must be made at a reasonable time thereafter. The third solicitation must be made by December 31 of the year following the initial solicitation. If the employer makes (or is in the process of making) those solicitations, it should report the employee’s birthdate (rather than their TIN). Employers need not solicit a TIN from an individual whose coverage is terminated.

Comments must be submitted by Nov. 16, 2015.

Notice 2015-68 »

IRS and Treasury Officials Provide Informal Views on Health Care Reform Issues

On May 8, 2015, the IRS and Treasury officials made an oral presentation at the Tax Section’s Employee Benefits Committee meeting. During that presentation the IRS held a Q&A session. The Joint Committee on Employee Benefits (JCEB) of the American Bar Association has created a report on the IRS responses during the Q&A session. The report includes unofficial, nonbinding remarks about health care reform, 401(k) plans and other topics.

Of particular interest are the health care reform Q&As. Although the responses in the JCEB report have not been reviewed by the IRS and do not represent official IRS policy, they provide helpful guidance on how the IRS might respond to certain issues. Here is a short summary of the four Q&As:

  • Section 4980H - Determining Full-Time Status (Q/A-21). This two part question focuses on an employee who is identified as full-time under the look-back measurement method and takes an unpaid leave of absence. The IRS officials stated that, for an employee who earns full-time status through a standard measurement period for the following stability period, the employer may treat the employee as a new hire upon their return to work if they took an unpaid leave of absence that lasts for at least 13 consecutive weeks (no hours of service). The officials also stated that employees classified as full-time during a stability period will not automatically lose full-time status during (so long as they remain employed) or after an absence of 13 consecutive weeks. Their employment must be terminated during the leave to lose full-time status, but if they are rehired within 13 weeks of termination, they resume full-time status as a continuing employee for the remainder of the stability period.
  • Section 4980H – Monthly Measurement Method (Q/A-22). This question addresses the categorization of an employee as variable hour. The officials stated that, a new employee’s status as variable or non-variable hour is determined based on the employer’s reasonable expectations at the time of hire. Generally, employees expected to average at least 30 or more hours per week at the time of hire should be categorized as full-time. According to Q/A-22, the regulations do not provide for recategorization of a new full-time employee to variable-hour status. Thus, properly categorizing new employees upon hire is vital since a new full-time employee must stay in that category until completion of the full standard measurement period.
  • Section 4980H – Monthly Measurement Period/COBRA Application (Q/A-23). This question discusses an employee who is identified as full-time under the look-back measurement method and then transfers to a part-time position with an offer of COBRA. This employee loses coverage upon transfer to the new part-time position because a standard measurement period has not been completed. The IRS officials stated that after the transfer the employee’s status as a full-time employee must still be determined on the basis of hours of service in each calendar month (monthly measurement) because the employee has not been employed for a full standard measurement period when the employment status changed. Additionally, the officials noted that if the employee has full-time hours for any given month, the employer’s offer of COBRA coverage counts as an offer of coverage for employer mandate purposes. However, this offer of coverage must still be affordable and provide minimum value. It was also noted that, to avoid the risk of penalty under the employer mandate, the employer could offer subsidized COBRA coverage to satisfy an affordability safe harbor.
  • Section 6056 Reporting – Lines 14 and 16 of Form 1095-C (Q/A-24). The officials confirmed that employers completing Form 1095-C must enter a code for every month on line 14 (or in the “All 12 Months” box if the same code applies for all 12 months), even if that entry is to indicate that no coverage was offered. Line 16 may be left blank if none of the series 2 codes apply under the circumstances (no other exclusions from the assessable employer mandate penalty for a given month with respect to that employee).

As employers prepare for reporting in early 2016, understanding the complex employer mandate requirements is important. NFP has resources to assist. Ask your advisor for more information.

JCEB Report »

CMS FAQ on SBC and Coverage Online Posting of Policy and Certificate of Coverage

On Sept. 8, 2015, CMS issued a frequently asked question (FAQ) related to the SBC final regulations. The FAQ guidance includes an extension under which issuers must make group certificate of coverage documents relating to SBCs accessible online.

As background, on June 12, 2015, the DOL, IRS and HHS (collectively, the Departments) issued final regulations on the SBC and uniform glossary requirements under PPACA. The final regulations were published in the Federal Register on June 16, 2015. While the final regulations essentially finalized the language of the proposed regulation with no changes, the Departments did make a few clarifications. One such clarification concerns the requirement for issuers to include a web address where participants can review and obtain a copy of their individual coverage policy or group certificate of coverage. Specifically, the final rule clarifies that issuers in the group market can provide a sample certificate of coverage until the actual certificate is executed by the plan sponsor. The web address must be included beginning the first day of the first open enrollment period beginning on or after Sept. 1, 2015, for SBCs provided to individuals who enroll or re-enroll in a group health plan through open enrollment.

In the current guidance, CMS acknowledges that some insurers are having difficulty making group certificates of coverage accessible by the applicability dates because of the volume of documents that must be made available and because this is the first time for this process. Thus, CMS will not take enforcement action against an issuer that cannot meet the online accessibility requirement, if it makes group certificate of coverage documents accessible online by Nov. 1, 2015. The extension is limited to the requirement to make group certificates of coverage accessible online and does not apply to any other requirements under the SBC final regulations.

For employers with open enrollment periods prior to Nov. 1, 2015, this means that the insurer still has to provide a timely SBC, but is not required to post the SBC on its website until Nov. 1, 2015. The SBC that is provided must still include the web address of where the document will be posted in the future.

CMS FAQ »


September 8, 2015

IRS Issues Guidance Regarding ‘Minimum Value’ of Employer-Sponsored Health Coverage

On Aug. 31, 2015, the IRS released a supplemental notice of proposed rulemaking (published in the Sept. 1, 2015 Federal Register) to be used in determining whether employer-sponsored health coverage provides minimum value (MV) for purposes of an individual’s premium tax credit eligibility. The guidance is consistent with prior IRS and HHS guidance, which states that a plan does not provide MV if it does not include coverage for in-patient hospitalization services or substantial coverage of physician services. Previously, there was a way to achieve minimum value status for a plan (through the MV calculator) without offering hospitalization and physician coverage. That loophole was closed by the IRS last year via IRS Notice 2014-69.

For employers, MV is important because it is the level of coverage an ALE must offer a full-time employee to avoid potential liability under the employer mandate. In addition, an offer of MV coverage precludes an employee from qualifying for a premium tax credit for coverage taken through the marketplace. This notice establishes that when determining premium tax credit eligibility, "an eligible employer-sponsored plan provides minimum value only if the plan's share of the total allowed costs of benefits provided to an employee is at least 60 percent AND the plan provides substantial coverage of inpatient hospital and physician services" (emphasis added). The IRS is requesting comments as to the meaning of “substantial coverage”.

The changes in this notice will generally be effective for plan years beginning after Nov. 3, 2015.

There remains a limited exception. If an employer prior to Nov. 4, 2014, had entered into an agreement with a non-hospital/non-physician services plan (or had begun enrolling employees into that plan), the plan will be considered as meeting MV for purposes of the employer mandate through the end of the plan year (so long as the plan year began by Mar. 1, 2015). Such an offer will not preclude an employee, if they are otherwise eligible, from qualifying for a premium tax credit.

The IRS is requesting comments on this notice by Nov. 2, 2015.

Supplemental Notice of Proposed Rulemaking »

CMS Releases Guidance Regarding the Transitional Reinsurance Program

On Aug. 18, 2015, CMS issued updated guidance related to the transitional reinsurance program and contributions required by PPACA. As background, group health plans are required to report reinsurance enrollment calculations to CMS annually from 2014 through 2016. The next report is due by Nov. 16, 2015 (since Nov. 15, 2015, is a Sunday). This report will be completed through https://pay.gov/public/home using the “2015 ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form” which will be made available Oct. 1, 2015. Plans will be assessed a fee per covered life. For 2015, that fee is $44. Payment is broken into two installments, with the first payment due by Jan. 15, 2016. For fully insured plans, the insurer is generally responsible for the filing and payment. For self-insured plans, the employer as plan sponsor is responsible for filing and payment.

The new guidance clarifies the calculation methods a group health plan will use when determining the number of covered lives. The calculation methods for a self-insured plan are similar to those used for PCOR fee purposes: Actual count, snapshot count, snapshot factor and Form 5500. However, while the PCOR fee takes into account the average number of covered lives over the plan year, the reinsurance fee calculates the average number of covered lives over a nine-month period (January through September), regardless of plan year. For example, a plan calculating the reinsurance contribution amount using the snapshot method will select at least one day in each of the three quarters to determine the total number of covered lives and then divide by three. The number of covered lives should be rounded to the nearest hundredth.

If an employer maintains multiple group health plans that provide coverage for the same covered lives, the sponsor may choose whether to report the enrollment count separately for each plan or combined into a single plan. If the sponsor chooses to aggregate the plans into one report, they must use the actual count or snapshot counting method if at least one plan is fully insured. If all plans are self-insured, the sponsor must use actual count, snapshot or snapshot factor method.

Reinsurance contributions are not required for individuals who have dual coverage under the group health plan and Medicare and for whom Medicare is primary. Additionally, reinsurance contributions are not required for individuals who reside in a U.S. territory.

Reporting entities must maintain documents to substantiate the enrollment count for at least 10 years. Employers that sponsor self-insured plans should review the guidance and their counting methods to ensure they are properly calculating the reinsurance contribution amount.

Transitional Reinsurance Program Operational Guidance »


August 25, 2015

Treasury, DOL and HHS Publish FAQ Regarding Proposed Transparency Reporting

On Aug. 12, 2015, the Treasury, DOL and HHS published information in the form of a frequently asked question related to transparency in coverage reporting required under PPACA. The agencies announced their intention to propose transparency reporting regulations that will apply to non-grandfathered group health plans. This reporting is separate from Sections 6055 and 6056 reporting. Non-grandfathered group health plans will be required to report information to HHS and the state insurance commissioner related to the plan’s claims payment policies and practices, enrollment data and cost-sharing requirements. More guidance is forthcoming. The reporting will not be required until after the agencies issue final regulations.

DOL FAQs About Affordable Care Act Implementation, Part XXVIII »

IRS Publishes Draft Guidance on Substitute Forms under IRC Sections 6055 and 6056

On Aug. 11, 2015, the IRS published a draft version of Publication 5223, General Rules and Specifications for Affordable Care Act Substitute Forms 1095-A, 1094-B, 1095-B, 1094-C and 1095-C. As background, larger employers (those subject to the employer mandate) and employers that sponsor self-insured plans are subject to certain informational reporting requirements under IRC Sections 6055 and 6056. Under those Sections, those employers must file certain forms (1095-B and 1095-C) with the IRS and distribute to employees/covered individuals either a copy of the forms or a substitute form. The reporting requirements first apply in January 2016 (reporting on the 2015 calendar year), and will continue annually going forward. Publication 5223 provides draft guidance for employers that want to use a substitute form to satisfy that distribution requirement.

According to the publication, the substitute form must contain all information provided on the actual form. In addition, the information must be printed in a font large enough to be easily read by the form recipient. Also, aside from the employer’s name and primary trademark or slogan, the substitute form may not include logos, slogans and advertisements since those items may detract from the importance of the tax information being reported.

The publication also states that employers may electronically distribute substitute forms to employees and covered individuals, so long as those employees/individuals provide consent to receive those particular forms via electronic delivery (and the consent itself is made via electronic means). In addition, prior to distributing the substitute form electronically, the employer must provide the form recipient with a statement that the employee/individual may request to receive a paper version of the form and that electronic consent can be withdrawn at any time (and the procedures to do so).

While the publication is in draft form and cannot yet be relied upon as official guidance, employers should review the publication to get an idea of how the IRS views the requirements relating to distribution of substitute forms under IRC Sections 6055 and 6056.

Draft Publication 5223 »

IRS Regulations Eliminate Automatic 30-day Extensions for Forms W-2, 1094 and 1095

On Aug. 12, 2015, the IRS released two sets of regulations eliminating the 30-day automatic extension for certain information returns. The purpose of these regulations is to combat refund claim fraud. Filing the returns earlier and allowing fewer extensions will allow the IRS to reconcile filings on a timely basis and determine which refund claims are legitimate. The temporary regulations specifically end automatic extensions for forms in the W-2 series (except Form W-2G), effective for returns due after Dec. 31, 2016. Additionally, the proposed regulations eliminate automatic extensions for most other information returns, including forms in the 1094 and 1095 series. Prior to these regulations, an automatic 30-day extension was available by filing Form 8809. A filer could request an additional non-automatic 30-day extension for Forms W-2, 1042-S and 8027 as well as the 1095 series, 1098 series, 1099 series and 5498 series by filing an additional Form 8809. While these combined regulations eliminate the automatic extension and restrict the circumstances under which a non-automatic 30-day extension may be granted, a filer may still apply for a non-automatic extension. However, an extension will only be granted in the case of extraordinary circumstances or catastrophe. An example cited in the regulations is a natural disaster or fire destroying the records a filer needs for filing the information returns.

The IRS is seeking comments by Nov. 12, 2015, regarding the appropriate time to remove the automatic extension available for the 1095 series, 1098 series, 1099 series, 5498 series and Forms 1042-S and 8027. Timing of the elimination of the automatic extension for Forms 1095-B and 1095-C will be important for group health plan sponsors. Currently an automatic extension for the report to the government is available (but not for the Forms 1095-B and 1095-C sent to the employee or covered individual). That extension may no longer be available starting with the 2018 filing season.

The regulations would take effect once the proposed regulations are finalized, but no earlier than the 2018 filing season.

Final & Temporary Regulations »
Proposed Regulations »


August 11, 2015

IRS Provides Possible Approaches and Requests Comments on Cadillac Tax in IRS Notice 2015‑52

On July 30, 2015, the IRS published IRS Notice 2015-52 outlining possible approaches to several “Cadillac Tax” issues. Earlier this year, as reported in the March 10, 2015, edition of Compliance Corner, the IRS published Notice 2015-16, which addressed issues such as “what is applicable coverage” and “the cost of applicable coverage.” Notice 2015-52 supplements that guidance and provides insight into how the IRS may deal with certain other Cadillac Tax issues. This most recent notice covers issues including persons liable for the tax, employer aggregation, determining the cost of applicable coverage, possible permitted adjustments to the applicable limits for age and gender demographics and notice and payment requirements.

As background, beginning in 2018, under the Cadillac Tax requirement, a 40 percent excise tax will be levied on the amount of the aggregate monthly premium for each primary insured individual (including COBRA/state continuation eligible individuals) that exceeds an annual applicable dollar limit for the employee for the month. The IRS is tasked with developing rules to determine the cost of applicable coverage, using COBRA applicable premium rules as a guide. The law specifies two base applicable dollar limits: $10,200 per employee for self-only coverage and $27,500 for other-than-self-only coverage. Multi-employer plans are treated as providing other-than-self-only coverage. To account for cost of living increases, there is a provision to adjust these base amounts in the case of excess cost increases between 2010 and 2018 and to annually adjust them post-2018. The law also allows for adjustments for qualified retirees and employers with a majority of employees engaged in high-risk professions such as installing or repairing electrical and telecommunications lines.

Generally speaking, the tax will apply to both fully insured and self-insured group plans and is not deductible for federal income tax purposes. The entity providing health coverage will be liable for the Cadillac tax. This will be coverage providers in the case of a fully insured plan, employers with regard to HSAs and the entities that administer plan benefits with regard to all other coverage for most other situations. This notice provides that the controlled group rules found in Internal Revenue Code Section 414 would generally apply for purposes of the Cadillac Tax. These are the same rules used to determine whether a controlled group exists for employer mandate purposes.

Notice 2015-52 clarifies that the excise tax and costs relating to increased income tax can be passed from coverage providers to employers. Furthermore, an income tax reimbursement formula is discussed, as is the proper allocation of contributions to HSAs, FSAs and HRAs.

Since not all employers have similar workforces, and coverage for certain segments of a workforce costs more than others (for the same level of coverage), it is possible age and gender adjustments to the Cadillac tax dollar limit (the amount above which a tax would apply) will be allowed. To accomplish this, the age and gender characteristics of the national workforce would need to be established for comparison. Once that information is gathered, it would be put into national-level tables for ease of use.

Employers will be responsible for informing coverage providers of the amount of excess benefit provided for each taxable period. The form and timing for that notice are still being developed. It is expected that the Cadillac tax will be remitted through Form 720, which is an existing quarterly excise tax filing used for several other purposes, including the filing and payment of the PCOR fee. It is likely that the IRS will designate one quarter as the Cadillac tax quarter.

While IRS Notice 2015-16 and IRS Notice 2015-52 give us insight into how the IRS may approach these issues, they are not formal regulations or guidance. When the proposed, and then final, regulations are published, many of these approaches may be included. However, many could be adjusted based upon comments received from industry coalitions, employer advocacy groups and coverage providers. Therefore, we do not recommend employers make changes to their plan design based on these notices. Making adjustments once the regulations are released is more appropriate.

The IRS invites comments on these issues. Comments are due by Oct. 1, 2015. Once comments are received and considered, the IRS will issue proposed regulations.

IRS Notice 2015-52 »

HR 3236 Affects Employer Mandate Application, HSA Eligibility and Form 5500 Filing

On July 31, 2015, President Obama signed HR 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, into law. The law includes provisions affecting the employer mandate, HSA eligibility and Form 5500 filing.

When an employer is determining their size for employer mandate purposes, they may now disregard employees who had coverage under TRICARE or a care health program through Veterans Affairs (VA) for that month. It is important to understand that these employees are only disregarded for calculating the employer’s size to determine whether the employer is subject to the employer mandate and Section 6056 reporting. If the employer is indeed subject to the employer mandate, any full-time veteran employee with TRICARE or VA coverage would still be offered minimum value, affordable coverage by the employer in order to avoid a penalty. Similarly, an employer with 50 or more full-time equivalent employees would still include a full-time veteran employee in Section 6056 reporting. This provision is effective Jan. 1, 2014. Employers close to the 50 or 100 full-time equivalent employee threshold may want to recalculate their size using at least 6 consecutive months in 2014. The result could affect whether they are subject to the employer mandate or reporting this year.

With regard to HSA eligibility, the IRS had previously provided in IRS Notices 2004-50 and 2008-59 that an employee was not eligible for HSA contributions if he/she had received medical benefits (other than preventive or permissible care) from VA in the preceding three months. The new law provides an exception in addition to the preventive and permissible care provision. Effective Jan. 1, 2016, an individual remains eligible for HSA contributions if the only care received from the VA in the preceding three months was preventive care, permissible care (i.e. dental or vision) or care related to a service-connected disability.

Lastly, plans that are subject to the Form 5500 filing must complete the filing within seven months following the end of the plan year. A two and a half month extension is available. Effective Jan. 1, 2016, HR 3236 lengthens the extension period to 3 and a half months.

HR 3236 »

IRS Releases 2015 Drafts of Reporting Instructions, Revised Forms 1095-B and 1095-C

On Aug. 7, 2015, the IRS released 2015 draft versions of Forms 1094-C and 1095-C Instructions, Forms 1094-B and 1095-B Instructions and revised 2015 drafts of Forms 1095-B and 1095-C.

The revised draft forms appear to have no substantial changes. The instructions, however, have several changes from the 2014 versions.

Most of the changes to the Forms 1094-C and 1095-C Instructions are to reflect guidance previously issued by the IRS related to reporting. As a reminder, Forms 1094-C and 1095-C are required of employers who have 50 or more full-time equivalent employees (i.e., those subject to PPACA’s employer mandate). Information provided on this forms is intended to help administer the employer mandate.

Summary of changes:

  • An employer may hand deliver the Form 1095-C to employees.
  • The penalty for failure to provide a required form to an individual and the IRS can be up to $500 per form.
  • The IRS will not impose penalties for 2015 reporting if the employer can show a good faith effort to comply.
  • Instructions have been added on how to report COBRA coverage.
  • If a plan fails to provide substantial coverage for inpatient hospitalization services and physician services, it does not constitute minimum value. It should not be reported as providing minimum value, even if it qualified for temporary relief under IRS Notice 2014-69.

The Forms 1094-C and 1095-C Instructions also include new guidance.

  • Instructions on how to submit corrected returns have been added.
  • An employer may file for an automatic 30-day extension by completing Form 8809.
  • An employer who is filing 250 or more forms and is thus required to file electronically may receive a waiver from electronic filing and file using paper forms.
  • On Part II of Form 1095-C, employers are asked to identify the plan start month. For 2015, this information is optional.
  • Employers who are relying upon the multiemployer interim rule relief should enter code 1H (no offer of coverage) on Line 14 for any month for which the employer contributes to a multiemployer plan on behalf of the employee. Code 2E should be entered on Line 16.
  • To determine the monthly employee contribution amount to be entered on Line 15 of Form 1095-C, the employer may calculate the employee’s annual contribution amount and divide by 12. This is helpful guidance for employers with 26 pay periods per year.

Similarly, the instructions for Forms 1094-B and 1095-B also have been revised to incorporate previously issued guidance from the IRS. As a reminder, these forms will be used to administer the individual mandate. A small employer with fewer than 50 full-time equivalent employees who sponsors a self-funded plan will use these forms to comply with its reporting requirements under Section 6055.

  • If an employer sponsors two group health plans providing minimum essential coverage, the employer does not have to report both coverages if the two plans have the same plan sponsor, funding mechanism (self- vs. fully insured) and the same participants. Reporting would not be required for the supplemental coverage (for example, prescription drug coverage).
  • Employers may hand deliver the Form 1095-B to covered participants.
  • The penalty for failure to provide a required form to an individual and the IRS can be up to $500 per form.
  • The IRS will not impose penalties for 2015 reporting if the employer can show a good faith effort to comply.

The instructions for Forms 1094-B and 1095-B also include new guidance.

  • For lines 10 through 15 on Form 1095-B, if the employer is a member of a controlled group or multiple employer welfare arrangement, enter the name of the covered employee’s employer. If coverage is provided through a multiemployer plan, do not complete Part II.
  • Instructions on how to submit corrected returns have been added.
  • An employer may file for an automatic 30-day extension by completing Form 8809.

2015 Revised Form 1095-B »
2015 Revised Form 1095-C »
2015 Draft Forms 1094-B and 1095-B Instructions »
2015 Draft Forms 1094-C and 1095-C Instructions »

CMS Issues Fact Sheet and FAQs Related to State Innovation Waivers

On July 22, 2015, CMS issued a Fact Sheet and a series of frequently asked questions (FAQs) related to State Innovation Waivers. As background, PPACA Section 1332 permits a state to apply for a waiver from certain provisions including a state exchange, premium tax credits, the individual mandate and the employer mandate. To apply for a waiver, the state must submit an application and supporting materials to the Secretary of HHS. Approved waivers would be effective Jan. 1, 2017.

To receive approval, the state must demonstrate an innovative way to provide access to quality health care that is at least as comprehensible and affordable and covers a comparable number of state residents as would be provided under the federal process. The state waiver must also provide coverage to a comparable number of state residents. Lastly, it must not increase the federal deficit.

While there is no direct impact to employers at this time, this issue has the potential to greatly impact employers in states that later receive approval for an innovation waiver. We will continue to monitor and report any developments.

CMS Fact Sheet and FAQs »

IRS Publishes PPACA Summary Chart for Employers

On Aug. 4, 2015, the IRS published Health Care Tax Tip 2015-46. The resource summarizes PPACA’s provisions for employers, including the Small Business Health Care Tax Credit, SHOP availability, Sections 6055 and 6056 reporting, employer mandate obligations and related transition relief. The chart identifies which provisions are available for employers based on size and also provides links to resources on each topic.

IRS Health Care Tax Tip 2015-46 »

CMS Publishes Slides Outlining Transitional Reinsurance Program Contributions for the 2015 Benefit Year, Holding Webinars on the 2015 Reinsurance Contribution Process

REGTAP is hosting a series of webinars in August and September to educate contributing entities, including plan sponsors of self-insured plans that are not self-administered.

In the first webinar, entitled "Transitional Reinsurance Program Contributions Overview for 2015 Benefit Year," REGTAP covered the following topics:

  • Overview of the Transitional RI Program
  • 2015 Contributing Entity Requirements
  • 2015 Contribution Rate
  • 2015 Key Deadlines
  • 2015 Submission Process Overview
  • 2015 Updates and Next Steps

The slide deck for that webinar is now available online at www.regtap.info.

The next webinar in the series, "The Transitional Reinsurance Program Contributing Entities and Counting Methods," will be presented Aug. 17, 24 and 31, 2015. The same material will be presented on all three dates, and attendees may register for the date of their choice. Individuals who are new to REGTAP will need to first register for a website ID and password before registering for the presentation.

Webinar Slides »
Registration Link for Upcoming Webinars »

IRS Issues Updated Draft of Publication 5164

On Aug. 5, 2015, the IRS released an updated draft of Publication 5164, entitled “Test Package for Electronic Filers of Affordable Care Act (ACA) Information Returns (AIR),” which contains general and program-specific testing information for use with ACA Assurance Testing System (AATS). The testing process information found in this publication includes who must test, Transmitter Control Code registration and criteria for passing testing.

Software developers must pass all applicable test scenarios before the software is deemed approved allowing them the ability to communicate with the IRS. Transmitters (a third-party sending the electronic information return data directly to the IRS on behalf of any business required to file), including issuers (health insurance issuers, sponsors of self-insured health plans or government agencies that administer government-sponsored health insurance programs), must use approved software to perform the communications test. Additionally, transmitters and issuers are only required to complete communication testing to transmit information returns to the IRS in the first year.

As a reminder, self-insured employers with fewer than 50 full-time equivalent employees are required to file Forms 1094-B and 1095-B to comply with Section 6055 of the IRC (to assist in enforcing the individual mandate). Employers (including self-insured, fully insured and uninsured) with 50 or more full-time equivalent employees are required to file Forms 1094-C and 1095-C to comply with Section 6056 of the IRC (to assist in enforcing the employer mandate). Employers filing 250 or more forms must file electronically with the IRS. Employers filing fewer than 250 forms may either file electronically or by using paper forms. Those filing electronically must report 2015 data by March 31, 2016.

Employers who file Forms 1094-B, 1095-B, 1094-C or 1095-C will want to review the guidance and familiarize themselves with the proposed filing process. Those filing electronically must use AIR and approved software. The individual responsible for electronically filing the employer’s forms will be required to register with IRS e-Services and receive an e-Services PIN which will be used to sign the electronically filed forms.

Updated Draft of Publication 5164 »


July 28, 2015

IRS Publishes Q&As on PCOR Fee

On July 10, 2015, the IRS issued a set of new questions and answers (Q&As) providing additional guidance on the PCOR fee.

As background, PPACA added the PCOR fee on health plans to support clinical effectiveness research. The PCOR fee applies to plan years ending on or after Oct. 1, 2012, and before Oct. 1, 2019. The PCOR fee is due by July 31 of the calendar year following the close of the plan year. For plan years ending in 2014, the fee is due by July 31, 2015.

Additionally, the PCOR fee is assessed based on the number of employees, spouses and dependents who are covered by the plan. For 2014 plan years ending on or before Sept. 30, 2014, the fee is $2.00 multiplied by the average number of lives covered under the plan. For plan years ending between Oct. 1, 2014, and Sept. 30, 2015, the fee increases to $2.08. The PCOR fee can either be paid electronically or mailed to the IRS with Form 720 using a Form 720-V payment voucher. According to the IRS, the fee is tax-deductible as a business expense.

In the new Q&As, the IRS provides the following guidance on the PCOR fee:

  • Basics of PCOR Fee: What it is, when it is due and how much it is (Questions 1-3);
  • Methods of calculation (Questions 4-6);
  • Who is required to report and what form is used (Questions 7-10);
  • When the PCOR fee expires (Question 11);
  • How and when to report for a short plan year (Questions 12-14); and
  • How to correct a previously filed Form 720 for overpayment or error(s) (Questions 15-16).

Some of the Q&As confirm information about the PCOR fee which we have provided in past editions of Compliance Corner (see the June 30, 2015 and July 14, 2015 editions) and on our HR & Benefits Compliance Solutions website.

There are also some helpful Q&As on exceptions to the PCOR fee (the PCOR fee does not apply to health insurance policies and self-insured plans that provide only excepted benefits, such as plans limited to vision or dental benefits and most FSAs) and on overpayments (plan sponsors cannot reduce the PCOR fee due July 31 for any overpayment from a prior year).

Other important questions addressed include:

  • How does an issuer of a specified health insurance policy or plan sponsor of an applicable self-insured health plan determine the average number of lives covered under the policy or plan in order to calculate the PCOR fee for the year?
  • If an employer provides COBRA coverage, or otherwise provides coverage to its retirees or other former employees, do covered individuals (and their beneficiaries) count as “lives covered” for purpose of calculating the PCOR fee?

PCOR fee calculations can be complex. NFP has resources to assist. Ask your advisor for more information.

New IRS Q&As about PCOR Fee »


July 14, 2015

Women’s Preventive Services Final Regulations Issued

On July 10, 2015, HHS, DOL and the Department of the Treasury issued final regulations related to women’s preventive services. The regulations finalize previously issued interim final and proposed rules from 2010 and 2014.

As background, non-grandfathered group health plans are required under PPACA to provide certain preventive care services with no cost sharing for participants. This includes contraceptive-related services for women. Religious employers, primarily limited to churches and other houses of worship, are exempt. An accommodation is available for religiously affiliated non-profit organizations. The group health plans sponsored by such organizations would still offer coverage for contraceptive services and items, but the cost would be borne by the insurer, not the participants or the non-profit organization. The organization would provide a self-certification to the insurer.

In August 2014, interim final regulations provided an alternative accommodation for non-profit organizations. To use this alternative accommodation, the organization notifies HHS of its religious objection rather than self-certifying to the insurer. HHS will coordinate with the insurer so contraceptive coverage is provided under the plan without cost to the participants or the organization. This alternative accommodation is finalized in the new regulations.

Also in August 2014, proposed regulations were issued in response to the Supreme Court’s decision in Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751 (2014). The proposed regulations expanded the availability of the accommodation to closely held for-profit entities that certify their religious objection to providing contraceptive coverage.

The final regulations define a closely held entity as one that is not a non-profit entity; has no publicly traded ownership interests and has more than 50 percent of its ownership interest directly or indirectly owned by five or fewer individuals. Ownership interests held by certain members of a family are treated as being owned by a single individual. To take advantage of one of the two accommodations, the for-profit entity’s highest governing body (for example, board of trustees or owners) must adopt a resolution establishing its owners’ religious objections to contraceptive services.

Interestingly, the regulations also provide accommodations for entities in which the structure is “substantially similar” to one in which five or fewer individuals own 50 percent or more of the entity. An example provided of a substantially similar structure is one in which six individuals own 49 percent of the entity.

Any employer plan sponsor that believes it may qualify for an accommodation and would like to pursue it further should contact their advisor.

Final Regulations »
HHS Press Release »
HHS Fact Sheet »

IRS Notice 2015-43 Provides Interim Guidance on Expatriate Plans

On June 30, 2015, the IRS issued Notice 2015-43, providing interim guidance on the application of certain provisions of PPACA to expatriate health insurance issuers, expatriate health plans and employers in their capacity as plan sponsors of expatriate health plans.

As background, on Dec. 16, 2014, Congress enacted the Expatriate Health Coverage Clarification Act of 2014 (EHCCA). Section 3(a) of the EHCCA provides that PPACA generally does not apply to expatriate health plans. Although HHS, DOL, and the Treasury (the “Departments”) did not issue prior guidance, the EHCCA became effective for expatriate health plans issued or renewed on or after July 1, 2015.

As a result, notice 2015-43 provides additional time and guidance to expatriate health plans so they can comply with the EHCCA's requirements. This notice allows “a reasonable good faith interpretation of the EHCCA” until further guidance is issued. Specifically, until there is further guidance, defining an expatriate health plan as “an insured group health plan with respect to which enrollment is limited to primary insureds for whom there is a good faith expectation that such individuals will reside outside of their home country or outside of the United States for at least six months of a 12-month period and any covered dependents, and also with respect to group health insurance coverage offered in conjunction with the expatriate group health plan,” in accordance with the DOL ACA Implementation FAQs Parts XIII and XVIII, is generally considered a reasonable good faith interpretation of the EHCCA.

However, since the notice confirms that coverage under an expatriate health plan counts as minimum essential coverage, the reasonable good faith standard does not apply to PPACA tax reporting requirements found in IRC Sections 6055 and 6056, the PCOR fee or the Health Insurance Providers Fee (also known as the "health insurance tax" or "HIT tax"), and expatriate plans should comply with those requirements.

The IRS previously released Notice 2015-29 providing guidance addressing the application of the HIT tax to expatriate plans (see the Apr. 7, 2015 edition of Compliance Corner). However, Notice 2015-43 includes a special rule for the PCOR fee. It states, “issuers and plan sponsors are permitted to determine the PCOR fee by excluding lives covered under a specified health insurance policy … if the facts and circumstances demonstrate that the policy or plan (1) was designed and issued specifically to cover primarily employees (a) who are working and residing outside the United States, or (b) who are not citizens or residents of the United States but who are assigned to work in the United States for a specific and temporary purpose or who work in the United States for no more than six months of the policy year or plan year; or (2) was designed to cover individuals who are members of a group of similarly situated individuals.”

The IRS is seeking comments to assist with the development of proposed regulations by the Departments. Comments are due by Oct. 19, 2015.

IRS Notice 2015-43 »

Trade Legislation Increases PPACA Reporting Penalties

On June 29, 2015, President Obama signed the Trade Preferences Extension Act of 2015 into law, creating Public Law No. 114-27. Among other things, the Act increased the penalties that can be levied upon entities who fail to comply with the PPACA reporting requirements. As background, PPACA requires certain informational reporting to the IRS and to plan participants under IRC Sections 6055 and 6056.

Specifically, the Act increased the penalty for failure to file a required information return with the IRS to $250 per return, a $150 increase from the previous penalty of $100 per return. The Act also doubled the cap on the total amount of penalties during a calendar year from $1,500,000 to $3,000,000. Further, if the failures to file result in a failure on both the information return (transmittal filed with the IRS) and on the individual statement (statement distributed to employees), then the penalties are doubled. The penalties are also doubled to $500 for each failure if the failure to file is caused by intentional disregard on the part of the entity responsible for filing. In the case of intentional disregard, there is no cap on the amount of penalties that can be imposed.

The increased penalties also apply to Forms W-2 and other information returns and filings, and they are effective on reporting that is required to be filed after 2015. Keep in mind, though, that this Act does not change the IRS’s enforcement of the first year of reporting for Sections 6055 and 6056. It still will not penalize employers who have made a good faith effort to comply with the reporting requirements in 2016. However, if the IRS finds that a good faith effort was not made, it could impose the newly increased penalties.

Trade Preferences Extension Act of 2015 »


June 30, 2015

U.S. Supreme Court Holds That Premium Tax Credits Are Available for Individuals Participating in Federally Facilitated Exchanges

On June 25, 2015, the U.S. Supreme Court, in a 6 – 3 ruling in King v. Burwell, held that the IRS may promulgate regulations to extend premium tax credits (PTCs) for coverage purchased through exchanges established by the federal government under PPACA Section 1321. Therefore, PTCs remain available for eligible individuals purchasing coverage through all state exchanges, including federally facilitated exchanges (FFEs).

First available in 2014, PTCs are intended to assist individuals with paying premiums for private health coverage offered through the exchanges. IRC Section 36B, added by PPACA, explicitly states that eligible individuals may receive PTCs if they are enrolled “through an Exchange established by the State.” However, the IRS promulgated a regulation encompassing a broader interpretation of Section 36B that allows PTCs to be available in both state-established exchanges and FFEs. This led to several lawsuits against the government claiming that the IRS exceeded its regulatory authority in creating the regulation and that the explicit language of Section 36B prohibits the availability of PTCs for individuals who obtain coverage in FFEs. This is an important distinction, because approximately 6 million Americans currently receive PTCs through an FFE. In addition, PTC qualification is the event that triggers potential employer mandate penalties for employers. This decision means that those individuals will continue to receive PTCs, and that employer mandate penalties can be triggered in states with FFEs.

As background on the case, King and three other Virginia taxpayers filed suit, challenging the validity of the IRS regulation, claiming that the IRS’s interpretation regarding the availability of PTCs is contrary to the statutory language of PPACA. Specifically, the plaintiffs argued that Virginia’s FFE could not administer PTCs and, therefore, the plaintiffs would be exempt from the individual mandate due to the cost of insurance being unaffordable. The U.S. Court of Appeals for the Fourth Circuit ruled against the plaintiffs and upheld the IRS regulation as a valid exercise of agency discretion in alignment with the overall goals of PPACA.

On appeal, the Supreme Court agreed with the Fourth Circuit and the majority opinion, written by Chief Justice Roberts, held that the relevant statutory language in IRC Section 36B is properly viewed as ambiguous and subject to multiple interpretations. Focusing on the purpose and intent of the law instead of a strict reading, the Supreme Court stated that “the statutory scheme compels the Court to reject the petitioners’ interpretation because it would destabilize the individual insurance market in any State with a Federal exchange and likely create the very ‘death spirals’ that Congress designed the Act to avoid.” Therefore, the Supreme Court reasoned that the “Act’s context and structure compel the conclusion that Section 36B allows tax credits for insurance purchased on any Exchange created under the Act.” The Supreme Court also provided a few examples of areas of PPACA where it would not make sense to interpret “established by the State” to mean only state-based exchanges. As a result of the Supreme Court examining the context of the phrase within the overall purpose of PPACA, the IRS regulation stands without need for amendment and PTCs are available in states that operate under either a state or federal exchange.

Justice Scalia wrote the dissenting opinion, stating that “words no longer have meaning if an Exchange that is not established by the State is ‘established by the State.’” Justice Scalia further argued that "rather than rewriting the law under the pretense of interpreting it, the Court should have left it to Congress to decide what to do about the Act's limitation of tax credits to state exchanges" and concluded that “[w]e should start calling PPACA “SCOTUScare.”

This decision gives employers and individuals a better idea of how to plan for PPACA compliance, and its provisions will remain in effect. Specifically, larger employers should continue to comply with the employer mandate, offering coverage to all full-time employees and dependents. In addition, large employers and employers that sponsor self-insured plans must plan to comply with informational reporting requirements (beginning in early 2016, reporting on 2015 compliance).

NFP Benefits Compliance will continue to monitor these developments and will provide additional information in future Compliance Corner newsletters, as necessary.

King v. Burwell »

IRS Releases 2015 Draft Versions of 6055 and 6056 Informational Reporting Forms

On June 16, 2015, the IRS released draft versions of the informational reporting forms that employer plan sponsors and health plans will use to satisfy their obligations under Sections 6055 and 6056 of the IRC in early 2016. The IRS is currently accepting comments on the draft forms. Instructions for the forms have not yet been released.

As a reminder, Forms 1094-B and 1095-B (6055 reporting) are required of insurers providing minimum essential coverage. These reports will help the IRS to administer and enforce the individual mandate. Form 1095-B, the form distributed to the employee, will identify the employee, any covered family members, the group health plan and the months in 2015 for which the employee and family members had minimum essential coverage under the employer's plan. The employee will subsequently file the form with his/her individual tax return. Form 1094-B identifies the insurer and is used to transmit the corresponding Form 1095-B to the IRS.

Forms 1094-C and 1095-C (6056 reporting) are to be filed by applicable large employers subject to the employer mandate. These reports will help the IRS to administer and enforce the employer mandate. Employers will use Form 1095-C to identify the employer, each employee, whether the employer offered minimum value coverage to the employee and dependents, the cost of the lowest plan option and the months for which the employee enrolled in coverage under the employer's plan. Further, if the plan is self-insured, the employer will use the form to fulfill its Section 6055 reporting obligations by indicating which months the employee and family members had minimum essential coverage under the employer’s plan.

Whereas Form 1095-C reports coverage information at the participant level, Form 1094-C reports employer-level information to the IRS. An employer will use this form to identify the employer, number of employees, whether the employer is related to other entities under the employer aggregation rules, whether minimum essential coverage was offered and if the employer qualified for the 2015 transition relief for employers with 50 to 99 employees.

The draft 2015 B forms and Form 1094-C do not contain any significant changes from the 2014 versions. However, draft Form 1095-C slightly differs from the 2014 version in the following ways:

  • Plan Start Month. A new field titled “Plan Start Month” has been added to Part II and is optional for 2015. Employers may indicate the first month of the plan year or enter “00” to leave this new field out for 2015. In 2016, this field will be required.
  • Continuation Sheet. A continuation sheet has been added to Part III for employers needing to report enrollment information for more than six individuals. Note that a continuation sheet has also been added to Form 1095-B.
  • Indicator Codes. The IRS has indicated that the line 14 indicator codes that report offers of coverage are unchanged for 2015. For 2016 and beyond, two new indicator codes will be available to indicate whether an offer of coverage to an employee’s spouse is a conditional offer or not. The goal is to align reporting with eligibility for PTC. The instructions to the 2014 Form 1095-C state that for purposes of reporting, an offer to a spouse includes an offer to a spouse that is subject to a reasonable, objective condition, regardless of whether the spouse actually meets the reasonable, objective condition. Currently this treatment is for reporting purposes only and generally will not affect the spouse’s eligibility for the PTC if the spouse did not meet the condition and therefore did not have an actual offer of coverage.

Form 1094-B »
Form 1094-C »
Form 1095-B »
Form 1095-C »
Submit Comments on Draft Forms »

CMS Issues Instructions on How to Elect Federal External Review Process

On June 15, 2015, CMS released technical guidance containing instructions on electing a federal external review process within the Health Insurance Oversight System (HIOS). As background, PPACA instituted new rules concerning internal claims and appeals and external review. Specifically, if a claimant exhausts the internal appeals process, then certain circumstances allow for the claimant’s appeal to go through an external review. Plans and issuers must comply with either a state external review process or the federal external review process.

This guidance requires health insurance issuers and self-insured, non-federal governmental plans to submit information regarding their election of a federal external review process to HHS through HIOS. The guidance includes a website where current federal contractor information can be found and provides instructions for electing a federal external review process, both for new HIOS users and existing HIOS users. Further, the guidance mentions that a copy of the HIOS eternal review election module user manual is available.

Technical Guidance »

IRS Releases Resources Regarding AIR Program

On June 15, 2015, the IRS released resources to assist various entities with electronic ACA informational return (AIR) submissions of returns required under PPACA. Forms 1094-B and 1095-B (6055 reporting) are required of insurers providing minimum essential coverage. Forms 1094-C and 1095-C (6056 reporting) are to be filed by applicable large employers subject to the employer mandate. Further, employers who sponsor a self-insured plan will use the Form 1095-C to fulfill their Section 6055 reporting requirements.

Electronic filing of Forms 1094 and 1095 (both B and C) is required by high-volume filers (those who file at least 250 returns) and is optional for employers who file fewer than 250 returns. The IRS previously established the AIR working group to provide instructions about how this electronic filing must be done. The two resources the IRS released are a comprehensive AIR Submission Composition and Reference Guide as well as a webpage that walks through some of the particulars of the AIR program.

Information provided by these resources includes: the process for applying for the program, technical requirements, what testing is necessary before the actual transmission, parameters for filing and data file size limits. While these resources are very technical in nature, they will be useful to entities that are filing these returns electronically.

AIR Submission Composition and Reference Guide »
Affordable Care Act Information Returns AIR Program- Did You Know »


June 16, 2015

Departments Issue Final Regulations on SBC and Uniform Glossary

On June 12, 2015, the DOL, IRS and HHS (collectively, the Departments) issued final regulations on the SBC and uniform glossary requirements under PPACA. The final regulations were published in the Federal Register on June 16, 2015.

These regulations amend the final regulations published in February 2012 and finalize the proposed regulations published Dec. 30, 2014 (See the Jan. 13, 2015 edition of Compliance Corner).

While the final regulations essentially finalized the language of the proposed regulation with no changes, the Departments did make a few clarifications. One such clarification concerns the requirement for issuers to include a web address where participants can review and obtain a copy of their individual coverage policy or group certificate of coverage. Specifically, the final rule clarifies that issuers in the group market can provide a sample certificate of coverage until the actual certificate is executed by the plan sponsor.

Another clarification relates to reducing unnecessary duplication. Specifically, group health plans that contract with a third party can rely on that entity to provide SBCs. This provision also applies to issuers who provide coverage to students at institutions of higher education. The final rules did clarify, however, that the group health plan must still monitor the issuing entity to ensure that the SBCs are provided and that they include the proper content.

While this final regulation addresses the requirements for providing the SBC and uniform glossary, the Departments will release finalized templates of the SBC and uniform glossary by January 2016. Those templates will apply to plans starting on the first day of the plan year beginning in 2017.

The final regulations are effective on Aug. 17, 2015.

Final Rule »
Fact Sheet »

HHS Seeks Public Comments on HPID Requirement

HHS has issued a request for information seeking public comments regarding the health plan identifier (HPID) requirements, including its policy on health plan enumeration and the requirement to use the HPID in electronic health care transactions. The deadline for submitting written or electronic comments is July 28, 2015.

As background, HIPAA requires health plans to obtain an HPID, which is to be used by the plan in certain HIPAA-related transactions. The HPID is a unique identifier for the plan, similar to a taxpayer identification number—a standard number that applies in all transactions so the parties involved know the true identity of the plan. Large health plans (those with annual receipts of more than $5 million) were supposed to obtain an HPID by Nov. 5, 2014 while small health plans had an additional year to comply. On Oct. 31, 2014, HHS announced that enforcement of HIPAA's HPID requirement had been delayed indefinitely (See the Nov. 4, 2014 edition of Compliance Corner).

HHS is now soliciting public input to assess whether policy changes may be warranted. At this time, no action is needed by employers (unless they wish to submit comments). The HPID requirement remains indefinitely on hold pending further guidance from HHS.

HHS Request for Information »


June 2, 2015

IRS Publishes FAQs on PPACA Reporting

On May 19, 2015, the IRS issued a set of revised and new FAQs providing additional guidance on employer compliance with PPACA reporting requirements under IRC Sections 6055 and 6056.

As background, Section 6055 is meant to assist the government in enforcing the individual mandate (reports on coverage at the individual level). Section 6056 is meant to assist the government in enforcing the employer mandate (reports on the employer’s coverage at the employer level) and advance premium tax credit (APTC) eligibility (reports whether a specific individual was offered minimum value, affordable employer sponsored coverage for each month, which affects that individual’s ability to qualify for an APTC).

To fulfill the Section 6056 requirement, Form 1095-C is to be used by applicable large employers (ALEs) (those employers with 50 or more full-time employees including full-time equivalent employees in the preceding calendar year). Form 1094-C is to be used for transmitting Form 1095-C. Self-insured ALEs will combine Sections 6055 and 6056 reporting on Form 1095-C.

In the revised Q&As, the IRS provides the following guidance on the reporting of health care coverage by ALEs:

  • Basics of Employer Reporting (Questions 1-4);
  • Who is Required to Report (Questions 5-12);
  • Methods of Reporting (Questions 13-17); and
  • How and When to Report the Required Information (Questions 18-31).

Some of the revisions include new FAQs confirming an ALE that does not have full-time employees does not generally have to file under Section 6056, but still must comply with Section 6055 and file Form 1094-C and Form 1095-C if it sponsors a self-insured health plan in which individuals were enrolled. There are also new FAQs that provide additional guidance on delivery of Form 1095-C to an employee (confirming that ALEs can furnish by hand delivery and electronically, if certain conditions are met) and penalties that may apply if an ALE fails to comply with reporting requirements in 2017 for coverage offered in 2016 and later years.

In the new FAQs, the IRS provides more specific guidance to ALEs on how to complete the required forms, including:

  • Basics of Employer Reporting (Questions 1-5);
  • Reporting Offers of Coverage and other Enrollment Information (Questions 6-13);
  • Reporting for Governmental Units (Questions 14-15); and
  • Reporting Offers of COBRA Coverage (Questions 16-18).

Important questions addressed in this new set of FAQs are:

  • For which employees is an ALE member not required to file a Form 1095-C?
  • How should information about the offer of coverage for the month in which an employee is hired or terminates employment be reported on Form 1095-C?
  • Is an ALE member required to enter a code in line 16, Applicable Section 4980H Safe Harbor, of Form 1095-C?
  • How should an ALE member complete Part II of Form 1095-C for a full-time employee who terminates employment during a calendar year and receives an offer of COBRA continuation coverage?
  • How should an ALE member complete Part II of Form 1095-C for an ongoing employee who receives an offer of COBRA continuation coverage due to a reduction in hours?

The reporting obligations are complex. Ask your advisor for more information.

Revised Q&As on Reporting of Offers of Health Insurance Coverage by Employers (Section 6056) »
New Q&As about Employer Information Reporting on Form 1094-C and Form 1095-C »

Agencies Publish FAQs on Cost Sharing and Provider Nondiscrimination

On May 26, 2015, the DOL, HHS and the Treasury (collectively, the Departments) published FAQs (FAQs about Affordable Care Act Implementation (Part XXVII)) which provide guidance on cost sharing and provider nondiscrimination.

As background, in the final HHS Notice of Benefit and Payment Parameters for 2016, HHS clarified that the self-only maximum annual limitation on cost sharing applies to each individual, regardless of whether the individual is enrolled in self-only coverage or in coverage other than self-only. Subsequently, CMS issued several follow-up clarifications. (See the Feb. 24, 2015, March 24, 2015, and May 19, 2015 editions of Compliance Corner). However, the Departments have received numerous questions regarding the application of these clarifications to non-grandfathered self-insured and non-grandfathered large group health plans. The new FAQs appear to address many of those questions.

In Q/A-1, the Departments confirm that these clarifications apply to both non-grandfathered self-insured and large group health plans. The guidance confirms the maximum out-of-pocket expenses employers can require employees to pay before health plan coverage takes effect: $6,850 for single coverage and $13,700 for family coverage. An example illustrates how this limit will work when a family of four has family coverage with a $13,000 limit on cost sharing for all four enrollees. In the example, no individual member of the family may have cost-sharing that exceeds $6,850.

Q/A-2 clarifies that this change only applies for plan or policy years that begin on or after Jan. 1, 2016.

Q/A-3 clarifies that this change also applies to non-grandfathered HDHPs.

In a change of topics, Q/As-4 and -5 discuss provider nondiscrimination issues. As background, health care reform prohibits non-grandfathered group health plans from discriminating with respect to participation under the plan or coverage against any health care provider who is acting within the scope of that provider's license or certification under applicable state law. In Q/A-4, the Departments state that until further guidance is issued, plans and issuers are expected to implement the requirements using a good faith, reasonable interpretation of the law and that no enforcement action will be taken against a group health plan or health insurance issuer who does so.

In Q/A-5, the Departments state that a prior FAQ no longer applies. The now redacted FAQ stated that the provider nondiscrimination rule is self-implementing, and that until further guidance was issued, plans and issuers were expected to implement the requirements using a good faith, reasonable interpretation of the law. Specifically, to the extent an item or service is a covered benefit under the plan or coverage and consistent with reasonable medical management techniques specified under the plan with respect to the frequency, method, treatment or setting for an item or service, a plan may not discriminate based on a provider's license or certification to the extent the provider is acting within the scope of the provider's license or certification under applicable state law. The new Q/A-5 states that until further guidance is issued, the Departments will not take any enforcement action against a group health plan as long as the plan or issuer is using a good faith, reasonable interpretation of the statutory provision.

FAQs


May 19, 2015

CMS Provides Guidance Related to HDHPs and Out-of-pocket Maximum Limits

On May 8, 2015, CMS issued guidance in the form of an FAQ. As background, non-grandfathered plans must have a maximum out-of-pocket annual limit of $6,850 in 2016 for self-only coverage. The guidance clarifies that even if an individual is enrolled in the family-tier coverage of a HDHP with a deductible of $10,000, each individual’s eligible expenses are still limited to the $6,850 self-only OOP maximum.

CMS Memo  »

CMS Explains Emails Regarding Reinsurance Contribution Submissions

On May 12, 2015, CMS issued an FAQ regarding group health plans that received an email requesting information about their reinsurance contribution submission even if the employer, issuer, TPA or ASO contractor had already submitted a reinsurance contribution for their respective covered lives. As background, CMS contacted group health plans for which it was unable to locate an “ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form” (Form) for the 2014 Benefit Year, and requested that these plans provide information to confirm the status of their Form filing for the 2014 Benefit Year so that CMS can reconcile its records.

In the FAQ, CMS acknowledges that some email recipients may have already filed a Form directly, or had a TPA or ASO contractor file on their behalf. In addition, CMS recognizes that insured group health plans may have had their Form submitted by the issuer for the plan's covered lives.

Nevertheless, CMS requests that all email recipients complete a series of questions this webpage as soon as possible in order to resolve their filing status. If the group health plan believes a health insurance issuer, TPA or ASO contractor has successfully filed on its behalf or that they are exempt from filing, the plan is instructed to select “No” for the question “Have you completed a form filing?” By making this selection, the plan will be allowed to verify this filing information.

In order to verify filing, the plan will need to provide the Pay.gov tracking ID(s) for the Form filing. Before beginning this process, the plan can access the series of questions it must answer using this link.

Please note that if an employer does not meet the definition of “contributing entity” under 45 CFR Sec. 153.20, or if an employer believes the coverage it offers qualifies for an exemption from reinsurance contributions under 45 CFR Sec. 153.400(a), the employer will need to provide such information or select a reason for the exemption.

FAQ about CMS Emails Regarding Reinsurance Contribution Submissions  »

Agencies Publish FAQs on Preventive Services Implementation

On May 11, 2015, the DOL, HHS and the Treasury (collectively, the Departments) published FAQs (FAQs about Affordable Care Act Implementation (Part XXVI)), which provide guidance on the coverage of preventive services. As background, PPACA requires non-grandfathered group health plans to provide preventive services without cost-sharing. The new FAQs specifically give regulatory guidance concerning breast cancer (BRCA) testing, FDA-approved contraceptives, sex-specific services, well-women care for dependents and colonoscopy coverage.

Under PPACA, one of the preventive services required to be provided without cost sharing is screening for women who have a family history of breast, ovarian and other cancers that predispose them to harmful mutations of the breast cancer susceptibility genes BCRA 1 or BCRA 2. However, there was some confusion as to whether or not the requirement to offer BCRA testing and genetic counseling extended to women who had prior non-BCRA-related breast cancer, but no family history or current symptoms. The FAQs clarify that genetic counseling and BCRA genetic testing must be provided with no cost sharing to women who have had prior non-BCRA cancers as long as they have not been diagnosed with BRCA-related cancer.

Another requirement under the preventive services mandate is for plans to provide coverage for contraception without cost sharing. However, the original FAQs on contraceptive coverage also provided that plans and issuers could use reasonable medical management techniques. In the new FAQs, the Departments clarify the rules on using medical management techniques as they apply to contraceptives. Specifically, plans must cover at least one form of contraception in each of the 18 FDA methods of contraception. See the FDA Birth Control Guide for a list of the 18 methods. The Departments explicitly addressed the ring and the patch, stating that a plan cannot limit contraceptives to the pill just because other methods are also hormonal contraceptives.

The FAQs further clarified that medical management techniques can be used within each method of contraception, such that plans may discourage the use of brand name contraceptives over generics or may encourage the use of one FDA-approved item over others. Additionally, plans that utilize medical management techniques must provide an exception process that is accessible, transparent, sufficiently expedient and not unduly burdensome on the participant or their service provider.

Due to the confusion surrounding whether or not plans had to cover at least one form of contraception in each method, the Departments will apply this guidance for plan years beginning on or after 60 days from the date the FAQs were issued (July 10, 2015).

In addition, the FAQs state that plans cannot limit sex-specific recommended preventive services based on an individual’s sex assigned at birth or gender identity. For example, a mammogram or pap smear would have to be provided to a transgender man if his medical provider determines the procedures are appropriate.

The FAQs also state that the recommended women’s preventive care services also apply to dependent children. So if the medical provider of a dependent child determines that well-women visits are age- and developmentally-appropriate for the dependent, then the plan would have to cover those services with no cost sharing.

Finally, the FAQs provide that the anesthesia used during colonoscopies is also to be provided without cost sharing.

FAQs  »


May 5, 2015

U.S. Supreme Court Strikes Down Ruling on PPACA Contraceptive Mandate

On April 27, 2015, the U.S. Supreme Court granted certiorari and vacated the Sixth Circuit’s decision in Michigan Catholic Conference, et al. v. Burwell, Secretary of United States Department of Health and Human Services (2015 WL 1879768, 83 USLW 3447 (U.S. Apr 27, 2015) (NO. 14-701)). As background, the plaintiffs represented multiple nonprofit entities, all of whom are affiliated with the Catholic Church. The plaintiffs alleged that the contraceptive mandate violates the Religious Freedom Restoration Act, the Free Speech, Free Exercise and Establishment Clauses of the First Amendment and the Administrative Procedure Act.

The district courts and the Sixth Circuit each denied preliminary injunctions that would stop the government from enforcing the contraceptive mandate. The plaintiffs appealed to the Supreme Court and the court remanded the case to the Sixth Circuit for further consideration in light of Burwell v. Hobby Lobby Stores Inc. (82 USLW 3328 (U.S. Nov 26, 2013) (NO. 13-354) ( (See the July 1, 2014 Compliance Corner article entitled “U.S. Supreme Court: PPACA Contraceptive Mandate Does Not Apply to Closely Held Companies” for more information.) This is just one case in a long line of challenges to the PPACA contraceptive mandate and religiously affiliated employers may be affected by the final decision in this case. Employers should consult with legal counsel before changing their benefit plan design in regard to contraceptives.

Court Order  »

IRS Releases Draft Publication 5165 for Electronically Filing PPACA Returns

The IRS has released the draft version of Publication 5165, entitled “Guide for Electronically Filing Affordable Care (ACA) Information Returns for Software Developers and Transmitters.” Employers who file Forms 1094-B, 1095-B, 1094-C or 1095-C will want to review the guidance and familiarize themselves with the proposed filing process.

As a reminder, self-insured employers with fewer than 50 full-time equivalent employees are required to file Forms 1094-B and 1095-B to comply with Section 6055 of the IRC enforcing the individual mandate. Employers (including self-insured, fully insured and uninsured) with 50 or more full-time equivalent employees are required to file Forms 1094-C and 1095-C to comply with Section 6056 of the IRC enforcing the employer mandate. Employers filing 250 or more forms must file electronically with the IRS. Employers filing fewer than 250 forms may file by paper or electronically. Those filing electronically must report 2015 data by March 31, 2016.

Those filing electronically must use the Affordable Care Act Information Return System (AIR). The only acceptable format will be XML. The individual responsible for electronically filing the employer’s forms will be required to register with the IRS e-Services and receive an e-Services PIN which will be used to sign the electronically filed forms.

Simultaneously, the IRS released a PowerPoint presentation summarizing the process and providing answers to frequently asked questions (FAQs). In the FAQs, the IRS states that if a vendor files the Form 1094-C on an employer’s behalf, the employer is not be required to electronically sign the form. The signature requirement has been waived for the 2015 processing year.

Draft Publication 5165  »

PowerPoint Presentation »


April 21, 2015

Essential Health Benefits: List of the Largest Three Small-group Products by State

On April 8, 2015, CMS issued a list of the largest three small-group products by state, as well as a listing of the three largest nationally available Federal Employee Health Benefit Program (FEHBP) plans, based on enrollment in the first quarter of 2014.

As background, non-grandfathered plans in the individual and small group markets both inside and outside of the Marketplaces must cover essential health benefits (EHB). The PPACA provides that what actually constitutes EHBs includes items and services within ten statutorily defined benefit categories, and that the scope of these benefits shall equal the scope of benefits provided under a typical employer plan. In response, HHS previously codified regulations to allow each state to select a benchmark plan that serves as a reference, or “base benchmark plan” for what the typical employer plan includes within that state. HHS intends to use this benchmark approach at least through plan year 2017.

States can choose a benchmark plan from among the following health insurance plans:

  • The largest plan by enrollment in any of the three largest small group insurance products in the state’s small group market;
  • Any of the largest three state employee health benefit plans by enrollment;
  • Any of the largest three national FEHBP plan options by enrollment; or
  • The largest insured commercial non-Medicaid Health Maintenance Organization (HMO) operating in the state.

This report identifies the first and third bullet points, based on first quarter 2014 enrollment data self-reported by issuers of individual and small group products and collected through HealthCare.gov. The report may be useful to employers, whether operating primarily in one state or in multiple states, to compare the employer’s benefit offerings with the state’s most popular small group insurance product or one of the largest three FEHBP plan options. Note that the plans listed within the report may not accurately represent the state’s selected base benchmark plan because the default plan for a state that did not select a benchmark plan is the largest plan by enrollment in the largest product in the state’s small group market (included within the report).

CMS Report  »

IRS Releases Publication 5215: Responsibilities for Health Coverage Providers

On April 15, 2015, the IRS released Publication 5215, which is primarily directed at small self-insured employers and health insurance carriers. As background, under PPACA entities that provide health insurance coverage to individuals are required (under IRC Section 6055) to report that coverage to the IRS and to the individual. Publication 5215 is a two-page document that provides general information aimed at helping small employers and other affected entities understand the Section 6055 reporting requirements. (PPACA also requires applicable large employers—those subject to the employer mandate—to report to the IRS and individual under IRC Section 6056. The IRS previously released Publication 5196—covered in the Feb. 24, 2015, edition of Compliance Corner—as a guide for those employers.)

Publication 5215 addresses several important points, including:

  • The reporting requirement for calendar year 2015 applies to small self-insured employers that provide minimum essential coverage (MEC) to individuals. Those employers must report that coverage to the IRS and give the covered individuals information about the coverage to help them when filing their tax return. Carriers must also report on covered individuals for fully insured plans.
  • The requirements to properly report on IRS Forms 1094-B and 1095-B, including furnishing and filing due dates, what information is reported and how Form 1095s apply to reporting entities.
  • The introduction of Forms 1094-C and 1095-C, which are the forms provided to full-time employees and to the IRS to help the IRS determine if an employer or its employees potentially owe a shared responsibility payment to the IRS.
  • Types of MEC offered and identification of the MEC provider for purposes of reporting responsibility.

The reporting obligations are very complex. Publication 5215 touches on a few high points. The takeaway for all small self-insured employers is that they must track months of coverage for covered individuals during 2015, including any month for which an individual is enrolled in MEC for at least one day, as well as gather other vital information to ensure a smooth reporting process in early 2016. NFP has resources to assist. Ask your advisor for more information.

IRS Publication 5215  »


April 7, 2015

DOL Publishes New FAQ Addressing SBC Implementation

On March 30, 2015, the DOL, HHS and the Treasury (collectively, the Departments) published an FAQ (FAQs about Affordable Care Act Implementation (Part XXIV)) directed at anticipated finalization of proposed changes to the SBC regulations, template and associated documents contained in proposed regulations published in Dec. 2014.

As background, on Dec. 22, 2014, the Departments published proposed regulations amending the final SBC regulations from Feb. 14, 2012. The proposed changes are designed to improve consumer access to important health plan information, as well as to provide clarifications that will make it easier for group health plans and health insurance issuers to comply with the SBC requirement. If finalized, the Departments expected the new regulations to apply to coverage that renewed or began on or after Sept. 1, 2015.

The takeaway from the FAQ is that the Departments are going to update the template and associated documents to better meet consumers’ needs as quickly as possible, but not by Sept. 1, 2015. The Departments now expect that in the near future they will finalize changes to the regulations and those changes are intended to apply to coverage that renews or begins on or after Jan. 1, 2016.

In addition, the Departments want to utilize consumer testing and offer an opportunity for the public to provide further comments before finalization of the SBC template and associated documents. The Departments anticipate the new template and associated documents will be finalized by January 2016 and will apply to coverage that would renew or begin on or after Jan. 1, 2017.

FAQ  »

IRS Addresses Expatriate Plans and the Health Insurance Providers Fee

On March 31, 2015, the IRS published Notice 2015-29, which replaces Notice 2014-24 addressing a temporary safe harbor for certain covered entities reporting expatriate plan coverage for purposes of the Health Insurance Providers Fee (also known as the "health insurance tax" or "HIT tax").

With IRS Notice 2015-29, the IRS recognizes existing regulations issued by HHS which define expatriate policies as group health insurance policies that provide coverage to employees, substantially all of whom are 1) working outside their country of citizenship, 2) working outside their country of citizenship and outside the employer’s country of domicile, or 3) non-U.S. citizens working in their home country. This definition, used by HHS in the definition of expatriate policies for purposes of the MLR calculation, has now been adopted by the IRS for purposes of the HIT tax calculation.

As background, PPACA imposes the HIT tax on covered entities (generally insurers) engaged in the business of providing health insurance with respect to U.S. health risks. The HIT tax is payable by each covered entity for a calendar year and equals the entity's proportionate share of the aggregate amount for that year as set by statute ($8 billion in 2014 and increasing thereafter). Each entity's proportionate share is determined based on the entity's net premiums written for U.S. health risks for the previous calendar year as compared with the aggregate net premiums of all covered entities.

On Dec. 16, 2014, Congress enacted the Expatriate Health Coverage Clarification Act of 2014 (Public Law 113-235). Section 3(a) of that law provides that PPACA generally does not apply to expatriate health plans and Section 3(c)(1) specifically excludes expatriate health plans from the HIT tax by providing that, for calendar years after 2015, a qualified expatriate enrolled in an expatriate health plan is not considered a U.S. health risk. These rules are generally effective for expatriate health plans issued or renewed on or after July 1, 2015.

IRS Notice 2015-29 was issued in response to this development. The IRS will automatically adjust the 2015 fee rather than issue refunds. However, if the computation reduces the covered entity’s 2015 fee below zero and results in an amount due to the covered entity for the 2015 fee year, the IRS will pay the amount due to the covered entity.

Importantly, the fee is not assessed directly against employer plan sponsors. That said, payment of a large overall fee will likely affect premiums paid by employers who sponsor insured plans and may impact some employers' decisions about whether to self-insure. IRS Notice 2015-29 took effect March 30, 2015.

IRS Notice 2015-29  »


March 24, 2015

CMS Clarifies Interaction of Cost-sharing Limits and HDHPs

On March 16, 2015, CMS issued guidance in the form of an FAQ clarifying how cost-sharing limitations will be calculated starting with the 2016 benefit year. The 2016 out-of-pocket (OOP) limits are $6,850 for single coverage and $13,700 for family coverage. The single coverage OOP limit applies per individual even if the individual is enrolled in family coverage. In other words, the single OOP limit must be administered as an embedded limit for each family member. If a single individual with family coverage reaches the maximum single OOP limit, the individual's eligible covered expenses would be paid at 100 percent for the remainder of the year. Expenses incurred by other family members would accrue toward the family OOP limit.

In its recent FAQ, CMS provided guidance on how this provision interacts with a qualified HDHP. As background, a qualified HDHP must not provide benefits (other than preventive, dental and vision related expenses) until the statutory minimum annual deductible has been met. If an individual has family coverage, benefits may not be paid until the statutory family deductible has been met. In other words, an embedded individual deductible is not permissible unless the individual deductible is equal to or more than the family statutory deductible.

In 2016, this means an individual's OOP expenses would accrue towards the individual OOP limit ($6,850). If the individual is enrolled in a family HDHP, the expenses would also accumulate toward the minimum statutory family deductible.

CMS FAQ


March 10, 2015

IRS Requests Comments on Cadillac Tax in IRS Notice 2015‑16

On Feb. 23, 2015, the IRS published IRS Notice 2015-16 which is the first movement by the agency on the so-called "Cadillac Tax," an excise tax on high-cost employer-sponsored health coverage for taxable years beginning Jan. 1, 2018. While the notice includes only a request for comments, this is the precursor to a highly anticipated proposed rule on the Cadillac tax. The notice suggests various implementation approaches, including the types of coverage subject to the tax, how the cost of such coverage will be determined and how limits on the cost of coverage subject to the tax will be determined on an annual basis.

Much of the notice explains how the statute dictates the Cadillac tax will work. As background, beginning in 2018, a 40 percent excise tax will be levied on the amount of the aggregate monthly premium for each primary insured individual (including COBRA/state continuation eligible individuals) that exceeds an annual "applicable dollar limit" for the employee for the month. The IRS is tasked to develop rules to determine the cost of applicable coverage by using COBRA applicable premium rules as a guide. The law specifies two base applicable dollar limits, $10,200 per employee for self-only coverage and $27,500 for "other-than-self-only" coverage. Multi-employer plans are treated as providing other-than-self-only coverage. There is a provision to adjust these base amounts in the case of excess cost increases between 2010 and 2018 and to annually adjust them post-2018 to account for cost of living increases. The law also allows for adjustments for qualified retirees and employers with a majority of employees engaged in high-risk professions or installing or repairing electrical and telecommunications lines. The tax will apply to both fully insured and self-insured group plans and is not deductible for federal income tax purposes.

Applicable Coverage

Under the Cadillac tax, "applicable coverage" is defined to include plans such as major medical (regardless of whether it is paid for on a pre-tax or post-tax basis), health FSAs, HSAs, governmental plans, retiree coverage, costs that are tax deductible for self-employed individuals and some on-site medical clinics. Employer contributions and pre-tax employee salary reductions to HSAs are included in the definition of applicable coverage, although after-tax employee contributions would be excluded.

Coverage under long-term care policies, stand-alone dental and vision and fixed indemnity and critical insurance coverage are not considered applicable coverage.

The IRS said future guidance is expected to include "executive physical programs" and HRAs in the definition of applicable coverage, but comments are requested on coverage through on-site medical clinics providing only de minimis medical care. Limited-scope dental or vision plans or EAPs qualifying as excepted benefits, whether insured or self-insured, are not currently included in the definition. Comments are requested on whether to exclude such programs.

Cost of Applicable Coverage

In the new notice, the IRS clarifies that the Cadillac tax is determined based on the cost of applicable coverage in which the employee is actually enrolled, an important distinction since there was some question as to whether the cost is based on the coverage "made available" to the employee. The IRS is specifically requesting comments on the cost of applicable coverage provision since the cost of applicable coverage is supposed to be determined using the rules to determine the COBRA applicable premium. In the notice, the IRS explains the rules for determining the value of coverage for COBRA purposes and discusses how they might be applied to the Cadillac tax. The IRS recognizes, however, that there are deficiencies in the current rules for computing COBRA premiums, and seeks to clarify and expound upon application of the COBRA rules to the Cadillac tax for self-insured plans, particularly. Comments are also requested on methods for calculating the cost of coverage under an HRA.

Overall the IRS is asking for comments on:

  • How to value HRAs
  • Whether to allow plans to use actual costs rather than past costs for determining the cost of applicable coverage
  • How to determine who has coverage other than self-only coverage
  • How to apply dollar limits when the self-only coverage that applies to an employee is different than non-self-only coverage that applies to beneficiaries of the employee
  • How the various adjustments to the dollar limit coverage specified in the statute should be applied
  • Whether alternative approaches to determining the applicable cost of coverage should be considered

Employers are responsible for calculating the tax. Payment of the tax is the responsibility of insurers for insured plans, employers for HSAs, and plan administrators for all other coverage. Comments are due by May 15, 2015.

Notice 2015-16

Emergency Services Volunteers are Not Employees for Purposes of the Employer Mandate

On Feb. 28, 2015, President Obama signed H.R. 33 into law, creating Public Law 114-3. This law amends the IRC to ensure that emergency services volunteers are not considered employees under PPACA's employer mandate. In final regulations issued last year, the IRS indicated it will generally not count hours of volunteer firefighters and emergency responders when determining full-time employees for purposes of the employer mandate. Supporters of H.R. 33 continued to push for passage, however, as insurance against future changes from the IRS. The regulations issued by the IRS outline how the agency will implement the law. Now that the law has passed, there is no chance that the IRS will change their interpretation.

Public Law 114-3  »

IRS Issues IRS Publication 974 Related to Premium Tax Credits

The IRS recently published revised Publication 974, Premium Tax Credit (PTC). This publication provides information, including a flowchart, to help individuals determine whether they are eligible for the PTC. The publication also addresses whether an individual's health care coverage is considered MEC (coverage necessary to avoid an individual mandate penalty under PPACA), as well as the interaction between PTC eligibility and MEC.

Additionally, this publication provides instructions and information for taxpayers in special situations who purchased 2014 health coverage through a state health insurance exchange (also called a 'marketplace'). The special situations include:

  • Taxpayers who must repay excess advance payments of the PTC and want to determine their eligibility for penalty relief
  • Individuals who are not lawfully present in the U.S. and are enrolled in a qualified health plan
  • Taxpayers who are filing a tax return but who are not claiming any personal exemptions
  • Taxpayers who married during the tax year and want to use an alternative calculation that may lower their taxes
  • Taxpayers who are filing a separate return from their spouses because of domestic abuse or abandonment
  • Self-employed tax-payers
  • Taxpayers who need to determine the second lowest cost silver plan premium

The publication is more relevant to individuals, since PTC and MEC generally relate to individual tax liability. In addition, the publication does not directly apply to or add compliance obligations for employers. However, employers should be aware of the publication to better understand how employer coverage affects PTC eligibility of its employees and to assist employees should they have questions relating to PTC eligibility.

IRS Publication 974 (Rev. February 2015), Premium Tax Credit  »

OPM Finalizes Changes to Multi-state Plan Program

On Feb. 24, 2015, the Office of Personnel Management (OPM) published final regulations regarding establishment of the multi-state plan (MSP) program for the state health insurance exchanges. Previously, OPM re-proposed the entire MSP rule issued in 2013. We reported on the most recent version of the proposed regulations regarding the MSP program in the Dec. 2, 2014 edition of Compliance Corner.

As background, an MSP is a type of private health insurance where OPM contracts with at least two issuers in each state who are able to offer coverage across state lines. In the 2014 plan year, the program was available in 36 states and the District of Columbia.

The final regulations attempt to make the MSP program more competitive. Changes include making the essential health benefits (EHB) benchmark selections available on a state-by-state basis (in addition to the OPM-selected benchmark plans)and the option to offer two or more MSP options in each state. Insurers participating in the MSP program must ensure that the service area for coverage is at least as wide as for coverage available through qualified health plans available in the exchange. OPM noted its intent to review an MSP plan insurer's package of benefits for discriminatory benefit design, as well as to work in conjunction with the states and HHS to identify and investigate potentially discriminatory (or otherwise noncompliant) benefit designs in MSP plan options.

While primarily of interest to insurers (since the regulations detail compliance requirements for insurers interested in participating in the MSP), employers operating in multiple states may be interested in researching program developments as another option for providing employer-sponsored coverage across state lines.

The final regulations are effective March 26, 2015.

Final Regulations »

February 24, 2015

CMS Issues Final Notice of 2016 Benefit and Payment Parameters, Including 2016 Reinsurance Contribution Amount and Out-of-Pocket Maximums

On Feb. 20, 2015, CMS issued the Final HHS Notice of Benefit and Payment Parameters for 2016, which finalized several provisions including reinsurance contributions, minimum value plans, marketplace enrollment and operations, insurance premium rate approvals, the individual mandate, SHOP participation rates, essential health benefits (EHBs) and out-of-pocket maximum amounts.

To begin with, the reinsurance contribution for 2016 is $27 per covered life, which is a decrease from the 2015 rate of $43 per covered life. The payment may be split into two payments with $21.60 due by Jan. 15, 2017 and $5.40 due Nov. 15, 2017. Importantly, expatriate plans (both self- and fully insured) are exempt from the reinsurance fee for benefit years 2015 and 2016.

Regarding minimum value plans, generally, plans must provide substantial coverage of inpatient hospital services and physician services in order to be determined as providing minimum value. There is transition relief available for plans that did not cover such services if the plan entered into a binding agreement or began enrolling employees prior to Nov. 4, 2014. Additionally, to qualify for the relief, the plan year must begin by March 1, 2015. Importantly, the plans will be considered to provide minimum value and are therefore subject to the reinsurance contribution for the 2015 benefit year.

On marketplaces, the open enrollment period for 2016 coverage in all marketplaces will be Nov. 1, 2015 through Jan. 31, 2016. This replaces the previously proposed period of Oct. 1, 2015 through Dec. 15, 2015. In comparison, the 2015 open enrollment period ran from Nov. 15, 2014 through Feb. 15, 2015.

A special enrollment period for the marketplace is available for individuals who participate in non-calendar year group health plans. Coverage would be effective on the first of the month following the end of the plan year.

Marketplaces may elect to collect premium payments related to COBRA, but the notifications and administration remain responsibilities of the employer.

Regarding insurance premium rates, effective for 2017 policy years, if an insurer proposes a rate increase of 10 percent or more for a non-grandfathered individual or small group plan, the rates must be publicly disclosed along with justification for the increase. State or federal regulators will review and determine whether the increase is reasonable.

An exemption from the individual mandate is available for individuals with gross incomes below the income filing threshold as well as individuals who are eligible for services through Indian Health Services, a Tribal health facility or an Indian Urban organization. Such individuals are not required to obtain an exemption certificate number from an exchange.

If a SHOP imposes a minimum participation rate on a small group, the rate must include not only those who have purchased coverage through the SHOP, but also anyone who is enrolled in coverage through another group health plan, Medicare, Medicaid, TRICARE, an individual policy or other minimum essential coverage.

With regard to EHB, a plan may not combine limits for habilitative and rehabilitative services. Any limits must be imposed separately. As a reminder, a plan cannot place a dollar limit on EHB.

For plans required to provide coverage for EHB, pediatric oral and vision coverage must be provided for participants through the end of the month in which the participant turns age 19.

Effective for the 2017 policy year, plans required to provide coverage for EHB may not restrict prescription drug coverage to mail-order delivery only. Such plans must also provide coverage through retail pharmacies. However, a plan may restrict access to mail order only for a specific drug if the FSA has restricted distribution of the drug to certain facilities or practitioners; or if appropriate dispensing of the drug requires special handling, provider coordination or patient education that cannot be met by a retail pharmacy.

The 2016 maximum out-of-pocket limit for self-only coverage is $6,850. The 2016 maximum out-of-pocket limit for family coverage is $13,700.

Press Release
Fact Sheet
Regulations

IRS Issues Temporary Relief Related to Employer Payment Plans

On Feb. 18, 2015, the IRS issued Notice 2015-17, which is related to employer payment plans. As background, the IRS has previously stated that an employer is prohibited from directly paying for or reimbursing an employee for the cost of an individual health insurance policy. These arrangements are called employer payment plans and are prohibited for plan years starting on or after Jan. 1, 2014. Such arrangements are considered a violation of the PPACA's preventive care mandate and prohibition on annual limits, which can carry a penalty up to $100 per day.

IRS Notice 2015-17 provides temporary relief for small employers with fewer than 50 full-time equivalent employees. If a small employer had an employer payment plan in 2014, or currently has such a plan, the IRS will not impose a penalty if the plan is terminated prior to July 1, 2015. If a small employer continues the plan after this deadline, the $100 per day penalty will apply. A large employer is not eligible for the temporary relief and would be liable for a penalty if they reimbursed or paid for employees' individual health insurance policies after Jan. 1, 2014.

In addition, for the remainder of 2015, an S corporation is permitted to pay for or reimburse premiums for individual health insurance for two-percent shareholders. This practice would not be considered an employer payment plan subject to a penalty.

The notice also clarifies that a small employer with fewer than 20 employees may provide reimbursement to an employee for Medicare Part B or Part D premiums. The employer must offer a group health plan in addition to the Medicare premium reimbursement arrangement. An employer with 20 or more employees would not want to adopt such a plan as they could violate the Medicare Secondary Payer regulations.

Finally, the notice provides that a small employer may integrate an HRA with TRICARE. As a reminder, stand-alone HRAs for active employees are generally prohibited after Jan. 1, 2014. HRAs must be integrated with group health coverage. An HRA may now be integrated with TRICARE, which means the employer must offer a minimum value group health plan to HRA participants, and the HRA is only available to employees enrolled in TRICARE. The HRA is limited to reimbursement of cost sharing and excepted benefits, including premiums for TRICARE supplemental coverage. Similar to the Medicare prohibition, an employer with 20 or more employees would not want to adopt such a plan as they could violate the TRICARE nondiscrimination provisions.

IRS Notice 2015-17  »

DOL Releases Guidance on Excepted Benefits

On Feb. 13, 2015, the DOL posted a new frequently asked question (FAQ) to its FAQs about Affordable Care Act Implementation. The new FAQ, Part XXIII, provides guidance related to excepted benefits. As background, excepted benefits are exempt from certain provisions of PPACA, ERISA and HIPAA. Supplemental benefits are excepted if they meet the following criteria:

  • The policy, certificate, or contract of insurance must be issued by an entity that does not provide the primary coverage under the plan. The supplemental plan cannot be self-insured.
  • The supplemental policy, certificate, or contract of insurance must be specifically designed to fill gaps in primary coverage, such as coinsurance or deductibles.
  • The cost of the supplemental coverage may not exceed 15 percent of the cost of primary coverage; and
  • The coverage must be Medicare supplemental health insurance (Medigap), TRICARE Supplemental programs or similar coverage that supplements a group health plan.
  • Supplemental coverage sold in the group insurance market must not differentiate among individuals in eligibility, benefits, or premiums based upon any health factor of the individual (or any dependents of the individual).

The new guidance answers the question of whether a supplemental plan would be excepted if it provided coverage for categories of benefits that are not covered under the primary plan. The Departments (DOL, IRS and Treasury) stated that they intend to propose regulations clarifying supplemental excepted benefits. Until regulations are issued, the departments will not take enforcement action against a supplemental excepted benefit plan if the categories of additional benefits are not essential health benefits in the state where the supplemental plan is being marketed. The plan will also need to meet the criteria listed above and be filed with and approved by the applicable state insurance department.

FAQs about Affordable Care Act Implementation, Part XXIII  »

Third Circuit Reverses Injunctions Barring Application of HHS Contraceptive Accommodation

On Feb. 11, 2015, the U.S. Court of Appeals for the Third Circuit lifted injunctions granted by two district courts, finding that the self-certification procedure required of religious organizations who seek to opt out of the contraceptive mandate does not violate the organizations' religious rights.

As background, PPACA requires group health plans and health insurance issuers to cover preventive care services for women without cost sharing, including contraceptive services. However, the regulations exempt certain religious employers (referred to as "eligible organizations") from the requirement to cover contraceptives. To claim this exemption, eligible organizations are required to complete EBSA Form 700, which is used to indicate that the organization has a religious objection to providing contraceptive coverage. The form is then sent to the plan's insurance carrier or third party administrator (TPA), who is required to provide contraceptive services to the organization's employees.

The appellees in this case, which included two Catholic diocese and a college established by the Presbyterian Church, argued that the self-certification requirement violated the Religious Freedom Restoration Act ("RFRA") by imposing a substantial burden on their religious exercise. They further contended that sending the self-certification to the insurance carrier or TPA would be triggering the provision of contraceptive coverage, which would amount to them being complicit with the offering of contraception. The District Court agreed with their reasoning and granted injunctions, allowing the organizations to forego the submission of the self-certification forms.

However, the Court of Appeals reasoned that submission of the self-certification forms did not have the effect that the appellees claimed. First, the court held that submission of the forms did not trigger or facilitate the provision of contraceptive coverage because federal law created the obligation of the insurance issuers and TPAs. Succinctly, the court explained that 'federal law, not the submission of the self-certification form, enables the provision of contraceptive coverage.'

Second, the court reasoned that submission of the self-certification form doesn't make the appellees complicit in the provision of contraceptive coverage because in completing the form, the appellees are expressly stating that they object to providing such coverage. Instead, the form represents a declaration that the organization or employer will not be complicit in providing contraceptive coverage.

Ultimately, the Court of Appeals found that the self-certification procedure did not cause or trigger the provision of contraceptive coverage, and as such, the procedure did not burden the appellees' religious exercise. Accordingly, the court reversed the District Courts' orders granting the injunctions.

Geneva College v. HHS »

IRS Releases Publication 5196: Getting Ready for Monthly Tracking

On Feb. 10, 2015, the IRS released Publication 5196, specifically directed at applicable large employers (those subject to PPACA's employer mandate, also known as the "employer shared responsibility requirement") and alerting them to the fact that reporting health coverage information for calendar year 2015 is required in early 2016. The two-page document provides general information aimed at helping employers understand the reporting requirements of the health care law. The publication addresses important points, including:

  • The reporting requirement for calendar year 2015 applies to applicable large employers (those with 50 or more full-time employees, including full-time equivalent employees). Employers of this size must comply with the reporting requirement even if they qualified for transition relief from employer shared responsibility payments for 2015.
  • The definitions of the terms "affordable coverage," "minimum essential coverage," "minimum value coverage," and "premium tax credit."
  • The introduction of Form 1095-C and Form 1094-C, which are the forms provided to full-time employees and to the IRS which will help the IRS determine if an employer or its employees potentially owe a shared responsibility payment to the IRS.

The employer shared responsibility requirements and related reporting obligations are very complex. Publication 5196 touches on a few high points. The takeaway for all applicable large employers is that they must track hours to determine which employees are considered full-time for each month during 2015, as well as other vital information to ensure a smooth reporting process in early 2016. NFP has resources to assist. Ask your advisor for more information.

IRS Publication 5196

IRS ACA Information Page: Types of Employer Payments and How They Are Calculated

On Feb. 11, 2015, the IRS published a webpage entitled "Types of Employer Payments and How They Are Calculated" as part of an educational campaign to educate employers on PPACA's employer shared responsibility provisions (also known as the "employer mandate").

The webpage first describes which payment applies when employers fail to offer minimum essential coverage (known as "Penalty A"). The description details how the payment is calculated. There is certain transition relief available under this penalty for employers who offer coverage to at least 70 percent of their full-time employees, as well as those who did not previously offer coverage to dependents but take steps during either 2014 or 2015 to extend coverage to dependents.

The second penalty applies when an employer fails to offer minimum essential coverage that provides minimum value and is affordable. The webpage details how the payment is calculated, which is a different calculation than for Penalty A. There are three examples illustrating which penalty applies and the calculations required.

Finally, the webpage defines the meaning of the term "offer of coverage" and describes how the assessment and collection of the employer shared responsibility payment will be handled by the IRS. Importantly, this payment is not deductible for federal income tax purposes.

IRS ACA Information Page »

CMS Announces New Special Enrollment Period and a Limited Enrollment Extension

On Feb. 20, 2015, CMS announced a new special enrollment period (SEP) for the federally facilitated exchange. Open enrollment for the exchange ended Feb. 15, 2015. However, individuals who were subject to the shared responsibility payment (individual mandate penalty) on their 2014 tax return may be eligible for an SEP open from March 15, 2015 through April 30, 2015. Such individuals would need to attest to the fact that they were unaware of or did not understand the implications of not enrolling in coverage and also to the fact that they did not become aware of the implications until after the open enrollment period ended.

This announcement followed news of a limited enrollment extension. If an individual was "in line" for enrollment on Feb. 15, 2015 and unable to complete an application, he or she was eligible for a limited enrollment extension until Feb. 22, 2015.

SEP Announcement »
Enrollment Extension »

February 10, 2015

IRS Finalizes Health Coverage Information Reporting Forms for Sections 6055 and 6056 Reporting

On Feb. 4, 2015, the IRS published several highly anticipated final versions of forms plus the final instructions employers and carriers will use to report individuals who are covered by minimum essential coverage (MEC) as well as what coverage employers are providing to employees in order to avoid the assessment of the employer mandate penalty. Previously, only draft versions of these forms and instructions were available. The finalized versions appear to be substantially similar to the draft versions.

As background, beginning in 2016, IRC Section 6055 requires that health plans report certain information to the IRS and to plan participants to help administer and enforce the individual mandate. This information will be reported using Forms 1094-B and 1095-B.

Also beginning in 2016, IRC Section 6056 requires employers who are subject to the employer mandate to report certain information to the IRS and to plan participants to help administer and enforce the employer mandate and eligibility for premium tax credits. This information will be reported using Forms 1094-C and 1095-C. These forms will be used by applicable large employers (those who are subject to the employer mandate), employers with self-insured plans and insurers.

Although reporting is not required until 2016 (for 2015), it is important for employers to become familiar with these instructions and forms so the proper information can be gathered throughout 2015. A table below illustrates the reporting responsibilities.


Employer Type 6055 6056 IRS Report Employee Statement
Small Fully Insured No No N/A N/A
Small Self-insured Yes No Form 1094-B
Form 1095-B
Copy of Form 1095-B Or Substitute*
Large Fully Insured No Yes Form 1094-C
Form 1095-C
(6056 section only)
Copy of Form 1095-C Or Substitute*
Large Self-insured Yes Yes Form 1094-C
Form 1095-C
(both sections)
Copy of Form 1095-C Or Substitute *

*Substitute must include same information as actual form; future guidance is expected to clarify this.

Forms 1094-B and 1095-B

Forms 1094-B and 1095-B are required of every entity that provides minimum essential coverage to an individual and is to be filed by insurers (if the plan is fully insured) or by the employer (if the plan is self-insured and the employer is not subject to the employer mandate). These forms are for reporting information to the IRS and to taxpayers about individuals covered by minimum essential coverage. Large employers who sponsor a self-insured plan and are subject to the employer mandate will instead report information about coverage on Form 1095-C. Form 1094-B is the submittal form and is to be submitted to the IRS with the total number of Forms 1095-B, the return form. The return and transmittal form must be filed with the IRS on or before Feb. 28 (March 31 if filed electronically) of the year following the calendar year of coverage. However, because Notice 2013-45 provided transition relief for Section 6055 reporting for 2014, the first Section 6055 returns required to be filed are for the 2015 calendar year and must be filed no later than Feb. 29, 2016, or March 31, 2016, if filed electronically.

Filers must furnish a copy of Form 1095-B to the person identified as the responsible individual on the form. This must be done by Jan. 31 each year by mail unless the individual consents to receive the statement electronically.

Forms 1094-C and 1095-C

Forms 1094-C and 1095-C are to be filed by applicable large employers who are subject to the employer mandate. The purpose of the forms is to report offers of health coverage to employees. The forms will also be used to help determine whether an employer owes an employer mandate penalty and whether an employee qualifies for a premium tax credit. Eligibility for 2015 employer mandate transition relief will also be reported on Form 1094-C. These forms must be filed with the IRS the year following the calendar year to which the return relates (by Feb. 28 if filing on paper or March 31 if filing electronically). However, because transition relief applies for Section 6056 reporting for 2014, the first Section 6056 returns required to be filed are for the 2015 calendar year and must be filed no later than Feb. 29, 2016, or March 31, 2016, if filed electronically.

Form 1095-C must also be furnished to the employee by Jan. 31 each year. This must be done via mail unless the recipient of the form consents to receive the statement electronically.

Employers should review the instructions to familiarize themselves with the reporting obligations and seek tax advice from those familiar with the forms to ensure.

Form 1094-B  »
Form 1095-B  »
Instructions for Forms 1094-B and 1095-B  »
Form 1094-C  »
Form 1095-C  »
Instructions for Forms 1094-C and 1095-C  »
IRS FAQs Section 6055  »
IRS FAQs Section 6056  »

IRS Provides Penalty Relief Relating to 2014 Advance Payments of the Premium Tax Credit

On Jan. 26, 2015, the IRS published Notice 2015-9, which relates to penalty relief for 2014 advance payments of the premium tax credit. As background, 2014 was the first year the individual mandate was effective and the first year advance premium tax credits (APTC) could be obtained to assist individuals purchasing insurance through either the federally facilitated or state health insurance exchanges. Generally, individuals with household income between 100 and 400 percent of the federal poverty level (FPL) qualify for a premium tax credit. The exchanges, using projected household income and other factors, determine eligibility for those credits. Once eligible, individuals may choose to receive the premium tax credit in advance (at the time they purchase insurance through the exchange, which is in 'advance' of the time individuals generally claim tax credits on their federal income tax returns, filed by April 15 of the following year). Individuals who choose to receive an APTC payment must later, upon filing their individual federal income tax returns (IRS Form 1040), reconcile the advance payment with the actual allowed premium tax credit.

Because the APTC payment may exceed the actual allowed premium tax credit, some individuals may owe money on their individual federal income tax return as a result of the reconciliation. Reconciliation for the 2014 year (occurring now, in 2015, as individuals prepare their individual federal income tax returns for 2014), is the first time the reconciliation process will occur.

Notice 2015-9 provides relief from penalties for late payment and underpayments where individuals may owe additional money in connection with their 2014 reconciliation. Specifically, penalties will not be assessed for late payments of due balances, so long as the individual is otherwise current with their federal income tax filing and payment obligations and timely reports the amount of the excess APTC on their 2014 tax return. Underpayment penalties will also be waived under those same conditions. The relief provided in Notice 2015-9 applies only for the 2014 taxable year.

The notice does not affect employers or their compliance obligations, but may be helpful as they assist employees with understanding their obligations under the individual mandate. The notice provides assistance and welcome relief for those who may not have been prepared for the reconciliation process or the possibility of owing more money after qualifying for premium tax credits.

IRS Notice 2015-9  »

IRS Publishes Small Business Health Care Tax Credit Fact Sheet

As employers prepare to file their 2014 federal tax returns, it is important to review the qualifications for the health care tax credit for small businesses. The IRS has released a fact sheet summarizing changes to the credit and its qualifications for tax years beginning in 2014. An employer may receive credit up to 50 percent of the amount the employer paid for qualified insurance premiums. This is an increase from the previous 35 percent. A tax-exempt employer may receive credit up to 35 percent of employer-paid premiums (up from 25 percent). Small employers may only claim the credit for two consecutive years beginning with the 2014 tax year. To qualify, the employer must have an average employee wage of $51,000 or less and must purchase SHOP coverage from the marketplace.

Fact Sheet  »

IRS Publishes Instructions for Form Insurers Use to Pay Health Providers Fee

On Jan. 22, 2015, the IRS published Instructions for Form 8963. The form itself is not yet available. As background, PPACA imposes the health providers fee on "covered entities" engaged in the business of providing health insurance with respect to United States health risks. The fee, also known as the "health insurance tax" or "HIT", is payable by each covered entity for a calendar year and equals the entity's proportionate share of the aggregate amount for that year as set by statute ($8 billion in 2014, and increasing thereafter). Each entity's proportionate share is determined based on the entity's net premiums written for U.S. health risks for the previous calendar year as compared with the aggregate net premiums of all covered entities. The instructions detail which covered entities must pay the tax and how each covered entity's tax obligation will be determined.

Covered entities must report net premiums written during the prior year by filing Form 8963 no later than April 15 of the year in which the fee is due. The IRS will notify covered entities of their preliminary fee calculation by June 15 of the applicable year. Covered entities will then be notified of their final fee calculation by August 31. The fee is due Sept. 30, 2015.

Importantly, the fee will not be assessed directly against employer plan sponsors. That said, payment of a large overall fee will likely affect premiums paid by employers who sponsor insured plans and may impact some employers' decisions about whether to self-insure.

Form 8963 Instructions »

New Federal Poverty Level Figures Published

On Jan. 22, 2015, HHS published the Federal Poverty Level (FPL) figures for 2015 in the Federal Register. The FPL figures are used for, among other things, determining whether individuals qualify for advance premium tax credits (APTC) and cost-sharing reductions (CSR) when purchasing health insurance through a federally facilitated or state exchange. The figures are also used for Medicaid determinations and determining exemptions from the requirement to purchase insurance or pay an additional tax. Importantly, applicable large employers will need these figures each year when determining if the coverage offered to employees is considered affordable if such employers wish to rely upon the FPL safe harbor. Other safe harbor calculations for affordability purposes are available under the employer mandate.


Persons in Family/Household FPL Guideline
1 $11,770
2 $15,930
3 $20,090
4 $24,250
5 $28,410
6 $32,570
7 $36,730
8 $40,890

For families/households with more than eight persons, add $4,160 for each additional person.

Separate figures apply for the states of Alaska and Hawaii.

Subsequently, on Jan. 29, 2015, CMS issued an informational bulletin further explaining the new figures. According to the bulletin, the increase in the FPL reflected a 1.6 percent adjustment for inflation, rounded and adjusted to reflect household size. Importantly, the bulletin clarifies that the federally-facilitated exchange began using the 2015 FPLs for Medicaid and CHIP eligibility Feb. 1, 2015. However, eligibility for APTC and CSR will continue to be determined using 2014 FPLs for enrollment that is effective in 2015.

Federal Register »
CMS Informational Bulletin »

IRS Releases Two Information Letters Reinforcing Inability of Employers to Reimburse Individual Policy Premiums

On Dec. 26, 2014, the IRS publicly released two previously private Information Letters in order to further clarify the IRS's position relating to the reimbursement of individual policy premiums. Letters 2014-0037 and 2014-0039, dated Sept. 22, 2014, written in response to two members of Congress inquiring on behalf of their constituents, reaffirm the IRS position that employers may not reimburse premiums paid for individual policies. The IRS first outlined its position back in 2013, when it published Notice 2013-54 (addressed in the Sept. 24, 2013 edition of Compliance Corner). That notice stated that employer premium reimbursement arrangements are considered group health plans that are subject to PPACA, and that such arrangements violate two of PPACA's provisions—the prohibition on annual dollar limits on essential health benefits and the requirement to provide preventive services at zero cost-sharing. The notice applied to several types of employer reimbursement arrangements, including pre-tax salary deductions applied to individual coverage, stand-alone HRAs used to reimburse employees for purchasing non-employer coverage and any other employer-provided reimbursement for individual policies.

Following publication of that notice, the IRS issued a set of FAQs that again addressed the issue, stating that employers may not reimburse employees on a tax-favored basis for individual health insurance policies purchased through the exchange or in the individual market (addressed in the May 20, 2014 edition of Compliance Corner). Still, most thought that employers could reimburse employees on a post-tax basis (i.e., reimburse the employee but then include the reimbursement in the employee's gross income for income and employment tax purposes, i.e. treat the reimbursement as wages/salary). However, in November of 2014, the DOL issued a set of FAQs that prohibits even a post-tax reimbursement arrangement (addressed in the Nov. 18, 2014 edition of Compliance Corner).

The newly released information letters also explain that while an employer-sponsored group health plan can be combined with a reimbursement arrangement to determine whether the combined arrangement is compliant, the combination of a reimbursement arrangement and an individual policy would not be allowed. These letters are yet an additional reminder that employers should not engage in this practice.

IRS Information Letter 2014-0037 »
IRS Information Letter 2014-0039 »


January 28, 2015

Supreme Court Declines to Hear Challenge to Individual Mandate

On Jan. 12, 2015, the U.S. Supreme Court denied a challenge to the PPACA filed by the Association of American Physicians and Surgeons and the Alliance for Natural Health USA (Ass'n of Am. Physicians & Surgeons, Inc. v. Burwell, No. 14-350, 2015 WL 132968 (U.S. Jan. 12, 2015)). The case challenged various aspects of the law, including the individual mandate. The individual mandate is a federal tax on certain individuals for failing to purchase health insurance coverage which has previously been upheld by the Supreme Court. In this case, the plaintiffs argued that the tax violates both the Fifth Amendment's prohibition of the taking of private property without just compensation as well as the origination clause, which requires that all bills for raising revenue must originate in the House of Representatives.

Before being denied certiorari by the Supreme Court, the plaintiff’s argument had already been rejected twice: first by a district court judge in 2012 and then by the D.C. Circuit Court of Appeals in early 2014. The D.C. Circuit, which had previously rejected this challenge in March, 2014, stated that there is already another case challenging the origination clause provision, with an appeal pending.

Supreme Court Order List Confirming Denied Cert  »

IRS Releases Guidance and Forms for Reporting 2014 Premium Tax Credits for Individuals

To assist taxpayers in filing their 2014 returns, the IRS has issued guidance regarding tax aspects of the PPACA. Specifically, Publication 5187 explains how taxpayers will satisfy and report the individual shared responsibility provision (individual mandate) of the PPACA. It also provides information about the new premium tax credit.

The IRS also released three forms and corresponding instructions taxpayers will use to file their 2014 tax returns. Form 1095-A is an informational statement that will be sent to taxpayers who purchased health insurance through the state or federal exchanges. Form 8962 will report the taxpayer’s premium tax credits received. Lastly, taxpayers will use Form 8965 to report they did not have minimum essential coverage or to claim an exemption from the individual mandate. An article about Form 8965 was available in the Jan. 13, 2015 edition of Compliance Corner.

Although this guidance is for individuals, employers are indirectly affected as receipt of advanced premium tax credits could trigger employer mandate penalties if an employer has failed to offer a full time employee minimum essential coverage. Employers should familiarize themselves with this guidance in the event that they receive a notice of appeal; such appeals provide employers with an opportunity to clarify whether employees are eligible to receive an advanced premium tax credit.

Publication 5187  »

Form 1095-A  »

Form 1095-A Instructions  »

Form 1095-A FAQs  »

Form 8962  »

Form 8962 Instructions  »

Form 8965  »

Form 8965 Instructions  »

2016 Actuarial Value Calculator Released

On Jan. 16, 2015, CMS released a bulletin announcing the availability of the Final 2016 Actuarial Value (AV) Calculator, with detailed explanations of updates made in response to comments received during the comment period. The guidance permits CMS to make periodic changes to the Actuarial Value calculator on an ongoing basis on specific areas, such as when the annual limit on cost-sharing is announced annually. For 2016, the annual limit on cost-sharing is estimated to be $6,850; however, the actual determination will not be made until the finalization of the 2016 HHS Notice of Annual Benefit and Payment Parameters Final Rule. If the finalized annual limit differs from the estimated dollar amount pre-set in the calculator, manual substitution of the correct annual limit on cost-sharing may be required.

As a reminder, this calculator is meant for use by issuers selling non-grandfathered individual and small group insurance policies both inside and outside the federal and state exchanges. The calculator determines at which level the plan will be set: bronze (AV of 60 percent), silver (AV of 70 percent), gold (AV of 80 percent), or platinum (AV of 90 percent). A de minimus variation of +/- 2 percent continues to be permitted for each tier. Employers will generally not use this calculator, since it is meant for use by issuers. However, the detailed explanations included in this bulletin for determining actuarial value and ensuring compliant plans may be of general interest to employers as they begin to structure plan designs for 2016.

2016 Actuarial Value Calculator Methodology  »
2016 Final Actuarial Value Calculator  »

IRS Releases Guidance for Small Businesses Claiming Health Care Tax Credit

On Jan. 21, 2015, the IRS released Notice 2015-08, which provides an exception allowing certain small employers in specified Iowa counties to claim the small business health care tax credit, even though a Small Business Health Options Program (SHOP) Exchange will not be operating in this area for all or part of 2015. Shortly thereafter, the IRS released Form 8941 and its related instructions, which is the tax form small employers (and their CPAs) use when claiming the small business health care tax credit. Note that there are significant changes for 2015:

  • The maximum tax credit increased to 50 percent of premiums paid for most small employers and 35 percent for tax-exempt eligible small employers.
  • The health plan must have been purchased through a SHOP exchange. An exception exists for some employers in certain Washington (2014 coverage only), Wisconsin (2014 coverage only) and Iowa counties (2015 coverage only) without SHOP coverage.
  • The tax credit is available for a maximum of two consecutive tax years.
  • Average annual wages must be less than $51,000 for 2014.

A helpful calculator is available to assist employers in determining whether to consult with their tax professional or CPA with regard to the small business tax credit. Employers should contact their advisor for access to the calculator and for more information about the small business health care tax credit.

IRS Notice 2015-08 »
Form 8941 »
Form 8941 Instructions »


January 13, 2015

Proposed Regulations Make Tweaks to Existing SBC Final Regulations

On Dec. 30, 2014, the IRS, DOL, and HHS issued proposed regulations relating to the summary of benefits and coverage (SBC) requirement under health care reform. In addition to the proposed regulations, the agencies also released revisions to the SBC template, instructions and uniform glossary summary.

Parts of the proposed regulations formalize previous FAQ guidance which addressed items such as contractual responsibility of SBC compliance, excluding Medicare Advantage plans from the SBC requirement, ability to provide SBCs electronically in conjunction with online enrollment and permitting a group health plan with multiple benefit packages to provide either a single or multiple SBCs.

Clarifications were made instructing that if an SBC was provided before an applicable event that would normally require an SBC distribution, a new SBC would not be required unless there were any changes to the SBC in the meantime. Each agency also addressed consequences for failure to provide the SBCs.

In terms of content, in addition to the existing requirement to provide contact information on the SBC for questions about the SBC, insurers are now required to include an internet address for obtaining a copy of the individual coverage policy or group certificate. There is no similar requirement for SBCs prepared for self-insured plans.

The 2012 final regulations regarding SBCs required the agencies to develop standard definitions of certain insurance-related terms. For this purpose, the agencies drafted a uniform glossary as a separate document that is a companion to the SBC. The uniform glossary must be provided in the format authorized by the agencies. The guidance issued in December 2014 added new terms to the uniform glossary, including ”claim,” “cost- sharing reduction,” individual responsibility requirement,” ”marketplace,” “minimum essential coverage,” ”minimum value standard” and ”specialty drug.”

Finally, there were changes made to the SBC template. The most obvious change was from four double-sided pages to two double-sided pages plus half of another page. The revised template removed two questions in the “Important Questions” section: The first about annual limits and the second about what is not covered. The SBC is also now required to include information about whether the plan provides MEC or meets minimum value requirements and what the implications of that determination are for the individual. Previously, the employer could use a separate document to report whether the plan provided MEC or met minimum value requirements. Lastly, the explanations of co-payments, co-insurance and other terms are removed, as they are addressed in the Uniform Glossary.

If finalized, the templates would apply to coverage that begins on or after Sept. 1, 2015.

Proposed Regulations  »
Templates, Instructions, and Related Materials  »
Fact Sheet  »

Expatriate Health Plans Exempt from Health Care Reform

On Dec. 16, 2014, President Obama signed HR 83 into law, creating Public Law No. 113-235. The law, known as the Consolidated and Further Continuing Appropriations Act was primarily enacted to appropriate funds to continue funding the federal government during 2015. However, the law included changes affecting the treatment of certain expatriate health plans under health care reform.

Expatriate health plans affected include both self-insured and fully insured group plans sponsored by employers which meet specific coverage standards. To qualify, such plans must provide minimum value (MV), cover inpatient hospital services, physician services and emergency services in countries where qualifying expatriates work, satisfy the HIPAA portability provisions (including HIPAA special enrollment rights) and offer coverage until age 26 (if dependent coverage is offered).

Under the relief, plans meeting these criteria will count as minimum essential coverage for purposes of both the individual mandate and employer mandate, which means employer and insurer reporting under Codes 6055 and 6056 will continue to be required.

The definition of an expatriate health plan is that substantially all of the primary enrollees (not including dependents) must be “qualified expatriates” fitting into one of the following categories:

  • Workers in the U.S.: Individuals whose skills and expertise caused the employer to temporarily transfer or assign them to the U.S., who are reasonably determined to require access to health insurance in multiple countries and to whom the employer periodically offers “other multinational benefits” (such as tax equalization).
  • Workers outside the U.S.: Individuals working outside the U.S. for at least 180 days in a consecutive 12-month period that overlaps with the plan year.
  • Charitable workers: Members of groups formed for traveling or relocating internationally to do certain nonprofit work (and not formed primarily for the sale of health insurance), if determined by the U.S. Department of Health and Human Services (HHS) to require access to health insurance in multiple countries.

Importantly, the law exempts expatriate health plans from the PCOR fee, reinsurance contribution and the annual fee on health insurance providers. However, the tax on high-cost health coverage (known as the Cadillac tax) continues to apply to employer-sponsored coverage of a qualified expatriate who is assigned to work in the United States. Additionally, the plans would be exempt from the annual and lifetime limit prohibition, essential health benefits, prohibition on rescissions, preventive care mandate, the SBC obligation, medical loss ratio requirements, internal appeals and external review requirements, prohibition on pre-existing condition exclusion periods, waiting period limitation, community rating and guaranteed availability and renewability.

The law is effective for expatriate health plans issued or renewed on or after July 1, 2015. Previous transition relief was in place, but it remains to be seen how the July 1 effective date will relate to existing plans.

Public Law 113-235  »

IRS Publishes Form 8965 and Instructions for Taxpayers Without MEC

The IRS has published the 2014 version of Form 8965 and Instructions. This form is to be completed and filed by taxpayers who did not maintain minimum essential coverage in 2014. Individuals may claim an exemption from the requirement (also known as the individual mandate). Exemptions include unaffordable coverage (the minimum cost of coverage would have been more than 8 percent of household income), members of a health-care-sharing ministry, members of Indian tribes, incarceration, household income below 138 percent of the federal poverty line and the taxpayer lived in a state that did not expand Medicaid, general hardship and the taxpayer was eligible for coverage (but not enrolled) in an employer plan that was on a non-calendar year basis.

Taxpayers who do not qualify for one of the health coverage exemptions will use Form 8965 to calculate and report their shared responsibility payment.

Form  »
Instructions  »

CMS Releases Updated Culturally and Linguistically Appropriate Services County Data

On Dec. 5, 2014, The CMS Center for Consumer Information and Insurance Oversight (CCIIO) released the December 2014 list, known as "Culturally and Linguistically Appropriate Services County" (CLAS) data, of counties that meet or exceed the 10 percent threshold of people who are literate only in the same non-English language. This list is important for two separate PPACA requirements:

1. Internal and external appeals notifications provided by non-grandfathered group health plans.

A non-grandfathered plan sending an internal or external appeals notification to an address found within one of the counties listed (that meets the 10 percent threshold for the population being literate only in the same non-English language) must be aware that the claimant is entitled to certain accommodations. These include a one-sentence statement in the English version of the notice in their non-English language indicating how to access the language services provided by the plan, asking questions and receiving answers orally (such as through telephone assistance) and receiving assistance with filing claims and appeals in their non-English language, and upon request receiving the entire notice in the applicable non-English language. On the model notices applicable to the internal and external appeals notifications, there is a one-sentence statement available in four languages: Spanish, Chinese, Tagalog and Navajo. Links to the model notices are included below.

2. Summary of benefits and coverage (SBC), regardless of grandfathered status.

PPACA requires the SBC to be presented in a "culturally and linguistically appropriate manner." The regulations require plans or insurers, regardless of grandfather status, to follow the analogous rules for providing appeals notices in a culturally and linguistically appropriate manner described above (requiring the English versions of SBCs sent to individuals residing in specified counties to include a one-sentence statement clearly indicating how to access the language services provided by the plan or insurer).

The counties in which this must be done are those in which at least 10 percent of the population residing in the county is literate only in the same non-English language. The 2014 CLAS data is the list of all such U.S. counties. This determination is based on U.S. Census data and includes four languages: Spanish, Chinese, Tagalog and Navajo.

Written translations of the SBC must be provided upon request in the applicable non-English languages. To assist with compliance with this language requirement, HHS provided written translations of the SBC template, sample language and uniform glossary in the four applicable languages (Spanish, Tagalog, Chinese and Navajo) and may also make these materials available in other languages.

2014 CLAS Data  »
Model Notice of Adverse Benefit Determination  »
Model Notice of Final Internal Adverse Benefit Determination  »
Model Notice of Final External Review Decision  »
Chinese SBC  »
Navajo SBC  »
Spanish SBC  »
Tagalog SBC  »
Additional SBC Resources (such as Uniform Glossary and Word format) for non-English language SBCs  »