Posted January 24, 2018

ACA Cadillac Tax Delayed Another Two Years!

On January 22, 2018, Congress passed a short-term funding resolution to end the federal government shutdown that began several days ago. While ending the shutdown is the centerpiece of the legislation, Congress also incorporated a few kernels of good news for employers in the form of relief from certain Affordable Care Act (ACA) taxes, at least temporarily. The Extension of Continuing Appropriations Act (ECAA) of 2018 grants an additional two-year delay for implementation of the high-value health plan excise tax (“Cadillac Tax”), an additional one-year moratorium on the annual fee on health insurers, and an additional two-year moratorium on the medical device tax.

Cadillac Tax

The Cadillac tax imposes a 40% excise tax on the aggregate cost of applicable employer-sponsored coverage in excess of certain statutory limits, which is assessed on the plans insurance carrier or self funded plan sponsor. Originally set to begin this year, the 2018 limits were to be $10,200 per year for self only coverage and $27,500 per year for coverage other than self-only, with adjustments allowed for pre-65 retirees, high-risk professions, and significant age and gender factors. The effective date of the Cadillac tax was delayed once before by the Protecting Americans from Tax Hikes Act (PATHA) of 2015, which pushed back implementation of the tax until 2020. The ECAA further shifts the tax’s effective date to 2022. Opponents of the tax fear it will lead to shifting of health care costs to employees through increased deductibles, coinsurance, and copayments in an effort by employers to keep plan costs down and avoid the tax. Opponents also argue that, because annual adjustments to the thresholds after 2018 are tied to general inflation rather than annual change in health care costs, a significant number of employer plans could be affected by the tax by the time it is implemented.

Many hoped the initial two-year delay passed in 2015 was an indication that a full repeal might follow, but to-date, permanent relief from the Cadillac tax has not come. Although the figure is a topic of debate, the Congressional Budget Office previously projected the tax would generate $87 billion over a 10-year period. So, while there is considerable support for repeal of the Cadillac tax among lawmakers, employers and other stakeholders, potential loss of the Cadillac Tax’s revenue stream on a permanent basis is an obstacle for some legislators.

At the very least, today’s action is recognition of the Cadillac tax’s unpopularity and it suggests Congress is likely to continue to at least contemplate workable plans for eliminating it. The move also provides some more breathing room for the many employers that have been evaluating strategies to curb the impact of the Cadillac tax. The additional time may allow employers to identify effective cost-management strategies that would enable them to avoid aggressive plan design modifications if and when the tax becomes a reality. Despite significant chatter regarding the possibility of a full repeal of the Cadillac tax, until any new developments occur, employers should plan for its implementation in 2022.

Medical Device Tax

Effective in 2013, the Medical Device Tax is a 2.3% excise tax imposed on the sale of certain medical devices by the manufacturer or importer of the device. The 2015 PATHA tax bill placed a two-year moratorium on the tax for device sales occurring in 2016 and 2017. The ECAA extends that relief to 2018 and 2019 as well.

Health Insurance Providers Fee

Effective in 2014, the Health Insurance Providers Fee is an excise tax imposed on providers of insured health insurance coverage, which insurers then pass on to purchasers as additional premium cost. The tax is a fixed dollar amount that is determined based  on an insurer’s industry market share, so resulting premium increase percentages vary. The 2015 PATHA tax bill placed a one-year moratorium on the fee (which should result in less of an increase to group health insurance premiums) in 2017. The ECAA reinstates that relief for another year in 2019.

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I am here to answer  any questions you might have as you prepare to comply with upcoming ACA requirements.   If you are not currently a Trion client and would like assistance navigating the changes required by health care reform, please contact me  by emailing   MBGray@Trion.com

 

About Trion Group, a Marsh & McLennan Agency, LLC (Trion) HCRAlert!

This content is provided by Trion, a Marsh & McLennan Agency, LLC (“Trion”) in collaboration with our compliance partner, Marathas, Barrow and Weatherhead LLP. The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of Trion, our lawyers, or our clients.

This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered.

While Trion and Marathas Barrow & Weatherhead LLP strive to ensure the accuracy and completeness of these alerts, the publisher, authors, editors, and contributors of the contents are not responsible for any errors or omissions and are not obligated to provide updates on the information presented herein. Trion and Marathas Barrow & Weatherhead LLP do not control or guarantee the accessibility, accuracy, relevance, timeliness, or completeness of outside information for which links may be provided, nor do we endorse any views expressed or products or services offered by such organization or authors.

 


Posted  November 8, 2017

November 8, 2017

IRS Indicates 2015 Employer Mandate Penalty Letters Are Imminent

On November 2, 2017, the Internal Revenue Service (IRS) updated its Questions and Answers on Employer Shared Responsibility Under the Affordable Care Act (ACA) – also known as the “employer mandate”. In particular, FAQs 55 through 58 provide guidance for employers who may be subject to employer mandate payments. The FAQs indicate the IRS will begin sending penalty letters “in late 2017” to Applicable Large Employers (ALEs) that may owe penalties for calendar year 2015. Around this time last year, the IRS had indicated penalty letters for 2015 would be coming “in early 2017”; however, those letters never materialized. Based on the latest update to its FAQs, it appears the IRS has worked out the kinks in its systems and is prepared to begin sending penalty letters.

BACKGROUND

In general, there are two potential penalties (both non-deductible for tax purposes) that could be imposed on an ALE for failure to satisfy the employer mandate.

  • Under the first (4980H(a)), an ALE can be subject to a penalty if it does not offer minimum essential coverage to at least 95% of its full-time (FT) employees and their children (70% during 2015 plus, for non-calendar year plans, any 2016 calendar months within the 2015 plan year). In this case, for each month the 4980H(a) standard is not met and at least one FT employee receives a premium tax credit (PTC) for Marketplace coverage, the applicable pro-rated monthly penalty is assessed for every FT employee, minus the first 80 (minus 30 after 2015).
  • Under the second (4908H(b)), ALEs that meet the 4980H(a) standard can still be subject to a penalty if one or more FT employees are not offered minimum essential coverage that meets ACA affordability and minimum value standards and receive a PTC for Marketplace coverage. For each such employee, the applicable pro-rated monthly penalty is assessed for each month the employee receives a PTC. Total 4980H(b) penalties are limited to the amount the 4908H(a) penalties would be, if applied.

For these purposes, a FT employee is generally one that averages 30 or more hours per week and an ALE is generally an employer with 50 or more FT employees (including FT equivalents) in the prior calendar year. However, ALE transitional relief was provided for 2015 to employers with fewer than 100 FT employees (as well as for portions of non-calendar year plan years).

The annualized 4980H(a) and 4980H(b) penalties are indexed each year for inflation, as shown in the following table:

4980H(a) Annualized Penalty 4980H(b) Annualized Penalty
2014* $2,000 $3,000
2015 $2,080 $3,120
2016 $2,160 $3,240
2017 $2,260 $3,390
2018 $2,320 $3,480

*No employer mandate penalties will be assessed for 2014.

To aid the IRS in administering compliance with the employer mandate, the ACA imposes certain annual information reporting requirements on ALEs. ALEs must submit to the IRS an individual statement (Form 1095-C) for each employee who was FT for one or more months of the calendar year (and must also provide a copy to the individual). Among other things, this form indicates whether the employee was offered coverage meeting ACA minimum value standards for any months of the year, the required employee contribution (if applicable), and whether the ALE is eligible for a safe harbor or other relief for any months of the year. Along with the individual forms, ALEs are also required to submit to the IRS a transmittal cover form (Form 1094-C) with summary data about its employees and offers of coverage.

IRS PENALTY ASSESSMENT PROCESS

Step One: Notification From IRS

The FAQs indicate the IRS will use “Letter 226J” to notify ALEs of proposed penalties. If the IRS determines that one or more of an ALE’s FT employees received a PTC in 2015, the IRS’ determination of whether the ALE may be liable for a penalty is based on the information reported to the IRS on Forms 1094-C and 1095-C for 2015. In instances where reporting indicates that, for months in which FT employees received PTCs, the employees weren’t offered affordable minimum value coverage and no employer safe harbor or other relief was reported, the IRS will issue Letter 226J. According to the Q&A, among other things, the letter will include:

  • A summary table outlining proposed penalties, by month, and whether liability is under 4980H(a), 4980H(b), or neither;
  • IRS Form 14765*, which is a list, by month, of FT employees who received PTCs and for whom the ALE did not report a safe harbor or other relief on the individuals’ Forms 1095-C;
  • IRS Form 14764*, which is an employer shared responsibility response form;
  • Description of actions the ALE should take if it agrees or disagrees with the proposed penalties;
  • Description of the actions the IRS will take if the ALE does not respond timely to Letter 226J; and
  • Contact information for a specific IRS employee the ALE can contact if it has questions.

*The IRS has not yet published Forms 14764 and 14765.

Step Two: ALE Response To IRS

An ALE that receives a Letter 226J has an opportunity to respond to the IRS to contest any proposed penalties before the IRS issues a demand for payment. Letter 226J will provide instructions for how the ALE should respond in writing to either agree with the proposed penalties or disagree with part or all of the proposed penalties. The due date for responding to Letter 226J will be noted in the letter (generally 30 days from the date of the letter). If the ALE does not respond to Letter 226J, the IRS will assess the amount of the proposed penalties and issue demand for payment.

Step 3: IRS Response to ALE

If an ALE responds to a Letter 226J, the IRS will acknowledge the ALE’s response with one of five versions of “Letter 227”, which will describe any further actions the ALE may need to take. If the ALE disagrees with the proposed or revised penalties indicated in Letter 227, the ALE may request a pre-assessment conference with the IRS Office of Appeals by following the instructions provided in the letter and IRS Publication 5, Your Appeal Rights and How To Prepare a Protest if You Don’t Agree. A conference must be requested in writing by the response date noted in Letter 227 (generally 30 days from the date of the letter). If the ALE does not respond to Letter 227, the IRS will assess the amount of the proposed penalties and issue demand for payment.

Step 4: Payment of Penalties

If, after this process, the IRS determines an ALE is liable for employer mandate penalties, the IRS will issue a demand for payment via “Notice CP 220J”. Notice CP 220J will include a summary of the assessed penalties and will reflect payments made, credits applied, and the balance due, if any. The notice will also instruct the ALE how to make payment, if any. ALEs are not required to include the employer mandate penalty payment on any tax return that they file or to make payment before receiving demand for payment via Notice CP 220J. Information regarding payment options such as an installment agreement can be found in IRS Publication 594, The IRS Collection Process.

NEXT STEPS

There were several legislative efforts earlier this year to repeal and replace the ACA, including retroactively eliminating the individual and employer shared responsibility mandates, and it has been reported that Republicans may again try to repeal those mandates as part of their tax reform bill. However, to date, no such repeal bills have passed and the most recent proposed tax reform bill does not include a repeal of the mandates. In the absence of a repeal, employers should be prepared to respond to any IRS penalty letters and continue to prepare for 2017 reporting (due in 2018).

Employers that receive Letter 226J should review it carefully and consider whether there is a basis to pursue an appeal, including whether each applicable employee was FT for ACA purposes in each month for which a penalty is assessed. Employers should be mindful of the response deadline, which will generally be 30 days from the issuance date appearing on the letter, and should consider taking steps now to work with applicable internal resources and outside data vendors to set up a process to ensure they have all information necessary to submit a timely appeal of proposed penalty assessments, including payroll records and documentation regarding how offers of coverage are made. Depending on mailing delays and internal routing, an employer may have a very short timeframe before the due date to respond, so advanced planning is critical. Employers that have questions regarding Letter 226J or IRS response letters should consult with qualified benefits counsel so that the relevant facts and circumstances can be reviewed.

Employers should also be reminded that ACA Section 1558 prohibits retaliation against employees who receive PTCs. Among other things, employers are prohibited from discharging or discriminating against an employee because the employee received a premium tax credit. Employers violating Section 1558 may be required to reinstate the employee to his or her former position (and provide back pay) and may be subject to compensatory damages, costs and expenses (including attorneys’ fees) incurred by the employee in connection with the bringing of a complaint.

To-date, the brief IRS FAQs published last week are the only guidance that has been provided regarding the employer mandate penalty assessment process. Undoubtedly, there are many procedural questions yet to be asked and answered. Trion will continue to monitor this matter and update you as developments occur.

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Your Trion Strategic Account Managers are here to answer any questions you might have as you prepare to comply with ACA requirements. If you are not currently a Trion client and would like assistance navigating the changes required by health care reform, please contact us today by emailing   MBGray@Trion.com    610-207-8985


October 10. 2017

Administration Expands Contraceptive Mandate Exemptions

Late last week, the Trump administration announced new policies that will allow more employer health plan sponsors to opt out of the Affordable Care Act (ACA) contraceptive coverage mandate on the basis of religious or moral objections. The changes, which take effect immediately, were released jointly by the Internal Revenue Service and Departments of Labor and Health and Human Services (“the Departments”) in  interim final rules regarding Religious Exemptions and Accommodations and Moral Exemptions and Accommodations for coverage of certain preventive services under the ACA.

Background

The ACA requires that non-grandfathered health plans provide coverage without participant cost sharing for preventive care services recommended by the U.S. Preventive Care Task Force with a rating of A or B, immunizations recommended by the CDC Advisory Committee on Immunization Practices, and children’s and women’s care guidelines supported by HHS. The guidelines adopted by HHS related to women’s preventive care include coverage of all FDA-approved contraceptive methods.

The contraceptive mandate has long been opposed by religious organizations and has been the subject of litigation for several years. In response, the Obama administration introduced regulations that grant an exception to the mandate for houses of worship and religious orders and grant an accommodation for religiously-affiliated non-profit groups and closely-held for-profit entities with religious objections to providing coverage for some or all contraceptive services. Under the accommodation, the employer is exempt from contracting, providing, paying or referring for such services, but coverage must still be made available at no cost to participants by the plan insurer or TPA.

New Rules

  • The newly issued rules broaden the contraceptive mandate exemption to include a much wider array of non-governmental employers:
    • Houses of worship and religious orders, non-profit organizations, for-profit entities, institutions of higher learning (in their arrangement of student health plans), and any other non-governmental employers that object based on sincerely held religious beliefs are exempt.
    • Non-profit organizations, for-profit entities that have no publicly traded ownership interests, and institutions of higher learning (in their arrangement of student health plans) that object based on sincerely held moral convictions but not religious beliefs are exempt.
  • The existing accommodation is changed to an optional process available to exempt organizations that choose it.
  • Plan sponsors are permitted to offer a separate benefit option to any individual who objects to having coverage for contraceptive services based on sincerely held religious beliefs or moral convictions; however, plan sponsors are not required to do so.

Relatively speaking, the new rules may have limited impact, as a majority of employers have no objections to covering birth control. According to a study commissioned by the Obama administration, more than 55 million women have access to birth control without co-payments because of the contraceptive coverage mandate. The approximately 200 employers that have been involved in suing the government over the mandate account for about 120,000 female health plan members.

Advocates for religious groups view the new rules as a big step forward in the years-long legal fight over contraceptive coverage. Women’s health and civil rights advocates, on the other hand, are voicing strong opposition to the new rules and are poised to take legal action of their own to try to block the changes. The American Civil Liberties Union filed a suit in federal court on Friday challenging the rules and the National Women’s Law Center and attorneys general in California and Massachusetts have already indicated they intend to do the same. Trion will continue to monitor the debate and update you as new developments occur.

I am here to answer any questions you might have as you prepare to comply with upcoming ACA requirements. If you are not currently a Trion client and would like assistance navigating the changes required by health care reform, please contact Marybeth Gray @   610-945-1270  or  MBGray@Trion.com

About Trion Group, a Marsh & McLennan Agency, LLC (Trion) HCRAlert!

This content is provided by Trion Group, a Marsh & McLennan Agency, LLC Company (Trion) in collaboration with our compliance partner, Marathas, Barrow and Weatherhead LLP (“MB&W”), a premier employee benefits, executive compensation and employment law firm. The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of Trion, our lawyers, or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered.

While Trion and MB&W strive to ensure the accuracy and completeness of these alerts, the publisher, authors, editors, and contributors of the contents are not responsible for any errors or omissions and are not obligated to provide updates on the information presented herein. Trion and MB&W do not control or guarantee the accessibility, accuracy, relevance, timeliness, or completeness of outside information for which links may be provided, nor do we endorse any views expressed or products or services offered by such organization or authors.

The Patient Protection and Affordable Care Act (“PPACA”) is a complex law. Any statements made by Trion concerning tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as accounting, tax, or legal advice. Those reading this alert are encouraged to seek direct counsel from your own tax, accounting and legal advisers as to whether your policies and procedures, health plans, and employee contribution requirements are compliant with the PPACA and with any other questions you have regarding this law.

© 2017 Trion Group, a Marsh & McLennan Agency, LLC Company. All Rights Reserved.
© 2017 Marathas Barrow & Weatherhead LLP. All Rights Reserved.

Sept 20,2017

To read more – click the “News Alert” tab

Medicare Part D Creditable Coverage Notice Deadline is October 14, 2017


Court Requires EEOC to Substantiate 30% Limit on Wellness Program Incentives

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Click on the links below

1) May 17 2017 PCORI Fees Due by July 31, 2017

2) May 15 2017 IRS Announces Reduced ACA Health Plan Affordability Threshold for 2018

3)May 11, 2017 House Republicans Pass American Health Care Act