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Do you offer coverage to your employees through a self-insured group health plan? Do you sponsor a Health Reimbursement Arrangement (HRA)? If so, do you know whether your plan or HRA is subject to the annual Patient-Centered Research Outcomes Institute (PCORI) fee?

This article answers frequently-asked questions about the PCORI fee, which plans are affected, and what you need to do as the employer sponsor. PCORI fees for 2017 health plans and HRAs are due July 31, 2018.

What is the PCORI fee?

The Affordable Care Act (ACA) created the Patient-Centered Outcomes Research Institute to study clinical effectiveness and health outcomes. To finance the nonprofit institute’s work, a small annual fee is charged on health plans.

Most employers do not have to take any action, because most employer-sponsored health plans are provided through group insurance contracts. For insured plans, the carrier is responsible for the PCORI fee and the employer has no duties.

If, however, you are an employer that self-insures a health plan or an HRA, it is your responsibility to determine whether PCORI applies and, if so, to calculate, report, and pay the fee.

The annual PCORI fee is equal to the average number of lives covered during the health plan year, multiplied by the applicable dollar amount:

  • If the plan year end date was between January 1 and September 30, 2017: $2.26.
  • If the plan year end date was between October 1 and December 31, 2017: $2.39.

Payment is due by July 31 following the end of the calendar year in which the plan year ended. Therefore, for plan years ending in 2017, payment is due no later than July 31, 2018.

Does the PCORI fee apply to all health plans?

The fee applies to all health plans and HRAs, excluding the following:

  • Plans that primarily provide “excepted benefits” (e.g., stand-alone dental and vision plans, most health flexible spending accounts with little or no employer contributions, and certain supplemental or gap-type plans).
  • Plans that do not provide significant benefits for medical care or treatment (e.g., employee assistance, disease management, and wellness programs).
  • Stop-loss insurance policies.
  • Health savings accounts (HSAs).

The IRS provides a helpful chart indicating the types of health plans that are, or are not, subject to the PCORI fee.

If I have multiple self-insured plans, does the fee apply to each one?

Yes. For instance, if you self-insure one medical plan for active employees and another medical plan for retirees, you will need to calculate, report, and pay the fee for each plan. There is an exception, though, for “multiple self-insured arrangements” that are sponsored by the same employer, cover the same participants, and have the same plan year. For example, if you self-insure a medical plan with a self-insured prescription drug plan, you would pay the PCORI fee only once with respect to the combined plan.

Does the fee apply to HRAs?

Yes. The PCORI fee applies to HRAs, which are self-insured health plans, although the fee is waived in some cases. If you self-insure another plan, such as a major medical or high deductible plan, and the HRA is merely a component of that plan, you do not have to pay the PCORI fee separately for the HRA. In other words, when the HRA is integrated with another self-insured plan, you only pay the fee once for the combined plan.

On the other hand, if the HRA stands alone, or if the HRA is integrated with an insured plan, you are responsible for paying the fee for the HRA.

What about QSEHRAs? Does the fee apply?

Yes. A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is new type of tax-advantaged arrangement that allows small employers to reimburse certain health costs for their workers. Although a QSEHRA is not the same as an HRA, and the rules applying to each type are very different, a QSEHRA is a self-insured health plan for purposes of the PCORI fee. In late 2017, the IRS released guidance confirming that small employers that offer QSEHRAs must calculate, report and pay the PCORI fee.

Can I use ERISA plan assets or employee contributions to pay the fee?

No. The PCORI fee is an employer expense and not a plan expense, so you cannot use ERISA plan assets or employee contributions to pay the fee. An exception is allowed for certain multi-employer plans (e.g., union trusts) subject to collective bargaining. Since the fee is paid by the employer as a business expense, it is tax deductible.

How do I calculate the fee?

Multiply $2.26 or $2.39 (depending on the date the plan year ended in 2017) times the average number of lives covered during the plan year. “Covered lives” are all participants, including employees, dependents, retirees, and COBRA enrollees. You may use any one of the following counting methods to determine the average number of lives:

  • Average Count Method: Count the number of lives covered on each day of the plan year, then divide by the number of days in the plan year.
  • Snapshot Method: Count the number of lives covered on the same day each quarter, then divide by the number of quarters (e.g., four). Or count the lives covered on the first of each month, then divide by the number of months (e.g., 12). This method also allows the option — called the “snapshot factor method” — of counting each primary enrollee (e.g., employee) with single coverage as “1” and counting each primary enrollee with family coverage as “2.35.”
  • Form 5500 Method: Add together the “beginning of plan year” and “end of plan year” participant counts reported on the Form 5500 for the plan year. There is no need to count dependents using this method since the IRS assumes the sum of the beginning and ending of year counts is close enough to the total number of covered lives. If the plan is employee-only without dependent coverage, divide the sum by 2. (If Form 5500 for the plan year ending in 2017 is not filed by July 31, 2018, you cannot use this counting method.)

For an HRA, count only the number of primary participants (employees) and disregard any dependents.

How do I report and pay the fee?

Use Form 720, Quarterly Excise Tax Return, to report and pay the annual PCORI fee. Report all information for self-insured plan(s) with plan year ending dates in 2017 on the same Form 720. Do not submit more than one Form 720 for the same period with the same Employer Identification Number (EIN), unless you are filing an amended return.

The IRS provides Instructions for Form 720. Here is a quick summary of the items for PCORI:

  • Fill in the employer information at the top of the form.
  • In Part II, complete line 133(c) and/or line 133(d), as applicable, depending on the plan year ending date(s). If you are reporting multiple plans on the same line, combine the information.
  • In Part II, complete line 2 (total).
  • In Part III, complete lines 3 and 10.
  • Sign and date Form 720 where indicated.
  • If paying by check or money order, also complete the payment voucher (Form 720-V) provided on the last page of Form 720. Be sure to fill in the circle for “2nd Quarter.” Refer to the Instructions for mailing information.

Caution! Before taking any action, confirm with your tax department or controller whether your organization files Form 720 for any purposes other than the PCORI fee. For instance, some employers use Form 720 to make quarterly payments for environmental taxes, fuel taxes, or other excise taxes. In that case, do not prepare Form 720 (or the payment voucher), but instead give the PCORI fee information to your organization’s tax preparer to include with its second quarterly filing.

Summary

If you self-insure one or more health plans or sponsor an HRA, you may be responsible for calculating, reporting, and paying annual PCORI fees. The fee is based on the average number of lives covered during the health plan year. The IRS offers a choice of three different counting methods to calculate the plan’s average covered lives. Once you have determined the count, the process for reporting and paying the fee using Form 720 is fairly simple. For plan years ending in 2017, the deadline to file Form 720 and make your payment is July 31, 2018.

Originally posted on thinkhr.com

The Department of Labor’s new claim rules for disability benefits took effect April 2, 2018. The changes were announced over a year ago, but the effective date was delayed to give insurers, employers, and plan administrators adequate time for implementation. Although we’ve reported on the key issues in this blog previously, now seems like a good time for a refresher on how the new rules affect employer plans.

Affected Plans

The new claim rules apply to disability benefits provided under plans covered by the Employee Retirement Income Security Act (ERISA); that is, plans sponsored by private-sector employers. Then the new rules apply if the ERISA plan must make a determination of disability in order for the claimant to obtain the benefit. Group short- and long-term disability plans are the most common examples, but pension, 401(k), and deferred compensation plans also may be affected.

Many plans do not make their own determination of disability, but instead condition the plan’s benefit on another party’s determination. For instance, employer plans that base the benefit on a disability determination made by the Social Security Administration (SSA) are not affected by the new rules.

New Rules

For ERISA plans affected by the new rules, the following additional requirements apply to disability claims filed on or after April 2, 2018:

  • Disclosure Requirements: Benefit denial notices must explain why the plan denied a claim and the standards used in making the decision. For example, the notices must explain the basis for disagreeing with a disability determination made by the SSA if presented by the claimant in support of his or her claim.
  • Claim Files and Internal Protocols: Benefit denial notices must include a statement that the claimant is entitled to request and receive the entire claim file and other relevant documents. (Previously this statement was required only in notices denying benefits on appeal, not on initial claim denials.) The notice also must include the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were used in denying a claim or a statement that none were used. (Previously it was optional to include a statement that such rules and protocols were used in denying the claim and that the claimant could request a copy.)
  • Right to Review and Respond to New Information Before Final Decision: Plans are prohibited from denying benefits on appeal based on new or additional evidence or rationales that were not included when the benefit was denied at the claims stage, unless the claimant is given notice and a fair opportunity to respond.
  • Conflicts of Interest: Claims and appeals must be adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. For example, a claims adjudicator or medical or vocational expert could not be hired, promoted, terminated or compensated based on the likelihood of the person denying benefit claims.
  • Deemed Exhaustion of Claims and Appeal Processes: If plans do not adhere to all claims processing rules, the claimant is deemed to have exhausted the administrative remedies available under the plan (unless exceptions for minor errors or other conditions apply). In that case, the claimant may immediately pursue his or her claim in court. Plans also must treat a claim as re-filed on appeal upon the plan’s receipt of a court’s decision rejecting the claimant’s request for review.
  • Coverage Rescissions: Rescissions of coverage, including retroactive terminations due to alleged misrepresentations or errors in applying for coverage, must be treated as adverse benefit determinations that trigger the plan’s appeals procedures.
  • Notices Written in a Culturally and Linguistically Appropriate Manner: Benefit denial notices must be provided in a culturally and linguistically appropriate manner in certain situations. Specifically, if the claimant’s address is in a county where 10 percent or more of the population is literate only in the same non-English language, the notices must include a prominent statement in the relevant non-English language about the availability of language services. The plan would also be required to provide a verbal customer assistance process in the non-English language and provide written notices in the non-English language upon request.

Action Steps for Employers

Employers are reminded to work with their carriers, third-party administrators, and advisors to make sure their plans comply with the new requirements. Consider these steps:

  • Identify all plans that are subject to ERISA. (Plans sponsored by governmental employers, such as cities and public school districts, and certain church plans, are exempt from ERISA.)
  • Does the ERISA plan provide any benefit based on disability? If so, is the benefit conditioned on a determination of disability made by the plan or by another party, such as Social Security?
  • For insured plans, such as group STD and LTD insurance plans, the carrier generally is responsible for compliance with ERISA’s claim rules. The employer, however, does have a duty to make reasonable efforts to ensure the carrier is complying.
  • For self-funded plans, the employer is responsible for compliance. Although the employer may engage the services of a third-party claims administrator, the employer remains responsible for the plan’s compliance with all rules.

Originally Published By ThinkHR.com

Q. Can we provide summary plan descriptions (SPDs) electronically?

A. Yes. However, just sending them is not enough to meet ERISA requirements; you must ensure the intended recipients are actually getting them.

Specifically, ERISA requires SPDs to be furnished using “measures reasonably calculated to ensure actual receipt of the material” via “methods likely to result in full distribution.” Electronic delivery is one way to meet this requirement.

Any electronically delivered documents must be “prepared and furnished in a manner consistent with applicable style, format, and content requirements.” Therefore, it is a good idea to test the electronic document and make sure formatting and style are correct.

Unlike first class mail or hand-delivery options, electronic delivery does not work the same for all recipients. Instead compliance differs depending on whether the recipients:

  • Can access the SPD through the employer’s electronic information system (such as email or intranet) located where they are reasonably expected to perform duties: Members in this group must use the employer’s computer system as an integral part of those duties. This covers employees working from home or who are traveling as well.
  • Cannot access the SPD through employer’s electronic information system in their workspace (access to a kiosk in a workplace common area is not sufficient). This may include employees as well as non-employees such as COBRA participants, retirees, terminated participants with vested benefits, beneficiaries, and alternate payees: Members of this group must “affirmatively consent” to receive the documents electronically, provide an electronic address, and “reasonably demonstrate” their ability to access documents in electronic form.

Both groups of recipients must be notified of their rights to receive paper copies of the documents (at no charge), and reasonable and appropriate steps must be taken to safeguard confidentiality of personal information related to accounts and benefits. A best practice is for employers to ensure return-receipt or notice of undelivered mail features are enabled. Employers may conduct periodic reviews or surveys to confirm receipt as well.

Just emailing the documents or posting them on the company’s intranet or benefit administration portal is not enough. Each time an electronic document is furnished, a notice (electronic or paper) must be provided to each recipient describing the significance of the document.

Originally Published By www.thinkhr.com

In its March 15, 2018, decision, the U.S. Court of Appeals for the Fifth Circuit overturned the U.S. Department of Labor’s (DOL) Fiduciary Rule that expanded the definition of an investment advice fiduciary under the federal Employee Retirement Income Security Act (ERISA). Under the Fiduciary Rule, investment brokers were going to be required to put the interest of their clients before their own when advising about individual retirement accounts (IRA) and 401(k) plans. Read our blog post on the rule from April 11, 2016.

According to the Fifth Circuit’s decision, “[t]he Fiduciary Rule … bears hallmarks of ‘unreasonableness’ … and arbitrary and capricious exercises of administrative power.” In other words, the court found that the DOL exceeded its authority with the Fiduciary Rule. Additionally, through its ruling, the court agreed with the plaintiffs’ claims that “the Rule is inconsistent with the governing statutes, the DOL overreached to regulate services and providers beyond its authority, the DOL’s imposed legally unauthorized contract terms to enforce the new regulations, the Rule violates the First Amendment, and it is arbitrary and capricious in the treatment of variable and fixed indexed annuities.”

For the time being, the Fiduciary Rule has been overturned, but the issue may be pursued in the U.S. Supreme Court, which has the authority to overturn the Fifth Circuit’s decision.

Originally Published By ThinkHR.com

On October 12, 2017, the White House released an Executive Order, signed by President Trump, titled “Promoting Healthcare Choice and Competition Across the United States.”

It is important to note that the Executive Order (EO) does not implement any new laws or regulations, but instead directs various federal agencies to explore options relating to association health plans, short term limited-duration coverage (STLDI), and health reimbursement arrangements (HRAs), within the next 60 to 120 days.

The Department of Labor is ordered to explore expansion of association health plans (AHPs) by broadening the scope of ERISA to allow employers within the same line of business across the country to join together in a group health plan. The EO notes employers will not be permitted to exclude employees from an AHP or develop premiums based on health conditions. The Secretary of Labor has 60 days to consider proposing regulations or revising guidance.

Practically speaking, this type of expansion would require considerable effort with all state departments of insurance and key stakeholders across the industry. Employers should not wait to make group health plan decisions based on the EO, as it will take time for even proposed regulations to be developed.

The Department of the Treasury, Department of Labor, and Department of Health and Human Services (the agencies) are directed to consider expanding coverage options from STLDI, which are often much less expensive than Marketplace plans or employer plans. These plans are popular with individuals who are in and outside of the country or who are between jobs. The Secretaries of these agencies have 60 days to consider proposing regulations or revising guidance.

Finally, the EO directs the same three agencies to review and consider changing regulations for HRAs so employers have more flexibility when implementing them for employees. This could lead to an expanded use of HRA dollars for employees, such as for premiums. However, employers should not make any changes to existing HRAs until regulations are issued at a later date. The Secretaries have 120 days to consider proposing regulations or revising guidance.

By Danielle Capilla
Originally Published By United Benefit Advisors

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires group health plans to provide notices to covered employees and their families explaining their COBRA rights when certain events occur. The initial notice, also referred to as the general notice, communicates general COBRA rights and obligations to each covered employee (and his or her spouse) who becomes covered under the group health plan. This notice is issued by the plan administrator within the first 90 days when coverage begins under the group health plan and informs the covered employee (and his or her spouse) of the responsibility to notify the employer within 60 days if certain qualifying events occur in the future.

The initial notice must include the following information:

  • The plan administrator’s contact information
  • A general description of the continuation coverage under the plan
  • An explanation of the covered employee’s notice obligations, including notice of
    • The qualifying events of divorce, legal separation, or a dependent’s ceasing to be a dependent
    • The occurrence of a second qualifying event
    • A qualified beneficiary’s disability (or cessation of disability) for purposes of the disability extension)
  • How to notify the plan administrator about a qualifying event
  • A statement that that the notice does not fully describe continuation coverage or other rights under the plan, and that more complete information regarding such rights is available from the plan administrator and in the plan’s summary plan description (SPD)

As a best practice, the initial notice should also:

  • Direct qualified beneficiaries to the plan’s most recent SPD for current information regarding the plan administrator’s contact information.
  • For plans that include health flexible spending arrangements (FSAs), disclose the limited nature of the health FSA’s COBRA obligations (because certain health FSAs are only obligated to offer COBRA through the end of the year to qualified beneficiaries who have underspent accounts).
  • Explain that the spouse may notify the plan administrator within 60 days after the entry of divorce or legal separation (even if an employee reduced or eliminated the spouse’s coverage in anticipation of the divorce or legal separation) to elect up to 36 months of COBRA coverage from the date of the divorce or legal separation.
  • Define qualified beneficiary to include a child born to or placed for adoption with the covered employee during a period of COBRA continuation coverage.
  • Describe that a covered child enrolled in the plan pursuant to a qualified medical child support order during the employee’s employment is entitled to the same COBRA rights as if the child were the employee’s dependent child.
  • Clarify the consequences of failing to submit a timely qualifying event notice, timely second qualifying event notice, or timely disability determination notice.

Practically speaking, the initial notice requirement can be satisfied by including the general notice in the group health plan’s SPD and then issuing the SPD to the employee and his or her spouse within 90 days of their group health plan coverage start date.

If the plan doesn’t rely on the SPD for furnishing the initial COBRA notice, then the plan administrator would follow the U.S. Department of Labor (DOL) rules for delivery of ERISA-required items. A single notice addressed to the covered employee and his or her spouse is allowed if the spouse lives at the same address as the covered employee and coverage for both the covered employee and spouse started at the time that notice was provided. The plan administrator is not required to provide an initial notice for dependents.

By Danielle Capilla
Originally Posted By www.ubabenefits.com

Cafeteria plans, or plans governed by IRS Code Section 125, allow employers to help employees pay for expenses such as health insurance with pre-tax dollars. Employees are given a choice between a taxable benefit (cash) and two or more specified pre-tax qualified benefits, for example, health insurance. Employees are given the opportunity to select the benefits they want, just like an individual standing in the cafeteria line at lunch.

Only certain benefits can be offered through a cafeteria plan:

  • Coverage under an accident or health plan (which can include traditional health insurance, health maintenance organizations (HMOs), self-insured medical reimbursement plans, dental, vision, and more);
  • Dependent care assistance benefits or DCAPs
  • Group term life insurance
  • Paid time off, which allows employees the opportunity to buy or sell paid time off days
  • 401(k) contributions
  • Adoption assistance benefits
  • Health savings accounts or HSAs under IRS Code Section 223

Some employers want to offer other benefits through a cafeteria plan, but this is prohibited. Benefits that you cannot offer through a cafeteria plan include scholarships, group term life insurance for non-employees, transportation and other fringe benefits, long-term care, and health reimbursement arrangements (unless very specific rules are met by providing one in conjunction with a high deductible health plan). Benefits that defer compensation are also prohibited under cafeteria plan rules.

Cafeteria plans as a whole are not subject to ERISA, but all or some of the underlying benefits or components under the plan can be. The Patient Protection and Affordable Care Act (ACA) has also affected aspects of cafeteria plan administration.

Employees are allowed to choose the benefits they want by making elections. Only the employee can make elections, but they can make choices that cover other individuals such as spouses or dependents. Employees must be considered eligible by the plan to make elections. Elections, with an exception for new hires, must be prospective. Cafeteria plan selections are considered irrevocable and cannot be changed during the plan year, unless a permitted change in status occurs. There is an exception for mandatory two-year elections relating to dental or vision plans that meet certain requirements.

Plans may allow participants to change elections based on the following changes in status:

  • Change in marital status
  • Change in the number of dependents
  • Change in employment status
  • A dependent satisfying or ceasing to satisfy dependent eligibility requirements
  • Change in residence
  • Commencement or termination of adoption proceedings

Plans may also allow participants to change elections based on the following changes that are not a change in status but nonetheless can trigger an election change:

  • Significant cost changes
  • Significant curtailment (or reduction) of coverage
  • Addition or improvement of benefit package option
  • Change in coverage of spouse or dependent under another employer plan
  • Loss of certain other health coverage (such as government provided coverage, such as Medicaid)
  • Changes in 401(k) contributions (employees are free to change their 401(k) contributions whenever they wish, in accordance with the administrator’s change process)
  • HIPAA special enrollment rights (contains requirements for HIPAA subject plans)
  • COBRA qualifying event
  • Judgment, decrees, or orders
  • Entitlement to Medicare or Medicaid
  • Family Medical Leave Act (FMLA) leave
  • Pre-tax health savings account (HSA) contributions (employees are free to change their HSA contributions whenever they wish, in accordance with the their payroll/accounting department process)
  • Reduction of hours (new under the ACA)
  • Exchange/Marketplace enrollment (new under the ACA)

Together, the change in status events and other recognized changes are considered “permitted election change events.”

Common changes that do not constitute a permitted election change event are: a provider leaving a network (unless, based on very narrow circumstances, it resulted in a significant reduction of coverage), a legal separation (unless the separation leads to a loss of eligibility under the plan), commencement of a domestic partner relationship, or a change in financial condition.

There are some events not in the regulations that could allow an individual to make a mid-year election change, such as a mistake by the employer or employee, or needing to change elections in order to pass nondiscrimination tests. To make a change due to a mistake, there must be clear and convincing evidence that the mistake has been made. For instance, an individual might accidentally sign up for family coverage when they are single with no children, or an employer might withhold $100 dollars per pay period for a flexible spending arrangement (FSA) when the individual elected to withhold $50.

Plans are permitted to make automatic payroll election increases or decreases for insignificant amounts in the middle of the plan year, so long as automatic election language is in the plan documents. An “insignificant” amount is considered one percent or less.

Plans should consider which change in status events to allow, how to track change in status requests, and the time limit to impose on employees who wish to make an election.

Cafeteria plans are not required to allow employees to change their elections, but plans that do allow changes must follow IRS requirements. These requirements include consistency, plan document allowance, documentation, and timing of the election change. For complete details on each of these requirements—as well as numerous examples of change in status events, including scenarios involving employees or their spouses or dependents entering into domestic partnerships, ending periods of incarceration, losing or gaining TRICARE coverage, and cost changes to an employer health plan—request UBA’s ACA Advisor, “Cafeteria Plans: Qualifying Events and Changing Employee Elections”.

By Danielle Capilla
Originally published by www.ubabenefits.com

On December 13, 2016, former President Obama signed the 21st Century Cures Act into law. The Cures Act has numerous components, but employers should be aware of the impact the Act will have on the Mental Health Parity and Addiction Equity Act, as well as provisions that will impact how small employers can use health reimbursement arrangements (HRAs). There will also be new guidance for permitted uses and disclosures of protected health information (PHI) under the Health Insurance Portability and Accountability Act (HIPAA). We review the implications with HRAs below; for a discussion of all the implications, view UBA’s Compliance Advisor, “21st Century Cares Act”.

The Cures Act provides a method for certain small employers to reimburse individual health coverage premiums up to a dollar limit through HRAs called “Qualified Small Employer Health Reimbursement Arrangements” (QSE HRAs). This provision will go into effect on January 1, 2017.

Previously, the Internal Revenue Service (IRS) issued Notice 2015-17 addressing employer payment or reimbursement of individual premiums in light of the requirements of the Patient Protection and Affordable Care Act (ACA). For many years, employers had been permitted to reimburse premiums paid for individual coverage on a tax-favored basis, and many smaller employers adopted this type of an arrangement instead of sponsoring a group health plan. However, these “employer payment plans” are often unable to meet all of the ACA requirements that took effect in 2014, and in a series of Notices and frequently asked questions (FAQs) the IRS made it clear that an employer may not either directly pay premiums for individual policies or reimburse employees for individual premiums on either an after-tax or pre-tax basis. This was the case whether payment or reimbursement is done through an HRA, a Section 125 plan, a Section 105 plan, or another mechanism.

The Cures Act now allows employers with less than 50 full-time employees (under ACA counting methods) who do not offer group health plans to use QSE HRAs that are fully employer funded to reimburse employees for the purchase of individual health care, so long as the reimbursement does not exceed $4,950 annually for single coverage, and $10,000 annually for family coverage. The amount is prorated by month for individuals who are not covered by the arrangement for the entire year. Practically speaking, the monthly limit for single coverage reimbursement is $412, and the monthly limit for family coverage reimbursement is $833. The limits will be updated annually.

Impact on Subsidy Eligibility. For any month an individual is covered by a QSE HRA/individual policy arrangement, their subsidy eligibility would be reduced by the dollar amount provided for the month through the QSE HRA if the QSE HRA provides “unaffordable” coverage under ACA standards. If the QSE HRA provides affordable coverage, individuals would lose subsidy eligibility entirely. Caution should be taken to fully education employees on this impact.

COBRA and ERISA Implications. QSE HRAs are not subject to COBRA or ERISA.

Annual Notice Requirement. The new QSE HRA benefit has an annual notice requirement for employers who wish to implement it. Written notice must be provided to eligible employees no later than 90 days prior to the beginning of the benefit year that contains the following:

  • The dollar figure the individual is eligible to receive through the QSE HRA
  • A statement that the eligible employee should provide information about the QSE HRA to the Marketplace or Exchange if they have applied for an advance premium tax credit
  • A statement that employees who are not covered by minimum essential coverage (MEC) for any month may be subject to penalty

Recordkeeping, IRS Reporting. Because QSE HRAs can only provide reimbursement for documented healthcare expense, employers with QSE HRAs should have a method in place to obtain and retain receipts or confirmation for the premiums that are paid with the account. Employers sponsoring QSE HRAs would be subject to ACA related reporting with Form 1095-B as the sponsor of MEC. Money provided through a QSE HRA must be reported on an employee’s W-2 under the aggregate cost of employer-sponsored coverage. It is unclear if the existing safe harbor on reporting the aggregate cost of employer-sponsored coverage for employers with fewer than 250 W-2s would apply, as arguably many of the small employers eligible to offer QSE HRAs would have fewer than 250 W-2s.

Individual Premium Reimbursement, Generally. Outside of the exception for small employers using QSE HRAs for reimbursement of individual premiums, all of the prior prohibitions from IRS Notice 2015-17 remain. There is no method for an employer with 50 or more full time employees to reimburse individual premiums, or for small employers with a group health plan to reimburse individual premiums. There is no mechanism for employers of any size to allow employees to use pre-tax dollars to purchase individual premiums. Reimbursing individual premiums in a non-compliant manner will subject an employer to a penalty of $100 a day per individual they provide reimbursement to, with the potential for other penalties based on the mechanism of the non-compliant reimbursement.

By Danielle Capilla
Originally published by www.ubabenefits.com

By Jennifer Kupper
In-house Counsel & Compliance Officer for iaCONSULTING, a UBA Partner Firm

BenefitPlanForm 5500 is the annual report that group benefit plans use to report required information about the plan’s financial condition and operations. Most group and pension plans that are subject to ERISA are required to file a Form 5500. With the July 31 deadline for calendar year plans fast approaching, and higher penalties for not filing taking effect in August, this is a good time to review this important plan filing.

What is a Form 5500?

Generally, the Department of Labor (DOL), the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) all require an annual benefit plan report filing, although there are many exemptions. A single annual report, known as a Form 5500 or Form 5500-SF, satisfies all three. It includes basic plan, sponsor, and administrator identifying information, the type of annual report being filed, and any related Schedules as attachments to the Form 5500.

Who must file the Form 5500?

Form 5500 is needed for both qualified retirement plans and group welfare plans. For this article, we’ll focus on group welfare plans, which include plans that provide medical, prescription drug, dental, vision, long term and short term disability, group term life insurance, health flexible spending accounts, accidental death and dismemberment benefits, long term care, formal severance policies, and telehealth. While other plans may also be considered welfare plans, these are the most common.

Group welfare plans generally must file Form 5500 if:

  • The plan is fully insured and had 100 or more participants on the first day of the plan year (dependents are not considered “participants” unless they are covered because of a Qualified Medical Child Support Order).
  • The plan is self-funded and it uses a trust, no matter how many participants it has.
  • The plan is self-funded and it relies on the Section 125 plan exemption, if it had 100 or more participants on the first day of the plan year.
Are there exemptions?

Yes, there are several exemptions to Form 5500 filing. The most notable are:

  • Church plans defined under ERISA section 3(33)
  • Government plans, including tribal government plans
  • “Top hat” plans that are unfunded or insured and benefit only a select group of management or highly compensated employees.
  • Small insured or unfunded welfare plans. This includes plans with fewer than 100 participants (including qualified former employees and COBRA beneficiaries) at the beginning of the plan year that are fully insured, entirely unfunded, or a combination of both. An unfunded plan has its benefits paid as needed directly from the general assets of the sponsoring organization.
How many Forms 5500 must be filed?

Generally, the number of Forms 5500 depends on the number of ERISA benefits the sponsor maintains, whether those ERISA benefits are combined into one plan, and whether the sponsor is part of a controlled group or is part of a multiemployer welfare arrangement (MEWA).

The plan’s governing documents and operations determine whether benefits are being provided under a single plan and can be reported on one Form 5500. The Summary Plan Description (SPD), required by ERISA, is a document which designates the ERISA plan number and can be used to bundle multiple benefit lines into a single plan for Form 5500 filing purposes.

When must Form 5500 be filed?

A plan’s Form 5500 must be filed by the last day of the seventh month after the close of the plan year. The filing date is based on the “plan year,” which is designated in the SPD or other governing document. If a plan does not have a SPD, the plan year defaults to the policy year.

For calendar year plans, the due date for the Form 5500 is July 31. Employers may obtain an automatic 2-1/2 month extension by filing Form 5558 by the due date of the Form 5500.

Can the Form 5500 be amended?

Yes, it is recommended that the plan sponsor file an amendment for any of the following situations:

  • The original filing omitted a benefit
  • The original filing created a gap in benefit reporting
  • The Schedule A forms were updated with a 10 percent or more increase in commissions or premiums than originally reported by the carrier
  • Mandatory information critical to the report was incorrect or omitted
What happens if the plan has failed to file a Form 5500?

Penalties!! Under ERISA Section 502, the Secretary of Labor may assess civil penalties of up to $1,100 per day against a plan administrator who fails or refuses to file Form 5500. The DOL is able to assess penalties in connection with Form 5500 failures reaching as far back as the 1988 plan year. Penalties are based on whether the Form 5500 was incomplete, deficient, filed untimely or never filed, and if there was willful disregard for refusing to file.

The current penalty for failure or refusal of a plan administrator to file a Form 5500 is up to $1,100 per day. In August 2016, those penalties will increase from $1,100 per day to $2,063 per day, regardless of whether the violation occurred before or after August 2016. If an annual report is rejected for failure to provide material information, it is treated as not having been filed.

In order to encourage sponsors to file, the DOL created the Delinquent Filer Voluntary Compliance Program (DFVCP). It was created as a means for sponsors to “self-report” their non-compliance, and includes a monetary incentive. If a plan sponsor qualifies for the DFVC Program, the penalties are reduced significantly to $10 per day for the first 199 days. If the plan is within a year of being late, the penalty it is capped at $2,000 per plan. If the plan is more than a year late in filing, there is a $4,000 per plan cap.

If the DOL notifies a plan sponsor of its failure to file a Form 5500 or of the assessment of penalties for failure to file, the plan sponsor is no longer eligible to participate in the DFVCP. Penalties may be assessed for the date the reports were initial due, not the date the sponsor was notified of its delinquency.

It is important to note that criminal sanctions and imprisonment are also possible for willful violations of the reporting and disclosure requirements.

As an example, Employer A and Employer B both sponsor a fully insured medical plan and group term life (GTL) plan for their employees. Each employer has the same number of participants in their medical and GTL plans: 75 participants in the medical plan, and 150 participants in the GTL plan.

The plan year for Employer A’s medical plan is December 1 through November 30. The GTL plan is on a calendar year contract. Employer A does not have an SPD wrap document combining these two plans. Employer A does not have to file a Form 5500 for the medical plan because it is fully insured and has fewer than 100 participants. However, it must file Form 5500 for the GTL plan because it has more than 100 participants. Since the GTL plan is on a calendar year (January 1 to December 31) contract, its Form 5500 is due by July 31, the end of the seventh month following the last day of the plan year.

Employer B, on the other hand, has an SPD wrap document which combines the medical and GTL plans into the same ERISA plan year and plan number. The employer chose that plan year to align with the medical plan’s December 1 – November 30 contract year. In this case, Employer B must file a single Form 5500 for both the medical and GTL benefits information because at least one of the plans has more than 100 participants. Its Form 5500 is due by June 30.

Employers should note that government agencies recently proposed significant changes to Form 5500 reporting, and should ensure they stay up to date on requirements as they change.

Read more here …

By Danielle Capilla
Chief Compliance Officer at United Benefit Advisors

The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires employers to offer covered employees who lose their health benefits due to a qualifying event to continue group health benefits for a limited time at the employee’s own cost. COBRA provisions are found in the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code (Code), and the Public Health Service Act (PHSA). Employers with 20 or more employees and group health plans are subject to COBRA provisions. Most governmental plans, church plans, and certain plans of Indian tribal governments are exempt from COBRA. Employers should always consult with counsel about state continuation laws that are similar to COBRA and apply to small employers.

Only seven events can trigger COBRA obligations and offers of coverage. They are:

  • Termination of employment
  • Reduction of hours
  • Divorce or legal separation
  • Death of the covered employee
  • A dependent child ceasing to be a dependent under the plan
  • Entitlement to Medicare
  • Bankruptcy

These events must lead to an individual’s loss of coverage. For example, if a reduction of hours or entitlement to Medicare did not result in an employee’s loss of benefit eligibility, there would be no obligation to offer COBRA coverage. Conversely, employees might experience a loss of coverage that does not trigger COBRA; for example if they fail to pay their portion of the premium or their employer stops offering coverage to spouses.

Affordable Care Act Impact on COBRA

The Patient Protection and Affordable Care Act (ACA) did not directly impact or change COBRA obligations for employers, but other changes in related regulations will determine how and when employers offer COBRA coverage to employees.

Beginning in 2015, to comply with the ACA large employers must offer their full-time employees health coverage, or pay one of two employer shared responsibility (play or pay) penalties. An employer is considered large, or an applicable large employer (ALE), if it has 50 or more full-time or full-time equivalent employees. Full-time employees are employees that average 30 hours a week or more. There are two methods that an ALE can use to determine which employees must be offered coverage to avoid penalties: the monthly method, and the measurement and look-back method. ALEs are also required to report on coverage that they did or did not provide.

For an in-depth review of the measurement and look-back methods and options, as the reporting obligations and FSA carryovers, request UBA’s ACA Advisor, “Cobra and the Affordable Care Act”.

Read More …

Switching over to AEIS Advisors was the best decision we’ve made this year. Ronald and his team were able to identify discrepancies on our billing statements which got missed by our last broker, and they saved us over $8,000 in credits! AEIS has proven to be an attentive and caring company, looking out for the best needs of their clients."

- Director of Operations

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