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

A health flexible spending account (FSA) is a pre-tax account used to pay for out-of-pocket health care costs for a participant as well as a participant’s spouse and eligible dependents. Health FSAs are employer-established benefit plans and may be offered with other employer-provided benefits as part of a cafeteria plan. Self-employed individuals are not eligible for FSAs.

Even though a health FSA may be extended to any employee, employers should design their health FSAs so that participation is offered only to employees who are eligible to participate in the employer’s major medical plan. Generally, health FSAs must qualify as excepted benefits, which means other nonexcepted group health plan coverage must be available to the health FSA’s participants for the year through their employment. If a health FSA fails to qualify as an excepted benefit, then this could result in excise taxes of $100 per participant per day or other penalties.

Contributing to an FSA

Money is set aside from the employee’s paycheck before taxes are taken out and the employee may use the money to pay for eligible health care expenses during the plan year. The employer owns the account, but the employee contributes to the account and decides which medical expenses to pay with it.

At the beginning of the plan year, a participant must designate how much to contribute so the employer can deduct an amount every pay day in accordance with the annual election. A participant may contribute with a salary reduction agreement, which is a participant election to have an amount voluntarily withheld by the employer. A participant may change or revoke an election only if there is a change in employment or family status that is specified by the plan.

Per the Patient Protection and Affordable Care Act (ACA), FSAs are capped at $2,600 per year per employee. However, since a plan may have a lower annual limit threshold, employees are encouraged to review their Summary Plan Description (SPD) to find out the annual limit of their plan. A participant’s spouse can put $2,600 in an FSA with the spouse’s own employer. This applies even if both spouses participate in the same health FSA plan sponsored by the same employer.

Generally, employees must use the money in an FSA within the plan year or they lose the money left in the FSA account. However, employers may offer either a grace period of up to two and a half months following the plan year to use the money in the FSA account or allow a carryover of up to $500 per year to use in the following year.

By Danielle Capilla
Originally Published By United Benefit Advisors

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) allows qualified beneficiaries who lose health benefits due to a qualifying event to continue group health benefits. The COBRA payment process is subject to various rules in terms of grace periods, notification, premium payment methods, and treatment of insignificant shortfalls.

Grace Periods

The initial premium payment is due 45 days after the qualified beneficiary elects COBRA. Premium payments must be made on time; otherwise, a plan may terminate COBRA coverage. Generally, subsequent premium payments are due on the first day of the month. However, under the COBRA grace period rules, premiums will still be considered timely if made within 30 days after the due date. The statutory grace period is a minimum 30-day period, but plans may allow qualified beneficiaries a longer grace period.

A COBRA premium payment is made when it is sent to the plan. Thus, if the qualified beneficiary mails a check, then the payment is made on the date the check was mailed. The plan administrators should look at the postmark date on the envelope to determine whether the payment was made on time. Qualified beneficiaries may use certified mail as evidence that the payment was made on time.

The 30-day grace period applies to subsequent premium payments and not to the initial premium payment. After the initial payment is made, the first 30-day grace period runs from the payment due date and not from the last day of the 45-day initial payment period.

If a COBRA payment has not been paid on its due date and a follow-up billing statement is sent with a new due date, then the plan risks establishing a new 30-day grace period that would begin from the new due date.

Notification

The plan administrator must notify the qualified beneficiary of the COBRA premium payment obligations in terms of how much to pay and when payments are due; however, the plan does not have to renotify the qualified beneficiary to make timely payments. Even though plans are not required to send billing statements each month, many plans send reminder statements to the qualified beneficiaries.

While the only requirement for plan administrators is to send an election notice detailing the plan’s premium deadlines, there are three circumstances under which written notices about COBRA premiums are necessary. First, if the COBRA premium changes, the plan administrator must notify the qualified beneficiary of the change. Second, if the qualified beneficiary made an insignificant shortfall premium payment, the plan administrator must provide notice of the insignificant shortfall unless the plan administrator chooses to ignore it. Last, if a plan administrator terminates a qualified beneficiary’s COBRA coverage for nonpayment or late payment, the plan administrator must provide a termination notice to the qualified beneficiary.

The plan administrator is not required to inform the qualified beneficiary when the premium payment is late. Thus, if a plan administrator does not receive a premium payment by the end of the grace period, then COBRA coverage may be terminated. The plan administrator is not required to send a notice of termination in that case because the COBRA coverage was not in effect. On the other hand, if the qualified beneficiary makes the initial COBRA premium payment and coverage is lost for failure to pay within the 30-day grace period, then the plan administrator must provide a notice of termination due to early termination of COBRA coverage.

By Danielle Capilla
Originally Published By United Benefit Advisors

The Consolidated Omnibus Budget Reconciliation Act of 1985 (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. The length of the COBRA coverage period depends on the qualifying event and is usually 18 or 36 months. However, the COBRA coverage period may be extended under the following five circumstances:

  1. Multiple Qualifying Events
  2. Disability
  3. Extended Notice Rule
  4. Pre-Termination or Pre-Reduction Medicare Entitlement
  5. Employer Extension; Employer Bankruptcy

In this blog, we’ll examine the first circumstance above. For a detailed discussion of all the circumstances, request UBA’s Compliance Advisor, “Extension of Maximum COBRA Coverage Period”.

When determining the coverage period under multiple qualifying events, the maximum coverage period for a loss of coverage due to a termination of employment and reduction of hours is 18 months. The maximum coverage period may be extended to 36 months if a second qualifying event or multiple qualifying events occur within the initial 18 months of COBRA coverage from the first qualifying event. The coverage period runs from the start of the original 18-month coverage period.

The first qualifying event must be termination of employment or reduction of hours, but the second qualifying cannot be termination of employment, reduction of hours, or bankruptcy. In order to qualify for the extension, the second qualifying event must be the covered employee’s death, divorce, or child ceasing to be a dependent. In addition, the extension is only available if the second qualifying event would have caused a loss of coverage for the qualified beneficiary if it occurred first.

The extended 36-month period is only for spouses and dependent children. In order to qualify for extended coverage, a qualified beneficiary must have elected COBRA during the first qualifying event and must have been receiving COBRA coverage at the time of the second event. The qualified beneficiary must notify the plan administrator of the second qualifying event within 60 days after the event.

Example: Jim was terminated on June 3, 2017. Then, he got divorced on July 6, 2017. Jim was eligible for COBRA continuation coverage for 18 months after his termination of employment (the first qualifying event). However, his divorce (the second qualifying event) extended his COBRA continuation coverage to 36 months because it occurred within the initial 18 months of COBRA coverage from his termination (the first qualifying event).

The health plan should indicate when the coverage period begins. The plan may provide that that the plan administrator be notified when plan coverage is lost as opposed to when the qualifying event occurs. In that case, the 36-month coverage period would begin on the date coverage was lost.

By Danielle Capilla
Originally Published By United Benefit Advisors

OSHA Injury Tracking Application Electronic Portal

As of August 1, 2017, the Occupational and Safety Health Administration’s (OSHA) new electronic portal, the Injury Tracking Application (ITA), is available for employers to file web-based reports of workplace injuries or illnesses.

Under OSHA’s electronic recordkeeping rule, covered employers with at least 250 employees must submit the following forms electronically:

  • Log of Work-Related Injuries and Illnesses (Form 300).
  • Summary of Work-Related Injuries and Illnesses (Form 300A).
  • Injury and Illness Report (Form 301).

Access the ITA and read about electronic submission

2017 VETS-4212 Reporting Opened

The 2017 filing season for the VETS-4212 started on August 1, 2017 and ends on September 30, 2017. The Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA) requires federal contractors and subcontractors subject to the act’s affirmative action provisions who enter into or modify a contract or subcontract with the federal government, and whose contract meets the criteria set forth in the law, to annually report on their affirmative action efforts in employing veterans.

The U.S. Department of Labor’s Veterans’ Employment and Training Service has a legislative requirement to collect, and make available to the Office of Federal Contract Compliance Programs, reported data contained on the VETS-4212 report for compliance enforcement.

File the 2017 VETS-4212 Report

OSHA Revises Online Whistleblower Complaint Form

On July 28, 2017, the Occupational Safety and Health Administration (OSHA) revised its online whistleblower complaint form to help users file a complaint with the appropriate agency. OSHA administers more than twenty whistleblower protection laws, including Section 11(c) of the Occupational Safety and Health (OSH) Act, which prohibits retaliation against employees who complain about unsafe or unhealthful conditions or exercise other rights under the Act. Each law has a filing deadline, varying from 30 days to 180 days, that starts when the retaliatory action occurs.

The updated form guides users through the complaint process, providing essential questions at the start to assist users in understanding and exercising their rights under relevant laws. The new system also includes pop-up boxes with information about various agencies for individuals who indicate that they have engaged in protected activity that may be addressed by an agency other than OSHA.

In addition to the online form, workers may file complaints by fax, mail, or hand-delivery; contacting the agency at 800-321-6742; or calling an OSHA regional or area office.

View the new online form in English or Spanish

Prevailing Health and Welfare Fringe Benefits Rate Announced Under the McNamara-O’Hara Service Contract Act

On July 25, 2017, the U.S. Department of Labor (DOL) released an all agency memorandum (number 225) announcing that under the McNamara-O’Hara Service Contract Act (SCA) the employee-by-employee benefit will be $4.41 per hour, or $176.40 per week, or $760.40 per month. Additionally, the average cost fringe benefit rate will also be $4.41 per hour.

The McNamara-O’Hara Service Contract Act requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates (including prospective increases) contained in a predecessor contractor’s collective bargaining agreement. The DOL issues wage determinations on a contract-by-contract basis in response to specific requests from contracting agencies. These determinations are incorporated into the contract.

The new rate became effective August 1, 2017.

Originally Published By Thinkhr.com

In conversations with HR professionals and benefit brokers, we find that the topic of long-term care insurance (LTCi) is often covered in less than two minutes during renewal meetings. When I ask why the topic of conversation is so short, they tell me, “Employees just aren’t asking about it, so they must not be interested.”

If employees aren’t asking about LTCi, does it mean they aren’t interested? They just may be unaware of the value of LTCi and that it can be offered by their employer with concessions not available in the open market. Here are the top seven reasons why LTCi should be a bigger part of the employee benefits conversation.

  1. Do you know LTCi can be offered as an employee benefit?
    There are multiple employer-sponsored products, including those with pricing discounts, guarantee issue, and payroll deduction.
  2. Do you believe Medicaid and Medicare will provide long-term care for employees?
    This is a popular misconception. Medicare and Medicaid will restrict your employees’ choices of where and how they receive care. These options will either not offer custodial or home care, or they’ll force employees to spend down their assets for care.
  3. Do you think LTCi is too expensive, or that your employee population is too young to need it?
    Many plans can be customized to meet personal budgets and potential care needs. It’s also important to know that rates are based on employees’ ages. The younger the employees are, the lower their rates will be.
  4. Are you aware of the variety of LTCi plans?
    Many policies offer flexible coverage options. Depending on the policy an employer selects, LTCi can cover a wide range of care—in some cases even adult day care and home safety modifications.
  5. Do you believe the market is unstable?
    Today’s products are priced based on conservative assumptions, and employers are enrolling very stable LTCi plans for their employees. Each month, we see new plan options and products being introduced along with new carriers entering the market.
  6. Do you already offer an LTCi plan but it’s closed to new hires?
    Being able to offer a similar LTCi benefit to all employees is crucial for most employers. Find a partner that can assist with the current LTCi plan and can assist with bringing in a new LTCi offering for new hires.

 

By Christine McCullugh
Originally Published By United Benefit Advisors

Congress approved the Health Insurance Portability and Accountability Act (HIPAA) to guard the privacy of personal medical information, and to give individuals the right to keep their health insurance coverage for pre-existing conditions in place even if they change jobs. The law has done this, providing important safeguards for patients. But it has also increased the red tape involved in medical care.

History

Congress passed HIPAA in August 1996, and the U.S. Department of Health and Human Services finalized standards for the electronic exchange, privacy and security of health information in 2002. The rules apply to health plans, health care clearinghouses, and to any health care provider, such as a doctor, who transmits health information in electronic form.

Significance

Congress intended HIPAA to protect individually identifiable health information. Any entity, including a physician’s office, a hospital or other health care facility, or an insurer, that deals with personal health information must follow strict rules about how to handle that information to avoid disclosing it to someone not authorized to see it. For example, Health and Human Services allows physicians and insurance companies to exchange individually identifiable health information to pay a health claim, but would not allow them to release it publicly. Penalties for violating the regulations include civil fines of up to $50,000 per violation, according to Health and Human Services.

Minimum Necessary

According to Health and Human Services, the privacy rule also requires physicians, hospitals, insurers, and other health care entities to use and disclose only the minimum amount of information needed to complete the transaction or fulfill the request. As a practical matter, for example, that means a physician should not send a patient’s entire medical file to an insurer if just one page from the record will suffice to answer the insurer’s query.

Portability

In addition to protecting patients’ privacy, HIPAA also limits the ability of a new employer plan to exclude coverage for pre-existing conditions. This means a person who has health insurance coverage can change jobs — and therefore health plans — without worrying that a condition they already have, such as diabetes or asthma, would not be covered under the new health plan. This was not always the case, according to the U.S. Department of Labor. “In the past, some employers’ group health plans limited, or even denied, coverage if a new employee had such a condition before enrolling in the plan. Under HIPAA, that is not allowed,” the Department of Labor says. HIPAA also prohibits discrimination against employees and their family members based on health histories, previous claims, and genetic information, according to the Department of Labor.

Pros of HIPAA

HIPAA, for the first time, allowed patients the legal right to see, copy, and correct their personal medical information. It also prevented employers from accessing and using personal health information to make employment decisions. And, it enabled patients with pre-existing conditions to change jobs without worrying that their conditions would not be covered under a new employer’s health plan.

Cons of HIPAA

However, HIPAA’s effects have not all been positive. The regulations increased the paperwork burden for doctors considerably, according to the American Medical Association. HIPAA has spawned a mini-industry of companies and consultants who help medical professionals comply with the law’s lengthy provisions. In addition, some professionals who deal with medical paperwork have become overcautious about releasing protected information. For example, some physician’s offices now refuse to mail test results, saying patients need to pick them up in person. And some hospitals require physicians to submit written requests on their own letterhead for information on a patient’s condition, when the law allows this information to be provided by phone.

Originally Published By Livestrong.com

Insurance has become the method by which most Americans have their health-care costs paid. By paying a regular monthly bill for health insurance, the cost of expected health care events is spread out into even payments and the cost of major unexpected medical incidents is absorbed by insurance. Lack of health insurance can have a profound negative effect on personal finances.

Bankruptcy

Lack of health insurance can come about due to lack of income to pay for it, or when a breadwinner is between jobs that would otherwise provide health insurance as an employment benefit. If a major illness or accident occurs during the time a person is uninsured, it can lead swiftly to bankruptcy, reports the Oregon Public Broadcasting News. Under-insurance, that is, health insurance which is not sufficient to cover the costs of a major health incident, can also lead to bankruptcy. A study published by the American Journal of Medicine in August 2009, reported that well over 60 percent of U.S. bankruptcies filed. in 2007 were due to inability to pay medical costs. Most of these debtors had medical debts over $5,000, which represented a significant portion of their household annual income; three-quarters had health insurance insufficient to cover their bills, and one-quarter had no insurance.

Reduction in Income

Lack of health insurance can lead to a breadwinner's death, further causing the most severe reduction on household income. According to a Harvard Medical School study reported by Reuters news, about 45,000 people in the United States die each year due to lack of health insurance. Thus, people who could otherwise serve as breadwinners or care-givers are removed from being able to do so. The Urban Institute points out that people lacking health insurance create the significant economic impact of reduced personal earnings, because poorer health means less productive work years and more time off work due to illness or injuries during those working years.

Penalties

Beginning January 1, 2014, most people will be required to maintain health insurance, and individuals who do not obtain health insurance will have to pay a penalty under the federal Patient Protection and Affordable Care Act of 2010. The insurance requirement penalty provision exempts people with income below the poverty level, as well as those in jail, members of registered Indian tribes, those whose religious tenets preclude health insurance, and individuals for whom essential health insurance coverage cost for one month would exceed 8 percent of their household gross income for the year. People who do not meet one of these exemptions, but who decline to purchase health insurance, may be penalized up to $95 in 2014, $350 in 2015, $750 in 2016, and $750 plus a cost of living increase for subsequent years. According to SmartMoney, the penalty provision is likely to have the strongest impact on the personal finances of younger, unmarried consumers. Although the statute exempts the poorest people from its provisions, the penalty for failure to have health insurance will negatively impact the personal finances of those to whom it applies.

By Cindy Hill
Originally Published By LiveStrong.com

Under Internal Revenue Code Section 105(h), a self-insured medical reimbursement plan must pass two nondiscrimination tests. Failure to pass either test means that the favorable tax treatment for highly compensated individuals who participate in the plan will be lost. The Section 105(h) rules only affect whether reimbursement (including payments to health care providers) under a self-insured plan is taxable.

When Section 105(h) was enacted, its nondiscrimination testing applied solely to self-insured plans. Under the Patient Protection and Affordable Care Act (ACA), Section 105(h) also applies to fully-insured, non-grandfathered plans. However, in late 2010, the government delayed enforcement of Section 105(h) against fully-insured, non-grandfathered plans until the first plan year beginning after regulations are issued. To date, no regulations have been issued so there is currently no penalty for noncompliance.

Practically speaking, if a plan treats all employees the same, then it is unlikely that the plan will fail Section 105(h) nondiscrimination testing.

What Is a Self-Insured Medical Reimbursement Plan?

Section 105(h) applies to a “self-insured medical reimbursement plan,” which is an employer plan to reimburse employees for medical care expenses listed under Code Section 213(d) for which reimbursement is not provided under a policy of accident or health insurance.

Common self-insured medical reimbursement plans are self-funded major medical plans, health reimbursement arrangements (HRAs), and medical expense reimbursement plans (MERPs). Many employers who sponsor an insured plan may also have a self-insured plan; that self-insured plan is subject to the Section 105 non-discrimination rules. For example, many employers offer a fully insured major medical plan that is integrated with an HRA to reimburse expenses incurred before a participant meets the plan deductible.

What If the Self-Insured Medical Reimbursement Plan Is Offered Under a Cafeteria Plan?

A self-insured medical reimbursement plan (self-insured plan) can be offered outside of a cafeteria plan or under a cafeteria plan. Section 105(h) nondiscrimination testing applies in both cases.

Regardless of grandfathered status, if the self-insured plan is offered under a cafeteria plan and allows employees to pay premiums on a pre-tax basis, then the plan is still subject to the Section 125 nondiscrimination rules. The cafeteria plan rules affect whether contributions are taxable; if contributions are taxable, then the Section 105(h) rules do not apply.

What Is the Purpose of Nondiscrimination Testing?

Congress permits self-insured medical reimbursement plans to provide tax-free benefits. However, Congress wanted employers to provide these tax-free benefits to their regular employees, not just to their executives. Nondiscrimination testing is designed to encourage employers to provide benefits to their employees in a way that does not discriminate in favor of employees who are highly paid or high ranking.

If a plan fails the nondiscrimination testing, the regular employees will not lose the tax benefits of the self-insured medical reimbursement plan and the plan will not be invalidated. However, highly paid or high ranking employees may be adversely affected if the plan fails testing.

What Are the Two Nondiscrimination Tests?

The two nondiscrimination tests are the Eligibility Test and Benefits Test.

The Eligibility Test answers the basic question of whether there are enough regular employees benefitting from the plan. Section 105(h) provides three ways of passing the Eligibility Test:

  1. The 70% Test – 70 percent or more of all employees benefit under the plan.
  2. The 70% / 80% Test – At least 70 percent of employees are eligible under the plan and at least 80 percent or more of those eligible employees participate in the plan.
  3. The Nondiscriminatory Classification Test – Employees qualify for the plan under a classification set up by the employer that is found by the IRS not to be discriminatory in favor of highly compensated individuals.

The Benefits Test answers the basic question of whether all participants are eligible for the same benefits.

 

By Danielle Capilla
Originally Published By United Benefit Advisors

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 2016 health plans and HRAs are due July 31, 2017.

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, 2016: $2.17.
  • If the plan year end date was between October 1 and December 31, 2016: $2.26.

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 2016, payment is due no later than July 31, 2017.

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.

Can I use ERISA plan assets or employee contribution 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 $2.17 or $2.26 (depending on the date the plan year ended in 2016) 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 2016 is not filed by July 31, 2017, 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 2016 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 2016, the deadline to file Form 720 and make your payment is July 31, 2017.

Originally published by www.thinkhr.com

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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