COVID-19 Update
Court Reinstates COVID-19 Vaccine Mandate
On December 17, 2021, the US Court of Appeals for the Sixth Circuit lifted the stay on the enforcement of the Occupational Safety and Health Administration’s emergency temporary standard (ETS) on vaccination and testing. The ETS covers private employers with 100 or more employees. Although the court’s ruling was promptly appealed to the Supreme Court, for now, the mandate has been reinstated and is in full effect.
In response, the DOL announced that OSHA would delay the enforcement of the mandate to give employers time to comply. Accordingly, OSHA will not issue citations for noncompliance with any requirements under the ETS until January 9, 2022, and will not issue citations for noncompliance with the standard’s testing requirements before February 9, 2022. Our original article on the mandate can be found in the November 11, 2021, edition of Compliance Corner.
Note that separate vaccine mandates apply to federal contractors and healthcare providers, and those orders remain under court review, with enforcement suspended in the meantime.
Sixth Circuit Order on Emergency Motion to Dissolve Stay »
DOL Announcement »
Healthcare Reform
PCOR Fee Increased for 2021-2022 Plan Years
On December 21, 2021, the IRS released Notice 2022-4, which announces that the adjusted applicable dollar amount for PCOR fees for plan and policy years ending on or after October 1, 2021, and before October 1, 2022, is $2.79. This is a $.13 increase from the $2.66 amount in effect for plan and policy years ending on or after October 1, 2020, but before October 1, 2021.
As a reminder, PCOR fees are payable by insurers and sponsors of self-insured plans (including sponsors of HRAs). The fee doesn’t apply to excepted benefits such as stand-alone dental and vision plans or most health FSAs. The fee, however, is required of retiree-only plans. The fee is calculated by multiplying the applicable dollar amount for the year by the average number of lives and is reported and paid on IRS Form 720 (which hasn’t yet been updated to reflect the increased fee). It’s expected that the form and instructions will be updated prior to July 31, 2022, since that’s the first deadline to pay the increased fee amount for plan years ending between October and December 2021. The PCOR fee is generally due by July 31 of the calendar year following the close of the plan year.
The PCOR fee requirement was reinstated through the Further Consolidated Appropriations Act, 2020 and will be in place until the plan years ending after September 30, 2029.
IRS Releases Final Instructions for 2021 Forms 1094/1095-C and Forms 1094/1095-B
The IRS recently released the final instructions for Forms 1094/1095-C and 1094/1095-B for the 2021 reporting year. With these final instructions, employers and insurers now have all the IRS documents needed to complete the 2021 reporting.
The 2021 final instructions mostly mirror the draft instructions that were released in October. For more information about the draft instructions, general purposes of Forms 1094-B/C and 1095-B/C, and the recently proposed rules, see the article published on October 14, 2021, and the article published in the December 9, 2021, edition of Compliance Corner.
One of the key changes from 2020 reporting is the deadline for furnishing Forms 1095-B/C to individuals. The IRS has proposed that the deadline be permanently extended to 30 days after January 31, rather than the IRS extending the deadline each year. For 2021 reporting purposes, employers can rely on the proposed extension. Therefore, the date by which employers must distribute Forms 1095-B or 1095-C to individuals is now March 2, 2022, instead of the January 31, 2022 deadline. Keep in mind that the deadlines for employers to file the forms with the IRS remain the same. For filing by mail, the deadline is February 28, 2022. The deadline for electronic filing is March 31, 2022.
Another update from the prior years’ reporting is that the good faith penalty relief for incorrect or incomplete information was eliminated permanently starting from the 2021 reporting. Therefore, employers should focus on accuracy and thoroughly completing the Forms 1094/1095-B and C for 2021 reporting since filers can no longer rely on this relief. Additionally, employers should retain all the supporting documents that were used to complete the forms in case of a proposed assessment.
Moreover, the 2021 instructions added two new codes (1T and 1U) to report individual coverage HRAs (ICHRA). Code 1T applies to ICHRAs offered to the employee and spouse but not dependents, with affordability determined using the employee’s primary residence location zip code. Code 1U applies to ICHRAs using the employee’s primary employment-site ZIP code affordability safe harbor.
Finally, the instructions permit insurers to provide Forms 1095-B to individuals in the prescribed alternative way rather than mailing a Form 1095 to each individual so long as an insurer provides clear and conspicuous notice, in a location on its website that is reasonably accessible, which states that a copy of their statement is available upon request. The insurer must retain the notice in the same location on its website through October 17, 2022. Similarly, self-insured employers can use the alternative way to furnish Forms 1095-C to cover non-full-time employees and nonemployees. For the details of the alternative way of furnishing Forms 1095, please refer to the respective instructions.
Employers should be aware of the new forms and instructions.
2021 Instructions for Forms 1094-C and 1095-C »
2021 Instructions for Forms 1094-B and 1095-B »
2021 Form 1094-C »
2021 Form 1095-C »
2021 Form 1094-B »
2021 Form 1095-B »
Federal Updates
IRS Releases 2022 Instructions for Forms 1099-SA and 5498-SA
The IRS recently released the 2022 Instructions for Forms 1099-SA and 5498-SA. The Form 1099-SA is used to report distributions from health saving accounts (HSAs) and other medical savings accounts. The 5498-SA reports contributions to these accounts for the applicable tax year.
The IRS updates the form instructions annually to incorporate any recent administrative, reporting or regulatory changes. The 2022 instructions reflect no significant changes.
HSA custodians are responsible for filing the forms with the IRS and providing copies to accountholders. However, employers who offer HSAs should be aware of the updated publication.
IRS Releases Draft Employers Tax Guide to Fringe Benefits
On December 7, 2021, the IRS provided an updated draft of the 2021 IRS Publication 15-B, the Employer’s Tax Guide to Fringe Benefits. This publication provides an overview of the taxation of fringe benefits and applicable exclusion, valuation, withholding and reporting rules.
The IRS updates Publication 15-B each year to reflect any recent legislative and regulatory developments. Additionally, the revised version provides the applicable dollar limits for various benefits for the upcoming year. As standard procedure, the IRS releases a preliminary draft of the updated guide before the final publication.
Further, the IRS will also issue a new draft of the form to alert users of any changes made to the prior version. This publication was most recently updated to note that the American Rescue Plan Act (ARPA) increased the employer-provided dependent care exclusion to $10,500 ($5,250 for a married employee filing a separate return) for calendar year 2021.
As a reminder, the business mileage rate for 2021 is 56 cents per mile, which can be used to reimburse an employee for business use of a personal vehicle and, under certain conditions, to value the personal use of a vehicle provided to an employee. The 2021 monthly exclusion for qualified parking is $270, and the monthly exclusion for commuter highway vehicle transportation and transit passes is $270. For plan years beginning in 2021, the maximum salary reduction permitted for a health FSA under a cafeteria plan is $2,750.
Employers should be aware of the availability of the updated publication and most recent modifications.
IRS Published Information Letter Concerning Expanding HDHP-Compatible Coverage
The IRS recently released an information letter that reiterates guidance regarding high-deductible health plan’s (HDHPs) coverage of primary and behavioral health care visits before the minimum required deductible is met, as well as HDHP rules generally.
The letter responds to an inquiry that asked the IRS to reconsider prior guidance that stated that male contraceptives are generally not considered to be preventive care. As such, a health plan providing benefits for male sterilization or male contraceptives before satisfying the minimum deductible is not an HDHP. As of now, the IRS considers that request a submission for a guidance recommendation.
In addition, the information letter reiterates general HDHP information, explaining that an HDHP generally may not provide benefits until the deductible for the plan year has been satisfied with an exception for preventive care services (which can be provided prior to the deductible being satisfied). Further, for purposes of HDHP administration, preventive care services include periodic health evaluations, routine prenatal and well-child care, immunizations and various screening services and exclude “any service or benefit intended to treat an existing illness, injury, or condition.”
This letter does not provide any new or updated information, but it does serve as a good reminder of the HDHP deductible requirement and what is considered preventative care for purposes of HDHP administration.
Retirement Update
PBGC Releases Regulatory Agenda for Fall 2021
The Pension Benefit Guarantee Corporation (PBGC) recently released a list of the rules it plans on promulgating during the fall of 2021. These rules are part of the agency’s efforts to fulfill the mandate under the American Rescue Plan Act (ARPA) to provide special financial assistance in the form of make-up payments of suspended benefits for participants and beneficiaries who are in pay status because their retirement plans adopted a benefit suspension under the Multiemployer Pension Reform Act of 2014 (MPRA), as well as certain insolvent plans that suspended benefits upon insolvency. The agency is also tasked with providing prospective reinstatement of suspended benefits for all participants and beneficiaries. In addition, PBGC plans to publish rules that prescribe actuarial assumptions that a multiemployer plan actuary may use to determine an employer’s withdrawal liability and provide guidance on determining the monthly amount of multiemployer plan benefits guaranteed by the agency.
The rules are listed below:
Proposed Rules
- Valuation Assumptions and Methods: Interest and Mortality Assumptions for Asset Allocation in Single-Employer Plans and Mass Withdrawal Liability Determination in Multiemployer Plans
- Multiemployer Plan Guaranteed Benefits
- Improvements to Rules on Recoupment of Benefit Overpayments
- Penalties for Failure to Provide Certain Notices or Other Material Information
- Actuarial Assumptions for Determining an Employer's Withdrawal Liability
Final Rules
- Benefit Payments and Allocation of Assets
- Examination and Copying of PBGC Records
- Adjustment of Civil Penalties
- Special Financial Assistance by PBGC
Employers who provide single-employer defined benefit pension plans or are part of multiemployer defined benefit pension plans should be aware of these pending developments.
Agency Rule List - Fall 2021 »
Statement of Regulatory and Deregulatory Priorities »
PBGC Releases Interest Rate Assumptions for Valuing Benefits
On December 14, 2021, the PBGC issued a final rule that amends the regulation on the allocation of assets in single-employer plans. The guidance, which is effective January 1, 2022, provides interest assumptions for plans with valuation dates in the first quarter of 2022.
These interest assumptions are used for valuing benefits under terminating single-employer plans, amongst other purposes. Specifically, the PBGC uses the interest assumptions to determine the present value of annuities in an involuntary or distress termination of a single-employer plan under the asset allocation regulation. The assumptions are also used to determine the value of multiemployer plan benefits and certain assets when a plan terminates by mass withdrawal in accordance with PBGC’s regulation on Duties of Plan Sponsor Following Mass Withdrawal.
The first quarter 2022 interest assumptions will be 2.37 percent for the first 20 years following the valuation date (the initial period) and 2.03 percent (the final rate) thereafter. As compared to the interest assumptions in effect for the fourth quarter of 2021, these updated assumptions reflect a decrease of 0.03 percent in the initial rate and a decrease of 0.08 percent in the final rate.
Employers who sponsor defined benefit pension plans may want to be aware of the updated guidance.
Allocation of Assets in Single-Employer Plans; Interest Assumptions for Valuing Benefits »
FAQ
For the Form W-2 reporting requirement (including the applicable employer-sponsored coverage amount to report on an employee’s Form W-2, Box 12 Code DD), must an employer report on union employees covered under a union plan? And are union employees included in the count to determine if the W-2 reporting requirement applies?
Under transition relief that is still in effect, an employer that contributes to a multiemployer plan (the term used to describe a union plan) is not required to include the cost of coverage provided to an employee under that multiemployer plan in determining the aggregate reportable cost. Thus, if the only applicable employer-sponsored coverage provided to an employee is provided under a multiemployer plan, no reporting is required on the Form W-2 for that employee. That transition relief was published back in 2012 (when the W-2 reporting obligation first became effective) but is still in effect. So, the employer would not be required to report on union employees' Forms W-2.
That said, union employees would be included in the count to determine if the employer has to report on other employees’ Forms W-2. As background, employers that file fewer than 250 Forms W-2 for the previous calendar year are not required to include the aggregate reportable cost on the current year’s Forms W-2, and that count is determined on an EIN-by-EIN basis (the aggregation/controlled group rules do not apply). So, generally speaking, to determine if an employer must report the cost of coverage for 2022, the employer would look back and determine if they filed fewer than 250 Forms W-2 under their EIN in 2021. If the count is less than the 250-form threshold, then the employer wouldn’t be subject to the Form W-2 cost of coverage reporting for 2022.
Applying that to the union employee example, if in 2020 the employer employed 200 union employees and 75 non-union employees, the employer would have filed more than 250 Forms W-2 in 2021. Therefore, the employer in 2022 would have to report the aggregate reportable cost on the non-union employees’ Forms W-2 (even if they didn’t have to report on the union employees’ forms, per the above exception).
The W-2 reporting requirement also applies to employer-sponsored major medical coverage, both fully and self-insured (e.g., PPO, POS or HDHP). In addition, the requirement applies to prescription drug coverage and any dental/vision coverage that is combined with major medical coverage. However, an employer would not report any “excepted benefits” (those not subject to HIPAA, and thereby exempt from ACA), including stand-alone dental or vision plans, non-coordinated and independent benefits (such as hospital indemnity or specific-illness plans), and health FSA salary reduction elections (but there are special rules regarding optional employer flex credits that could be used to contribute to an FSA). HRAs, HSA contributions, long-term care and coverage under Archer MSAs are also not included.
Employers will also want to review their EAP, wellness and on-site medical clinic arrangements and programs. If COBRA applies to those plans, then the cost of these programs will need to be included in the reportable cost. Whether COBRA applies is a trickier analysis, but it basically comes down to whether the EAP, wellness program or on-site medical clinic provides medical care. Employers should work with outside counsel in making that determination.
If the employer continues to have questions, they should review their obligations under this requirement with their advisor. Additionally, the IRS has provided a Q&A to assist employers in both determining whether they are subject to the reporting requirement and calculating the total cost of coverage. NFP has information as well. Please ask your advisor for more information.
State Updates
Hawaii
2022 Temporary Disability Insurance Weekly Maximums Announced
The state’s Department of Labor and Industrial Relations recently announced the 2022 Temporary Disability Insurance (TDI) maximum weekly benefit and contribution amounts.
The weekly benefits amount remains 58% of an employee’s average weekly wages. However, the maximum benefits amount was increased to $697 per week in 2022 from $640 per week in 2021.
Further, the employee maximum weekly contribution was increased to $6 per week in 2022 from $5.51 per week in 2021
Employers with employees in Hawaii should consult with their payroll vendors and disability insurers to ensure that the appropriate contributions will be withheld starting January 1, 2022, and that the new maximum weekly benefit is reflected for the claims paid in 2022.
State of Hawaii - 2022 Maximum Weekly Wage Based and Maximum Weekly Benefit Amount »
Illinois
Expansion of Telehealth Services Continues
On December 10, 2021, Gov. Pritzker issued Executive Order 2021-32, extending the applicability of several prior COVID-19-related executive orders, in light of the continued public health emergency. Executive Order 2020-09 was included in the order, extending its applicability now through January 8, 2022 (among several other executive orders).
Executive Order 2020-09 expands telehealth services to also include electronic and telephonic methods. It requires health insurers to cover the costs of in-network telehealth services for any clinically appropriate and medically necessary covered services and treatments.
The order was originally effective beginning March 19, 2020, and states that it will continue for the duration of the governor’s proclamation of disaster. It has been extended several times and is now extended through January 8, 2022.
Employers should be aware of these developments.
Impact of Prescription Drug Coupons on HSA Eligibility
On December 8, 2021, the Department of Insurance issued Company Bulletin 2021-13, providing supplemental guidance on statute 215 IL ILCS 134/30(d) and its applicability to high deductible health plans (HDHPs).
Under federal law, counting the amount of any discount, voucher, coupon or the like for prescription drugs toward a participant’s deductible generally makes that participant ineligible to contribute to an HSA unless such payments are for preventive care as recognized by the IRS. In contrast, Illinois law – 215 IL ILCS 134/30(d) – requires health plans to count discounts, vouchers, coupons or the like towards all cost-sharing requirements.
The department recognized that this conflict prevents any state-regulated coverage from being a qualified HDHP (and therefore prevents any participant with such coverage from being HSA-eligible), so it stated that it would not enforce 215 IL ILCS 134/30(d) when it would require HDHPs to apply any discount, voucher, coupon or the like for prescription drugs towards a participant’s deductible or other cost-sharing prior to the deductible being satisfied. However, once the statutory minimum deductible is met, the provisions of 215 IL ILCS 134/30(d) will be enforced (even if the plan deductible is higher than the statutory deductible and has not been met). For reference, the IRS statutory minimum deductible for calendar year 2022 is $1,400 and $2,800 for self-only and family coverage, respectively
While this guidance is directed at insurers, employers should be aware of these developments.
Kansas
Expansion of Telehealth Services Continues
Recently, HB 2001 was signed into law which provides that employers who implement a COVID-19 vaccine requirement must exempt employees who refuse due to a sincerely held religious belief or for medical reasons when such employees submit a written waiver explaining those reasons.
Employers should be aware of these developments (and note that such requirements are aligned with federal guidance). For more information on the federal vaccine mandates, see our original article on the federal mandate in the November 11, 2021, edition of Compliance Corner.
Kentucky
New Law Prohibiting Drug Copay Accumulator Programs Takes Effect on January 1, 2022
Kentucky is one of several states that enacted a law to require the amount of a drug manufacturer’s financial assistance (e.g., coupon, discounts, or vouchers) to count toward an enrollee’s cost-sharing, such as an out-of-pocket maximum, deductible and copay. The law’s implementation date is January 1, 2022, and it intends to prohibit “copay accumulator programs” in an effort to protect consumers.
Copay accumulator programs are sometimes implemented by insurers and PBMs in order to exclude prescription drug manufacturers’ coupons and other forms of financial assistance from counting toward a health plan enrollee’s annual cost-sharing limit, which disadvantages enrollees.
Besides Illinois, Kentucky was the only state to recognize that their law that prohibits copay accumulator programs conflicts with the federal law’s qualified HDHP/HSA eligibility rule. The federal rule states if an enrollee receives the drug manufacturer’s financial assistance before satisfying the enrollee’s annual deductible, the enrollee becomes ineligible to contribute to their HSA. In light of this, the state issued guidance (Bulletin 2021-002) to clarify that the state’s copay accumulator programs prohibition bill does not apply to qualified HDHPs when they are coupled with an HSA.
Therefore, insurers and PBMs are required to count prescription drug manufacturers’ financial assistance towards enrollees’ cost-sharing when a plan is not a qualified HDHP/HSA and issued in Kentucky.
Massachusetts
2022 Individual Mandate Coverage OOP and Deductible Minimum Creditable Coverage (MCC) Limits
The Massachusetts Individual Mandate requires each Massachusetts resident to have health coverage that meets the Minimum Creditable Coverage (MCC) standards set by the Commonwealth Health Insurance Connector (Connector) or pay a penalty through their state tax returns. The Connector has announced the 2022 deductibles and out-of-pocket maximum limits for minimum creditable coverage (MCC). The 2021 and 2022 limits are summarized below.
Although employers are not required to provide MCC for their Massachusetts employees, insurers or, in some cases, employers are required to complete Form 1099-HR that indicates whether a plan is MCC or not and distribute the form to their Massachusetts employees. Then, the same form must be submitted to the state Department of Revenue (DOR) by January 31, following the plan year.
Additionally, employers with six or more employees who work in Massachusetts are required to submit an annual report, entitled the Health Insurance Responsibility Disclosure (HIRD) form, where MCC status is also reported, by December 15.
Therefore, employers who have employees in Massachusetts should be aware of the 2022 MCC limits.
| Deductible Limits | 2021 | 2022 |
| Employee-only tier deductible | $2,700 | $2,750 |
| Employee-only tier separate Rx deductible | $300 | $340 |
| Family tier deductible | $5,400 | $5,500 |
| Family tier Rx deductible | $660 | $680 |
| Maximum Out-of-Pocket (OOP) Limits | 2021 | 2022 |
| Employee-only tier OOP max | $8,550 | $8,700 |
| Family tier OOP max | $17,100 | $17,400 |
Bulletin 06-21. The MCC Regulations for Calendar Year 2022 »
Bulletin 05-20. The MCC Regulations for Calendar Year 2021 »
Mass.gov. Health Care: Frequently Asked Questions for Employers, Form MA 1099-HC »
Missouri
COVID-19 Vaccine Mandate Guidance
Recently, Gov. Parson issued Executive Order 21-10 in response to the federal vaccine mandates. The order provides that no state agency, board, commission or other entity of the executive branch shall compel any individual to obtain the COVID-19 vaccine pursuant to the federal vaccine mandate when the individual refuses due to a sincerely held religious belief or for medical reasons. Further, no such state agency is permitted to impose a penalty to any individual or business for failure to comply with any federally imposed COVID-19 vaccine mandate when failure to comply is due to a sincerely held religious belief or for medical reasons.
Employers should be aware of these developments.
South Dakota
COVID-19 Vaccine Mandate Guidance
Recently, Gov. Noem issued Executive Order 2021-14 in response to the federal vaccine mandates. The order provides that any employee for any state agency, department, bureau, division, board, commission or other executive branch entity; any employee of an authority authorized by state law; and any employee of the Board of Regents and Board of Technical Education is not required to receive a COVID-19 vaccination when the individual refuses due to a sincerely held religious belief or for medical reasons.
Employers should be aware of these developments.
Washington
Governor Delays Collection of Long-Term Care Tax
On December 17, 2021, Gov. Inslee announced a delay of the payroll tax that will fund the state’s new long-term care (LTC) program – the Washington Cares Fund. Before the governor’s announcement, employers were required to report their Washington employees’ wages and hours and collect the premiums from employees’ wages beginning on January 1, 2022.
Citing the desire to allow lawmakers to improve the law, Gov. Inslee directed the state Employment Security Department not to collect the premiums for this program before they come due in April. He also encouraged employers not to deduct the premiums from employees’ paychecks. The hope is that this gives the government time to pass legislation extending the implementation dates until next year.
Employers with Washington employees should be mindful of the governor’s announcement and consult with legal counsel about their obligations given this development.
Statement on Delaying WA Cares Fund Premium Assessment »
This material was created by PPI Benefit Solutions to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The service of an appropriate professional should be sought regarding your individual situation. PPI does not offer tax or legal advice. "PPI®" is a service mark of Professional Pensions, Inc., a subsidiary of NFP Corp. (NFP). All rights reserved.
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Industry news topics covered in the Compliance Corner are chosen based on general interest to most employers and may include articles about services not available through PPI.
FAQ
For the Form W-2 reporting requirement (including the applicable employer-sponsored coverage amount to report on an employee’s Form W-2, Box 12 Code DD), must an employer report on union employees covered under a union plan? And are union employees included in the count to determine if the W-2 reporting requirement applies?
Click here to read the answer.