IRS Provides COVID-19 Guidance on Retiree Rehires and Qualified Pension Plan Distributions
On October 22, 2021, the IRS provided COVID-19-related guidance regarding qualified pension plan distributions. The guidance, in the form of two new frequently asked questions (FAQs), addresses the rehiring of retirees and in-service distributions.
The first FAQ focuses upon the situation in which an individual retires and then commences benefit distributions from a qualified pension plan. The plan does not provide for in-service distributions to active employees, and due to unforeseen COVID-19 related hiring needs, the employer (and plan sponsor) rehires the individual.
The specific question posed is whether the individual’s prior retirement will no longer be considered a “bona fide retirement” because of the rehiring. For plans that do not permit in-service distributions, IRS rules for plan qualification to include a bona fide retirement requirement for the individual to receive retirement benefits. Neither the Code nor the IRS defines bona fide retirement, so the determination would typically be based on the facts and the circumstances surrounding the employment termination (and whether it was potentially designed to circumvent the distribution rules).
The IRS answer indicates that a rehire due to unforeseen circumstances that do not reflect any prearrangement will not cause the individual's prior retirement to no longer be considered a bona fide retirement under the plan. Therefore, if the plan terms permit, benefit distributions could continue after the rehire. However, the guidance advises employers to review any plan terms that may prohibit the rehire of a retiree within a specified timeframe, suspend distributions upon rehire, or otherwise impact the pension benefit of a rehire.
The second FAQ asks whether a qualified pension plan can allow a working individual to commence in-service distributions. The IRS response explains that the plan terms may generally allow an individual to commence in-service distributions upon attainment of either age 59½ or the plan's normal retirement age. However, distributions commencing before age 59½ may be subject to a 10% additional premature withdrawal tax, unless an exception to the tax applies.
Retirement plan sponsors, particularly those facing unanticipated pandemic-related labor shortages, may find this guidance helpful.
IRS Proposes Regulations Regarding ACA Reporting
On November 22, 2021, the IRS released proposed rules that will provide an automatic 30-day extension each year for Forms 1095-B or 1095-C distribution to individuals. While the rule is currently proposed and not yet final, the IRS explains that these proposed regulations can be relied on for calendar years beginning after December 31, 2020, and before the date when the IRS decides to finalize the regulations. As such, for 2021 reporting purposes, 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).
The ACA imposes two reporting requirements under Sections 6055 and 6056. Section 6055 requires entities that provide minimum essential coverage to report to the IRS and to covered individuals the months in which the individuals were covered. Section 6056 requires applicable large employers (under the employer mandate) to report to the IRS and full-time employees whether they offered minimum essential coverage that was affordable and minimum value.
Under the proposed rule, the date by which employers must distribute Forms 1095-B or 1095-C to individuals is automatically extended 30 days from the previous January 31 deadline. While the IRS has previously extended the deadline each year, this proposed rule amends the rules to permanently change the due date of the reporting. Specifically, Forms 1095-B and 1095-C furnished to individuals will be timely if provided no later than 30 days after January 31 of the calendar year following the reporting year (if the date falls on a weekend day or legal holiday, statements will be timely if provided on the next business day).
Further, the IRS has in the past recognized good faith efforts made by employers that timely file and distribute their required Forms 1094-B/C and 1095-B/C. As a result, such employers have not been subject to penalties if the information filed was incorrect or incomplete. Since the intention of this good faith relief was to be transitional relief, the IRS stated last year that it was the last year they intended to provide such relief. Accordingly, the agency also proposes that the good faith relief should no longer apply.
The proposed rules do not extend the date by which employers must file Forms 1094-B/C and 1095-B/C with the IRS. Reporting entities must still file Forms 1094-B/C and 1095-B/C with the IRS by February 28, if filing by paper, and March 31, if filing electronically. Employers may still request an automatic extension to file the Forms 1094-B/C and 1095-B/C with the IRS, as long as they submit a Form 8809 on or before the due date of those filings.
Employers should keep this guidance in mind as they prepare their ACA filings and distributions for 2021. We will monitor the status of the proposed rules and communicate any updates accordingly.
IRS Issues 2022 Inflation-Adjustments Limitations for Health FSAs, Commuter Benefits and Adoption Assistance
On November 10, 2021, the IRS issued Revenue Procedure 2021-45, providing certain cost-of-living adjustments for a wide variety of tax-related items, including health FSA contribution limits, transportation and parking benefits, qualified small employer health reimbursement arrangements (QSEHRAs), the small business tax credit and other adjustments for tax year 2022. Those changes are outlined below.
- Health FSA. The annual limit on employee contributions to a health FSA will be $2,850 for plan years beginning in 2022 (up $100 from 2021). In addition, the maximum carryover amount applicable for plans which permit the carryover of unused amounts is $570 (up $20 from 2021).
- Qualified transportation fringe benefits . For 2022, the monthly limit on the amount that may be excluded from an employee’s income for qualified parking increases to $280, as does the aggregate fringe benefit exclusion amount for transit passes (both up from $270 in 2021).
- QSEHRAs . For 2022, the maximum amount of reimbursements under a QSEHRA may not exceed $5,450 for self-only coverage and $11,050 for family coverage (an increase from $5,300 and $10,700 in 2021).
- Adoption assistance program . The maximum amount an employee may exclude from his or her gross income under an employer-provided adoption assistance program for the adoption of a child will be $14,890 for 2022 (a $450 increase from the 2021 maximum of $14,440). This exclusion begins to phase out for individuals with modified adjusted gross income greater than $223,410 and will be entirely phased out with $263,410 modified adjusted gross income.
- Small business health care tax credit. Some changes impact the small business health care tax credit since the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10. For 2022, the average annual wage level at which the credit phases out for small employers is $28,700 (up $900 from 2021).
Employers with limits that are changing (such as for health FSAs, transportation/commuter benefits and adoption assistance) will need to determine whether their plans automatically apply the latest limits or must be amended (if desired) to recognize the changes. Any changes in limits should also be communicated to employees.
HHS Announces Adjustments to Penalties for SBC, MSP, and HIPAA Violations
HHS recently announced inflation-adjusted penalty amounts related to Summary of Benefits and Coverage (SBC), Medicare secondary payer (MSP) and HIPAA privacy and security rules violations. These new penalty amounts are calculated based on a cost-of-living increase of 1.01182%. The new amounts are applied to penalties assessed on or after November 15, 2021, for violations occurring on or after November 2, 2015.
Summary of Benefits and Coverage (SBC)
The ACA requires insurers and group health plan sponsors to provide SBCs to eligible employees and their beneficiaries before enrollment or re-enrollment in a group health plan. The maximum penalty for a health insurer or plan’s failure to provide an SBC increased from $1,176 to $1,190 per failure.
Medicare Secondary Payer (MSP) rules
- Penalty on financial incentives to discourage enrollment in a group health plan. The MSP provisions prohibit employers and insurers from offering Medicare beneficiaries financial or other benefits as incentives to waive or terminate group health plan coverage that would otherwise be primary to Medicare. The failure to comply with the MSP rules increased from $9,639 to $9,753.
- Penalty on failure to disclose to HHS when a plan is primary to Medicare. The maximum daily penalty for the failure of an insurer, self-insured group health plan or a third-party administrator to inform HHS when the plan is or was primary to Medicare increased from $1,232 to $1,247.
HHS Administrative Simplification
The HIPAA administrative simplification regulations provide standards for privacy, security, breach notification and electronic health care transactions to protect the privacy of individuals’ health information.
The penalty amounts vary depending on the violators’ level of intentions and situations broken down by HIPAA’s four-tiered penalty structure. The below chart summarizes the new and prior penalty amounts.
|Eff. November 2021 (New)
|Prior Amounts (Old)
|Calendar year Cap
|Calendar year Cap
|Lack of knowledge
|Reasonable cause and not willful neglect
|Willful neglect: corrected within 30 days
|Willful neglect: not corrected
With this latest increase in penalties, employers may want to review their compliance on SBC, MSP and HIPAA along with other employee benefits compliance requirements to help prevent agency audits and potential penalties.
Agencies Issue Interim Rule Regarding Transparency in Prescription Drug Spending
On November 23, 2021, the IRS, HHS and EBSA published interim final rules related to prescription drug and health care spending reports. The rules are the latest in a series implementing the transparency provisions of the Consolidated Appropriations Act, 2021 (CAA).
The CAA requires health insurers and group health plans to report certain information regarding spending on prescription drugs and health care treatment. The rules do not apply to HRAs (including ICHRAs), health FSAs, or stand-alone vision or dental plans. The insurer is responsible for reporting on a fully insured plan. The employer plan sponsor will be responsible for a self-insured plan if a third-party administrator is not contracted to perform such service. Insurers and administrators are permitted to aggregate spending information across all market segments as long as the general plan information is provided for each specific policy included in the reporting (see the initial three bullet points below).
The rules clarify that the reporting is based on calendar-year data, not policy or plan year data. This is to help facilitate comparison between plans. The annual report must include:
- Beginning and end dates of the plan year.
- The number of enrollees covered.
- Each state in which the plan is offered.
- Average monthly premium paid by employees versus employers.
- Total health care spending broken down by type (including hospital costs; health care provider and clinical service costs, for primary care and specialty care separately; costs for prescription drugs; and other medical costs, including wellness services).
- Prescription drug spending by enrollees versus employers and insurers.
- The 50 most frequently dispensed brand prescription drugs and the total number of paid claims for each.
- The 50 costliest prescription drugs by total annual spending and amount spent for each.
- The 50 prescription drugs with the greatest increase in plan or coverage expenditures from the previous year.
In addition, prescription drug rebates and fees received by the plan or participant must be reported if it impacts premiums or cost-sharing. This includes discounts, chargebacks or rebates, cash discounts, free goods contingent on a purchase agreement, up-front payments, coupons, goods in kind, free or reduced-price services, grants or other price concessions.
Initially, the report for 2020 data was to be due December 27, 2021, and 2021 data due June 1, 2022. If an insurer, administrator or plan sponsor is prepared to report by those dates, the departments are ready to receive the data. However, the rules provide relief in respect to the reporting deadlines. Reports on 2020 and 2021 data will be accepted until December 27, 2022. Future reports will be due on June 1 following the data year. For example, the 2023 report will be due June 1, 2024.
Again, fully-insured plan sponsors will not be required to report but may need to work with the insurer on collecting data. Employer plan sponsors of self-insured plans should review agreements with third party administrators to determine reporting responsibility.
DOL Releases ERISA Enforcement Statistics
In a DOL fact sheet, the agency announced that over $2.4 billion was recovered from enforcement of ERISA by the Employee Benefits Security Administration (EBSA) through investigations, complaint resolution and other enforcement efforts for the fiscal year 2021.
The EBSA’s oversight extends to almost 734,000 retirement plans, approximately 2 million health plans and 662,000 other welfare plans. The fact sheet explains that over $2 billion was recovered through investigations, and $499.5 million was restored to workers through informal complaint resolution. Of EBSA’s 1,072 civil investigations, over 69% resulted in monetary or other corrective action. Non-monetary corrective action ranged from removal of a plan fiduciary to implementation of new plan procedures.
Where voluntary compliance efforts do not come to fruition, EBSA refers cases to the Solicitor of Labor. In the fiscal year 2021, the agency referred 70 cases to litigation. In addition, EBSA closed 208 criminal cases resulting in 38 guilty pleas or convictions and 72 individuals indicted.
As demonstrated by the data summarized in the fact sheet, ERISA enforcement remains robust. Employers should take note of EBSA’s increased enforcement activity and be mindful of this information when formulating and administering their own ERISA compliance.
IRS Issues Interest Rate Guidance for Defined Benefit Pension Plans
On November 18, 2021, the IRS released Notice 2021-62, which updates interest rates for defined benefit pension plan minimum funding purposes. Specifically, the notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates and the 24-month average segment rates applicable to single-employer defined benefit pension plans. Additionally, the notice provides the 30-year Treasury weighted average rate used by multiemployer plans to determine current liability.
With respect to single-employer defined benefit pension plans, the Internal Revenue Code specifies the minimum funding requirements and interest rates that must be used to determine a plan’s target normal cost and funding target. The target normal cost is the present value of benefits earned (or expected to be earned) during the year. The funding target is the present value of benefits accrued on the first day of the plan year.
For this purpose, the present value is normally determined using three 24-month average corporate bond interest rates (known as “segment rates”), each of which is used to discount benefits payable during specified periods. These segment rates are adjusted by the applicable percentage of the 25-year average segment rates for the period ending September 30 of the year preceding the calendar year in which the plan year begins. Alternatively, a plan can elect to use the monthly corporate bond yield curve in place of the segment rates.
The notice includes a table (Table 2021-10) with the monthly corporate bond yield curve based upon October 2021 data. It specifies the spot first, second, and third segment rates for the month of October 2021 as, respectively, 0.87, 2.74 and 3.16.
According to the notice, the 24-month average corporate bond segment rates applicable for November 2021 (without adjustment for the 25-year average segment rate limits) for the first, second and third segments are, respectively, 0.96, 2.64 and 3.32.
The notice further explains that the American Rescue Plan Act of 2021 (ARPA) provided interest rate relief by changing the 25-year average segment rates and the applicable minimum and maximum percentages used to adjust the 24-month average segment rates. The following are the adjusted 24-month average segment rates taking into account the ARPA amendments:
|For Plan Years Beginning In
However, the ARPA permitted a plan sponsor to elect not to have these changes apply to any plan year beginning before January 1, 2022. For a plan year for which such an election applies, the adjusted 24-month average segment rates are as follows:
|For Plan Years Beginning In
With respect to minimum funding requirements for multiemployer plans, the notice provides the interest rate for calculating the plan’s current liability. This interest rate must be no more than five percent above and no more than 10 percent below the weighted average interest rates on 30-year Treasury securities during the four-year period ending on the last day before the beginning of the plan year. The notice provides that for plan years beginning in November 2021, the 30-year Treasury weighted average rate was 2.16%, which results in a permissible interest rate range of 1.94% to 2.26% to calculate a plan’s current liability.
Sponsors of defined benefit plans should be aware of the guidance and may want to consult with their counsel or actuaries for further information.
IRS Releases Required Amendment List for Retirement Plans
On November 30, 2021, the IRS issued Notice 2021-64, which is the 2021 Required Amendments List (RA List) for qualified retirement plans. The yearly RA Lists provide changes in retirement plan qualification requirements that could result in disqualifying provisions and require a remedial amendment. A disqualifying provision is a required provision that isn’t listed in the plan document, a provision in the document that doesn’t comply with the qualification requirements or a provision that the IRS defines as such.
The RA List applies to both §401(a) and §403(b) plans and is divided into two parts: Part A and Part B. Part A lists changes in qualification requirements that generally will require affected plans to be amended. Part B lists changes that would likely not require amendments to most plans but might require an amendment because of an unusual plan provision in a particular plan.
This year, there is one Part A entry addressing the special financial assistance program for financially troubled multiemployer plans, which was provided through the American Rescue Plan Act of 2021. Notably, there are no Part B changes this year.
The remedial amendment deadline for disqualifying provisions resulting from items on the 2021 RA List is December 31, 2023 (or later, for certain governmental plans). Therefore, plan sponsors should determine whether amendments are necessary for their retirement plan and work with their service providers to adopt any such amendment.
IRS Letter Waives Roth 60-Day Rollover Deadline
On September 1, 2021, the IRS released a private letter ruling granting a waiver of the otherwise applicable 60-day timeframe to rollover Roth funds from a qualified plan to a Roth IRA.
The letter was issued in response to a request by a taxpayer who had contributed on both a pre-tax and post-tax basis (through a designated Roth account) to the defined contribution plan offered by his employer. When he terminated employment, he requested a direct rollover of his pre-tax elective deferrals and earnings to a traditional IRA and a direct rollover of his Roth contributions and earnings to a Roth IRA. Both IRAs had been previously established at the same financial institution.
The plan’s TPA issued two separate checks to the financial institution, one reflecting the amount of the designated Roth contributions and earnings and the other reflecting the amount of the pre-tax elective deferrals and earnings. Despite the taxpayer’s instructions for each amount to be deposited in the appropriate IRA, the financial institution deposited both checks in the traditional IRA.
The taxpayer did not become aware of the error until many months later. At such time, the financial institution suggested that he submit a request to the IRS for a waiver of the 60-day rollover requirement to correct the mistake.
In the letter, the IRS explains that the Internal Revenue Code allows a waiver of the 60-day requirement. Because if not providing one would be against equity or good conscience and events beyond the taxpayer’s control would make a refusal of the waiver unreasonable. In deciding whether to grant the waiver, the IRS will consider all relevant facts and circumstances, including mistakes by financial institutions; inability to complete a rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or a postal error; the use of the amount distributed; and the time elapsed since the distribution occurred.
The IRS concluded that the information and documentation presented by the taxpayer supported his position that the failure to satisfy the 60-day rollover deadline was due to an error by the financial institution and waived the 60-day rollover requirement. The taxpayer was given 60 days from issuance of the letter to roll the misdirected funds to the Roth IRA.
Although the ruling technically only applies to the requesting taxpayer and cannot be cited as precedent, it provides insights into how the IRS may view similar situations.
FAQ: Why shouldn’t employers offer health coverage to independent contractors?
Before addressing the issues of whether coverage should be offered to independent contractors, it is important to understand the difference between an independent contractor and an employee. An employer needs to be very careful in classifying workers. If the worker is correctly classified as an independent contractor, it is not recommended that the employer offer them coverage or consider them “common law employees.”
The determination of who is an employee versus an independent contractor takes a facts and circumstances based analysis of the nature of the individual’s employment. It includes an analysis of factors such as who directs the individual’s work, provides tools, determines work processes, etc. In plain terms, a contractor is given a project or goal to accomplish. The contractor determines how the project gets completed. If the employer dictates exactly how a project must be completed, then the individual is most likely an employee.
Courts have used the following factors to determine whether an individual is an employee or independent contractor:
- the hiring party's right to control the manner and means by which the product is accomplished
- the source of the instrumentalities and tools
- the location of the work
- the duration of the relationship between the parties
- whether the hiring party has the right to assign additional projects to the hired party
- the extent of the hired party's discretion over when and how long to work
- the method of payment
- the hired party's role in hiring and paying assistants
- whether the work is part of the regular business of the hiring party
- whether the hiring party is in business
- the provision of employee benefits
- the tax treatment of the hired party
The DOL has two helpful resources on this issue – a fact sheet and eLaws Advisor. Both resources outline discussion points and questions that should be asked when determining the status of independent contractors. They are available at:
eLaws Advisor: elaws - Fair Labor Standards Act Advisor (dol.gov)
The DOL and many states have made misclassification a focal point of investigation. Penalties can be high for misclassifying an employee as an independent contractor if the federal investigator believes the practice to be motivated by an avoidance of paying taxes on the workers or offering them benefits. See the following information on the DOL Initiative: Misclassification of Employees as Independent Contractors | U.S. Department of Labor (dol.gov)
Generally speaking, an employer would want to limit its offerings to independent contractors- including tools, supplies, equipment, and benefits. If there is too much integration of the employer and the contractor, the DOL and IRS may determine the employee to be a misclassified employee. This would have tax implications for the employer as well as past liability on the group health plan. An employer could owe back employment taxes and have past liability for workers’ compensation.
Health Plan Eligibility
Under ERISA and the Internal Revenue Code, only employees and common law employees can be offered coverage under an ERISA group health plan. That term would not include an independent contractor. An independent contractor is a self-employed individual. They are not a common law employee. If an employer determines and offers them the benefits that should only be provided to common law employees, the DOL could view that as evidence that the workers are misclassified as independent contractors.
As self-employed workers rather than employees, independent contractors would not be eligible for coverage under any ERISA plan- group medical, dental, vision, health FSA, life, disability or HRA. If an independent contractor is offered coverage under a group health plan, there could also be an argument that the plan would be considered a multiple employer welfare arrangement (MEWA). This could subject the plan to MEWA filings and state-imposed MEWA regulations.
The employer mandate requires the employer to offer coverage to and report full-time employees (including common-law employees). If the employer offers coverage to an independent contractor or reports them as a full-time employee, they are adding weight to the argument that they have misclassified the worker as an independent contractor and that the contractor should have been classified as an employee.
If the individual is classified as an independent contractor, not offered coverage and the DOL later determines them to be a common law employee, this could result in the employer being subject to employer mandate penalties if the person goes to the exchange and receives a premium tax credit.
Employment practices are beyond our scope. Employers should carefully consider the factors discussed above and whether the workers will be independent contractors or employees, consulting with employment counsel as necessary. If the workers are independent contractors, then offering them coverage may give rise to compliance and legal issues. If they are employees, then the employer would have to look at their terms of eligibility to see if they remain eligible for coverage.
Applications Now Accepted for Paid Family and Medical Leave Program
On December 1, 2021, Gov. Lamont announced that applications are now being accepted from residents for the state’s new Paid Family and Medical Leave (PFML). The submissions would be for qualifying events occurring on or after January 1, 2022.
The PFML program allows eligible workers to take paid time off to care for their own health, a newborn child or a sick family member, amongst other reasons. Eligible employees can receive up to 12 weeks of income replacement, with the amount varying based upon the employee’s earnings and capped at 60 times the state’s minimum wage. If an employee is entitled to employer provided benefits in addition to PFML, the combined benefits cannot exceed 100% of the employee’s regular weekly earnings.
The Connecticut Paid Leave Authority, which administers the PFML program, is accepting applications through its website or by email, fax, phone, or email. The website provides an instructional video for creating an account, which is required to submit or monitor a claim online.
The website also outlines the claims process and applicable timeframes. Generally, after a claim is filed, the employer must verify certain information to validate the employee’s eligibility and claim payment amount. Supporting documentation must then be submitted before the claim decision is made. The website indicates that benefits paid through the program will be issued weekly and paid two weeks in arrears.
Employers should be aware of the recent announcement and review the PFML website resources regarding the claims process.
State Provides Sample Form and FAQs for Essential Health Benefits Disclosure Requirement
On November 16, 2021, the Illinois Department of Labor (DOL) released guidance on the new Illinois Consumer Coverage Disclosure Act (CCDA) disclosure requirement and also provided a sample disclosure form.
The CCDA (signed by Gov. Pritzker in August 2021) requires employers to provide eligible employees with a disclosure that compares their coverage to essential health benefits required for coverage received through the Illinois marketplace. The disclosure must be provided upon hire, annually thereafter and at the request of an employee, and can be provided via email or posted on a website that an employee is able to regularly access.
The CCDA is applicable to all employers with employees in Illinois who provide group health insurance coverage. Importantly, this requirement applies to both fully insured and self-insured plans. The DOL explains this further in its FAQs, noting that the CCDA creates a notification requirement for all employers, regardless of the type of insurance they provide.
Employers who offer group health plans in Illinois should be aware of this requirement, review the FAQs provided and sample disclosure, and discuss with carriers and TPAs, as applicable, to ensure compliance.
Reminder: MA HIRD Form Due December 15, 2021
The Health Insurance Responsibility Disclosure (HIRD) form is a state reporting requirement in Massachusetts that applies to in-state and out-of-state employers with employees in Massachusetts. The HIRD form collects employer-level information about an employer’s sponsored insurance (ESI) offerings, i.e., their group health plan(s). The HIRD form must be completed and submitted online by December 15, 2021, for the current reporting year.
To file a HIRD form, employers must log in to their MassTaxConnect account and select the “File health insurance responsibility disclosure” hyperlink under the account alerts.
MA PFML 2022 Poster and Notices Updated
The Department of Medical and Family Leave recently updated the PFML workplace poster, employer notice, and rate sheet to reflect the 2022 rates in several languages.
For 2022, employers are not required to reissue these notices to existing employees. Employers are required to distribute these updated notices to new employees who start their employment on or after January 1, 2022. All the required notices and posters can be found here
As a reminder, effective January 1, 2022, the new contribution rate on eligible employee wages will be 0.68% of each Massachusetts employees’ eligible wages. The covered employers are encouraged to communicate regarding the 2022 MA PFML contribution amount with their payroll vendors to ensure that the appropriate amounts will be withheld through payroll.
Affected employers should be aware of these developments.
MA PFML 2022 Poster and Notices Updated
As a reminder, if an employer has at least one employee who resides primarily in New Jersey for at least 15 days in any month, the employer is subject to file Form(s) 1095 with the New Jersey Division of Taxation in the subsequent year annually. The current 2021 tax year’s filing is due on March 31, 2022. Employers are permitted to provide copies of Forms 1095-C (or B) that are prepared for the AIRS to meet NJ’s reporting requirements.
For fully insured plans, if their insurers are filing their NJ residents’ Form(s) 1095, then the employers are not required to file the forms with the state. Employers are encouraged to discuss and confirm with their insurers that the insurers are filing their forms timely.
For self-insured plans, employers are responsible for filing completed Forms 1095-C (or B) with the state, timely.
The main objective of this state reporting is for the state to enforce its Individual Mandate requirement by verifying that each resident had health coverage in the prior year.
Affected employers should be aware of these developments.
State Interprets Statute Capping Insulin Costs
On November 29, 2021, Commissioner Mulready issued Bulletin No. LH 2021-04. This bulletin, sent to all health insurance companies and other interested parties, provides guidance regarding recent legislation that affects the amount policyholders must pay for insulin.
The state recently passed HB 1019, effective November 1, 2021, which states that the amount that a policyholder must pay for insulin is capped at $30 for a thirty-day supply and $90 for a ninety-day supply for each covered insulin prescription, regardless of the amount or type of insulin needed to fill the prescription or prescriptions of the covered person.
The bulletin states that the department’s position that the out-of-pocket monthly cap shall apply regardless of whether the policyholder has met the annual deductible or coinsurance requirements within a given policy. As of the effective date of the legislation, the caps will apply to existing health plans as well as upon issue or renewal of a benefit plan.
In addition, it is the department’s position that if a policyholder’s thirty-day supply of insulin consists of three different insulin prescriptions, then the covered policyholder shall be required to pay a maximum of $30.00 out-of-pocket for each of the three insulin prescriptions, because the caps apply to each supply regardless of the amount of type.
This cap does not apply to Medicare Part D plans.
Employers with plans regulated by the state should be aware of this development.
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.
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.
Why shouldn’t employers offer health coverage to independent contractors?