Federal Updates
Executive Order on Health Care Transparency also Asks for Guidance on Expanding HDHPs, Health FSA Carryovers and Medical Expenses
On June 24, 2019, the White House published Executive Order 13877, Improving Price and Quality Transparency in American Healthcare To Put Patients First. The executive order directs the Treasury, HHS, and DOL to adopt guidance and rules that will help improve price and quality transparency in health care generally. While the primary purpose of the order is geared toward price and quality transparency, the order also addresses HDHPs, health FSA carryovers, and medical expenses.
On transparency, the order directs the regulatory agencies to, within 90 days, request comments on a proposal to require providers, insurers, and self-insured health plans to provide information to patients (prior to receiving care) on expected out-of-pocket expenses. The order also directs the agencies to, within 180 days, adopt rules directed at increasing access for researchers, innovators, and others to de-identified claims data from group health plans. The rules must do so in a way that complies with HIPAA and other laws that ensure patient privacy and security.
On HDHPs, the order directs the Treasury to, within 120 days, publish guidance that allows HDHPs to be more compatible with HSAs. Specifically, the order asks for a rule that makes HDHPs compatible with HSAs, even where the HDHP covers medical care for chronic conditions before the statutory deductible has been met.
On health FSA carryovers, the order directs the Treasury to, within 180 days, propose regulations that would increase the amount that an employee can carryover from one health FSA plan year to the next.
On medical expenses, the order directs the Treasury to, within 180 days, propose regulations that would treat certain arrangements as eligible expenses under IRC Section 213(d). Those arrangements could potentially include direct primary care arrangements and health care sharing ministries.
The order is not a change in law — so employers do not have to do anything with regard to immediate changes on compliance efforts. The order is an indication that some of the above changes could be coming, depending on how the agencies respond and develop their guidance. The regulatory agencies must first publish proposed rules and go through a comment period, so any changes would not likely take effect until late 2020 at the earliest (and even then, there would likely be a grace period for plan years that have already begun). NFP Benefits Compliance will continue to monitor developments on this and report in future editions of
Compliance Corner
.
Executive Order 13877 »
HHS Answers Two Questions Related to PHI Disclosures
On June 26, 2019, HHS posted two FAQs to its website related to the use and disclosure of protected health information (PHI). The first answers whether one health plan is permitted to share PHI with a second health plan for care coordination purposes without the individual’s authorization. As background, the HIPAA privacy rules permit a covered entity (including a health plan) to disclose PHI for its own health care operation purposes. HHS clarified that disclosing PHI for those purposes includes a health plan disclosing PHI of a former participant to a new health plan for care coordination purposes.
The second question answers whether a covered entity may use a participant’s PHI to inform them about other available health plan options that it offers without the individual’s authorization. The HIPAA privacy rules prohibit using PHI for marketing purposes. However, there is an exception for communications to individuals regarding replacements to, or enhancements of, existing health plans, so long as the covered entity is not receiving financial remuneration for the communications. Thus, an insurer is permitted to market its other health plan options to participants as long as they do not receive financial compensation for sending the communication and they are in compliance with any business associate agreement in place.
While these FAQs do not present a new compliance requirement, they do provide additional clarification on how HIPAA applies to certain situations. Covered entities should familiarize themselves with this guidance.
HHS, HIPAA Privacy FAQs »
Retirement Update
IRS Proposes Rules on Multiple Employer Plans
On July 3, 2019, the IRS proposed rules that modify how employer qualification failures are treated if the employer provides retirement benefits through a multiple employer plan (MEP). As background, a MEP is a defined contribution plan in which multiple employers participate. For IRC and ERISA purposes, MEPs are considered a single plan. In the previous IRS rules on MEPs, there was a “unified plan rule” that meant that the whole MEP could be disqualified if one participating employer failed to satisfy a plan qualification requirement. This was known as the “one-bad-apple rule.”
This proposed rule does away with the one-bad-apple rule if certain conditions are met. This change comes in response to President Trump’s executive order on Strengthening Retirement Security in America. You can find more information on that executive order in our
Compliance Corner
article
here
.
Under the proposed rule, MEPs can avoid the disqualification of one participating employer causing the disqualification of the entire plan if the following requirements are met:
The MEP has to “spin off” the participant accounts of the employer that has been unresponsive after committing a qualification failure.
The MEP must establish procedures that promote compliance.
The MEP’s plan documents must explain the procedures the MEP will use to address participating employer failures.
The MEP must notify the participating employer of a failure by providing up to three notices that identify the failure, suggest remedial actions, and warn of the consequences of failing to take remedial action.
The MEP must allow the participating employer 90 days to respond to the qualification failure notice.
In implementing the spin-off of the disqualified participating employer, the MEP must give notice to the employees, stop accepting contributions from that employer, and spin-off the plan assets of that employer’s employees.
This proposed rule will be welcome news to MEP sponsors. The rule would become effective on or after the date the final rule is published in the federal register. The IRS will accept comments on the rule until October 1, 2019. MEP sponsors and their participating employers should consider the requirements set in place by this rule.
IRS Revises Resources Related to 401(k) Hardship Distributions
The IRS has updated their web page related to hardship distributions from a 401(k) based on changes made by the Bipartisan Budget Act of 2018.
Beginning in 2019, hardship distributions may be made from elective deferrals, qualified nonelective contributions (QNECs), qualified matching contributions (QMACs), and earnings attributable to any of those.
Also effective in 2019, a participant is no longer prohibited from making elective deferrals in the six month period following the receipt of a hardship distribution. Additionally, the participant is not required to take all available plan loans prior to requesting the hardship distribution.
These changes are already in effect. Thus, plan sponsors should already be in compliance. Please contact your NFP advisor with any questions.
IRS Issue Snapshot - Hardship Distributions from 401(k) Plans »
Announcements
Reminder: Form 5500 Filing for Calendar Year Plans Due July 31
Applicable plan sponsors must file Form 5500-series returns on the last day of the seventh month after their plan year ends. As a result, calendar-year plans generally must file by July 31 of this year (reporting on the 2018 plan year). Plans may request a two-and-a-half-month extension to file by submitting Form 5558, Application for Extension of Time to File Certain Employee Plan Returns, by that plan's original due date.
As a reminder, group health plans sponsored by a governmental or church entity aren’t required to file a Form 5500, as those plans aren’t subject to ERISA. Additionally, unfunded, insured, or combination unfunded and insured health plans with fewer than 100 participants on the first day of the plan year are also exempt from the filing.
NFP has vendors available to assist with filings. Please ask your advisor if you need assistance.
Forms and Instructions »
Form 5500 EFAST2 »
Form 5558, Extension of Time »
PCOR Fee, Form 720 Filing Due July 31
The ACA imposed the PCOR fee on health plans to support clinical effectiveness research. The PCOR fee applies to plan years ending on or after October 1, 2012, and before October 1, 2019. The PCOR fee is generally due by July 31 of the calendar year following the close of the plan year.
PCOR fees are required to be reported annually on Form 720, Quarterly Federal Excise Tax Return, for the second quarter of the calendar year. Plan sponsors that are subject to PCOR fees but not other types of excise taxes should file Form 720 only for the second quarter. No filings are needed for the other quarters for such employers.
The PCOR fee is generally assessed based on the number of employees, spouses, and dependents that are covered by the plan. For plan years ending in 2018 on or before October 1, 2018, the fee is $2.39 multiplied by the average number of lives covered under the plan. For plan years ending between October 1, 2018, and October 1, 2019, the fee increased to $2.45 multiplied. Form 720 and corresponding instructions were revised to reflect the increased fee.
The PCOR fee can be paid electronically or mailed to the IRS with the Form 720 using a Form 720-V payment voucher. According to the IRS, the fee is tax-deductible as a business expense.
As a reminder, the insurer is responsible for filing and paying the fee for a fully insured plan. The employer plan sponsor is responsible for filing on a self-insured plan, including an HRA. A stand-alone dental or vision HRA would be accepted and wouldn’t be subject to the PCOR fee.
Form 720 »
Form 720 Instructions »
FAQ
In light of DOL guidance on the coverage of ABA therapy and mental health parity, must plans cover ABA therapy?
There is currently no law federal law that would require a plan to cover ABA therapy. As background, the mental health parity rules generally require that mental health treatment (if it’s offered) must be provided in parity with medical surgical benefits. But mental health parity does not require plans to offer mental health treatment; it simply outlines what must happen if an employer does cover mental health treatment.
So let’s start there: A self-funded plan would likely be allowed to exclude mental health treatment altogether. They could also choose to exclude treatment for autism or simply for ABA therapy. However, some state laws mandate autism treatment and ABA therapy. So fully insured plans might be required to provide the therapy under state law.
Sometimes, self-funded plans do have to follow the state benchmark when it comes to essential health benefits (which are the benefits that must be covered under small plan insurance). This happens because the benchmarks are also used to identify the essential health benefits for purposes of determining whether lifetime or annual limits can be imposed on certain treatment. However, currently, only the state of Ohio and the District of Columbia seem to include ABA therapy as an essential health benefit.
This question has recently come up as some practitioners and employers are familiar with the DOL FAQ that discusses ABA therapy. However, it’s important to note that the DOL did not actually opine on whether or not ABA therapy must be covered. Instead, they answered the question of a hypothetical situation where an employer tries to deny coverage for ABA therapy as an experimental treatment. The problem is that ABA therapy is not considered experimental by professional guidelines. So the FAQ was prohibiting the hypothetical plan from excluding certain mental health treatments as “experimental” when there is not support for that under professional/industry guidelines. (See Q2 of the FAQ:
https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-39-proposed.pdf
)
So in summary, plans are not necessarily required to offer ABA therapy sessions and can likely exclude them or seek to limit those sessions to a certain number unless they are subject to a state insurance mandate that requires the therapy. Keep in mind, though, that autism is an issue with increasing visibility; so it’s likely that we’ll see more guidance/regulations on it as parents and medical practitioners continue their advocacy.
State Updates
Connecticut
Paid Family Leave Law Enacted
On June 25, 2019, Gov. Lamont signed into law SB 1, creating Public Act No. 19-25. This is a new law in CT relating to paid family and medical leave (CT PFML). It generally requires all private employers with employees who work in CT to provide paid leave to eligible employees, and the law expands the reasons for which an employee may take a leave. As background, CT already has protections for family and medical leave under its CT family and medical leave Act (CF MLA) — but that law does not require a protected leave to be paid. The new law CT PFML creates that new paid leave requirement, as outlined below.
Beginning on January 1, 2022, eligible employees may begin taking CT PFML leave. CT PFML provides up to 12 weeks of paid family or medical leave within a 12-month period. In addition, employees who have a serious health condition resulting in incapacitation during pregnancy will be eligible for two additional weeks of paid leave. An employee is eligible for CT PFML if they have been working for at least three months prior to the leave request. Generally speaking, the benefit amount is 95% of the employee’s base weekly earnings, capped at an amount that is 60 times the state minimum wage.
CT PFML will be administered by the state (through a newly created regulatory board), so employers will not have to provide benefit payments. However, CT employers will – beginning in 2022 – have to notify their employees of their rights under CT PFML. We anticipate that the new CT regulatory board will provide model notices in advance of that employee notification requirement. Employers will have to notify employees both upon hire and annually thereafter.
CT PFML applies to employers with as few as one employee (and appears to include remote employees working in CT, even if the employer primarily operates in a different state). CT PFML also expands the definition of “family member” to include an employee’s spouse, sibling, son or daughter, grandchild, grandparent, domestic partner, or an individual related to the employee by blood or affinity (if that affinity can be shown to be the equivalent of a family relationship). Employees can take CT PFML for the same reasons they could take CFMLA, which include birth, adoption, or foster care of a child, to take care of a spouse or family member who has a serious health condition, for the employee’s own serious health condition, to serve as an organ or bone marrow donor, or because of any qualifying exigency arising out of a military duty (a family member is on active duty or has been notified of an impending call or order to active duty in the armed forces).
CT’s PFML will be funded through an employee payroll tax of 0.5%, which will begin in January 2021. The new payroll tax will be subject to the Social Security cap (currently $132,900). Employers will need to work with payroll providers to ensure the appropriate taxes are withheld — they’ll have a year and a half to work through that, considering the January 2021 applicability date.
CT PFML does allow for employers to apply for an exemption, assuming the employer provides a private plan that is at least as generous as CT PFML’s requirements for paid leave. CT’s regulatory board has been directed to outline the exemption process. Separately, employers participating in the state plan can coordinate their leave policies with CT PFML. They can require employees to substitute PTO or other paid leave during a CF MLA leave, although the employee still has the right to reserve up to two weeks of any such available PTO or other paid leave.
Overall, the new law creates additional responsibilities for employers with employees in CT. CT PFML requirements do not take effect until 2021 (employee payroll deductions commence) and 2022 (employees may begin taking leave), so there is plenty of time. But employers should work with their payroll providers and outside counsel in developing appropriate leave policies to include CT’s new PFML requirements.
Public Act No. 19-25 »
Press Release »
Massachusetts
PFML Implementation Dates Delayed
On June 11, 2019, Gov. Baker, along with state House and Senate leadership, announced an agreement to implement a three-month delay to the July 1 contribution start date for the state’s Paid Family and Medical Leave (MA PFML) program. Gov. Baker and the legislative leaders issued this statement:
To ensure businesses have adequate time to implement the state’s Paid Family and Medical Leave program, the House, Senate, and Administration have agreed to adopt a three-month delay to the start of required contributions to the program. We will also adopt technical changes to clarify program design. We look forward to the successful implementation of this program this fall.
In response, on June 13, 2019, the MA legislature passed an emergency bill to formalize the delay; Gov. Baker signed the bill (creating Chapter 21) on June 14, 2019. In addition, on June 14, 2019, the MA Department of Family and Medical Leave (DFML) published a notice to MA employers regarding the MA PFML delay. As a result of those events, employers will be required to begin taking deductions from wages or payments for services rendered by employees (and contractors) and start paying their portion of MA PFML costs on October 1, 2019 (rather than the original date of July 1, 2019). MA PFML benefits are not actually available until January 2021 — that effective date is not altered by this three-month delay announcement. Along with the delay and to offset the shorter period for collections, the DFML employer notice states that the contribution rate has been adjusted from 0.63% to 0.75% of wages. That will raise the tax for an employee earning the state average weekly wage from $872 to $1,083 per year.
The DFML also announced several other related extensions. First, employers now have until September 30, 2019, to notify all covered individuals (employees and contractors) regarding their MA PFML rights and obligations. DFML is in the process of updating model notices, and will post them on the PFML website when they’re available. Second, employers that offer paid leave benefits that are at least as generous as those required under MA PFML may apply for an exemption from the obligation to remit contributions. Employers now have until December 20, 2019, to apply for an exemption for contributions relating to the October 1 contribution period.
The DFML also published the PFML final regulations. The delay gives both employers and the MA government more time to prepare for MA PFML implementation, and time for carriers to potentially create private plans that can be exempted from the rules. In the meantime, employers should continue to prepare to comply with the MA PFML law, even with the slight delay in contributions. We will continue to monitor developments, including the posting and publishing of final regulations, and communicate accordingly.
Press Release »
Chapter 21 »
Notice to MA Employers About PFML Delay »
Final Regulations »
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.