Healthcare Reform
IRS Publishes the ACA’s Affordability Percentage and Individual’s Premium Tax Credit Table for 2020
House Votes to Repeal Cadillac Tax
Third Circuit Affirms Injunction of Contraceptive Mandate Exemptions
On July 12, 2019, the US Court of Appeals for the Third Circuit affirmed a district court decision that enjoined the 2017 HHS final rules providing exemptions for the ACA’s contraceptive mandate. As background, the ACA requires most employers to provide certain preventive services, including contraceptive services and items, without cost-sharing. Under the ACA, certain qualifying religious employers were already exempt from the contraceptive coverage requirement, and other employers that held religious objections could also request an exemption via an accommodation process.
However, in October 2017, HHS published two interim final rules that significantly expanded the religious exemption (as outlined in our October 17, 2017,
article here
) by allowing any employer (including non-closely held companies and publicly traded companies) to claim a religious or moral objection to offering certain contraceptive items and services. The government went on to issue final versions of the rules (as outlined in our November 13, 2018,
article here
).
Following the publication of the interim final rules, a number of states filed lawsuits challenging the new exemptions. They argued that the DOL had failed to follow the Administrative Procedures Act (APA) and that the new exemptions would harm their state residents and run afoul of the ACA. Federal district courts in Pennsylvania and California both issued injunctions blocking enforcement of the interim and final rules.
The Third Circuit took up the case that came out of the Pennsylvania District Court on appeal, and they agreed with the lower court that the states included in the suit against the federal government had standing to sue. They also agreed that the states are entitled to an injunction of the law because they are likely to succeed in showing that the adoption of the final rules violated the APA.
Additionally, they argued that a nationwide injunction was necessary to avoid harm to individuals throughout the country. Specifically, they reasoned that employees working for employers in the states that filed the lawsuit might actually live in other states and that students covered by these plans might also go to school out of state.
We expect the government to continue to appeal this decision. We’ve also seen a conflicting opinion come out of the federal district court in the northern district of Texas (which invalidated the entire contraceptive mandate for certain employers).
Ultimately this means that the future of these exemptions remains uncertain. For employers, neither the court decisions nor the final rules settle the issue. As such, employers wishing to claim any expanded religious exemptions to the ACA’s contraceptive mandate should work with outside counsel to better understand the risks inherent in going forward with doing so.
Commonwealth of PA v. President U.S. of America, 888 F.3d 52 (3rd Cir. 2018) »
HHS Updates Federal External Review Process
Federal Updates
IRS Expands List of Preventive Care Services Under HSA Rules
On July 17, 2019, the IRS published Notice 2019-45, which expands the preventive care benefits that can be provided by a HDHP without affecting the HDHP participants’ HSA eligibility. As background, to be eligible to establish and contribute to an HSA, an individual must have qualifying HDHP coverage and no impermissible coverage. A qualified HDHP is one that does not provide benefits for any year until the minimum deductible for that year is satisfied. However, there is a safe harbor for the absence of a deductible for preventive care — so an HDHP can provide preventive care without causing an individual to lose HSA eligibility.
Previously, preventive care generally was not defined as including services or benefits aimed at treating existing illnesses, injuries, or conditions. However, a June 2019 executive order called for the IRS to amend those rules and allow for a change to that definition to include such existing illnesses, injuries, and conditions. One reason for this expansion is that failure to address these types of chronic conditions has been demonstrated to lead to consequences, such as amputation, blindness, heart attacks, and strokes, that require considerably more extensive medical intervention.
As a result of the executive order, the IRS published the new notice, which states that certain services and items that are used for chronic conditions are considered preventive care for purposes of HSA eligibility, when they are prescribed to prevent exacerbation of the diagnosed condition or the development of a secondary condition. The notice includes an appendix that lists 14 medical services or items for individuals with 11 specific chronic conditions (asthma, congestive heart failure, diabetes, coronary artery disease, osteoporosis and/or osteopenia, liver disease, depression, hypertension, bleeding disorders, and heart disease).
For example, insulin and other glucose lowering agents, retinopathy screening, glucometer and Hemoglobin A1c testing are now considered preventive care for individuals diagnosed with diabetes. Similarly, inhaled corticosteroids and peak flow meters are considered preventive care for individuals diagnosed with asthma.
The notice is clear that the listed services/items are considered preventive care only to the extent that they are used to treat the chronic conditions specified; if they are used to treat other conditions, then they are not considered preventive care. Also, the notice does not impact or change the definition of preventive care for purposes of the ACA’s preventive care mandate (the requirement to cover preventive care without cost-sharing).
The notice is effective immediately. The notice does not require HDHPs to cover all the conditions and treatments listed; but if they do, those services will be considered preventive care (and therefore wouldn’t adversely impact HSA eligibility). Employers will want to review any HDHP/HSA offerings to determine if changes are necessary.
Employers can wait until the next plan year to implement any changes (since it would require an amendment to the plan documents and employee communications). Employers should consider whether they want to cover all the conditions and treatments listed in the guidance, and whether they want to cover them at 100% (or add in cost-sharing, such as copayments or coinsurance).
Notice 2019-45 »
News Release »
Announcements
Final Reminder: Form 5500 Filing for Calendar Year Plans Due July 31
Each year, PPI Benefit Solutions files the Annual Return/Report Form 5500 Schedule A for the ACSA and BIEB Group Insurance Trusts. This filing includes all coverages provided and administered through the Trusts, eliminating the need for Trust members to file for these coverages. Clients may be responsible for filing Form 5500 for benefits and products purchased outside of the ACSA or BIEB Trusts, as well as any employer-sponsored fringe plans such as cafeteria plans, educational assistance plans, or legal plans.
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.
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
We offer employee-paid voluntary benefits. As the employer, we do not contribute to the cost of such benefits. Are we required to include them in the Form 5500 filing?
ERISA applies to group medical, dental, vision, health FSA, HRA, group disability, AD&D, and group term life. It can also apply to business travel accident plans, telemedicine, and employee assistance programs based on the program’s specific benefits. It does not apply to a dependent care assistance program (DCAPs/dependent care FSA), HSAs, transportation plans, and certain voluntary products.
Employee-paid voluntary products generally fall into that last category. ERISA contains an exception for voluntary plans, if they meet the voluntary safe harbor rules. They do so by meeting the following criteria:
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100% employee contributions (no employer contributions).
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Employee participation is completely voluntary.
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The employer does not endorse the program. However, the employer may permit the insurer to publicize the program to employees and the employer may collect premiums through payroll deductions and remit premiums to insurer.
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The employer receives no consideration for plan implementation. However, reasonable compensation (no profit) is allowable for administrative services rendered for the plan.
There is additional guidance on how employers can be involved without endorsing the program:
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Plan documents, including an SPD/wrap document, should not indicate that the plan is sponsored by the employer.
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The employer should not encourage or urge participation in the plan.
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Insurance presentations in the workplace are permissible.
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Employer may notify employees of the existence of the plan, but should refer plan questions to insurer.
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Maintaining eligibility lists and submitting enrollment forms to the insurer are permissible.
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Employees do not contribute to the cost of coverage on a pre-tax basis (not included in the Section 125 plan).
If the voluntary plans meet this criteria, they would be exempt from ERISA, which means they would not be included in the Form 5500 filing, not included in the SPD or wrap document, not subject to the DOL claims and appeal procedures, and the employer would not have fiduciary obligations associated with the plan.
If the only criteria that applies to the plan is that the premiums are taken pre-tax, that alone may be enough to subject the plan to ERISA. Thus, an employer needs to carefully consider whether to include voluntary products in its Section 125 cafeteria plan.
State Updates
Nevada
New Paid Sick Leave Law Enacted, Effective in 2020
On June 13, 2019, Gov. Sisolak signed SB 312 into law. The law creates new paid leave requirements for certain employers. Specifically, Nevada employers with 50 or more employees in the state will be required to provide employees with at least 0.01923 hours of paid leave for each hour worked in a benefit year, and employees can use that leave for any reason.
Under the related formula, an employee who works 40 hours per week during the year will earn approximately 40 hours of paid leave for that year. Importantly, the law does not apply to temporary, seasonal, or on-call employees, and includes exemptions for employers in their first two years of operation and employers that, pursuant to a contract, policy, or collective bargaining agreement, provide employees with paid leave or PTO benefits that meet the law’s minimum requirements.
As for benefits, employers may limit the use of paid leave to 40 hours within a benefit year, and employers can front-load paid leave (credit the total amount of paid leave at the beginning of the year) or require leave to be accrued during the course of the year. If accrual is used, employers must allow employees to carry over accrued, unused paid leave to the following year (employers can limit the carryover to 40 hours, though). If front-loading is used, employers are not required to allow such a carryover.
According to the law, employers cannot deny an employee the right to use accrued paid leave for any reason, require an employee to provide an explanation for using the paid leave, or instruct an employee to find a replacement as a condition to using paid leave. Employees, though, must provide advance notice, where possible, of the intent to take leave.
Employers will have to post a notice (which will eventually be available from the Nevada Labor Commissioner) explaining employees’ and employers’ rights and obligations under the law. Employers will also be required to maintain a record of accrual and use of paid leave for each employee for a one-year period, and must provide employees an accounting of their paid leave accrual and use each payday (through a paystub or other method).
Employers will want to work closely with payroll providers in developing appropriate tracking, recording and accrual policies and procedures. The Labor Commissioner is charged with enforcement of the law and may impose administrative penalties of up to $5,000 per violation. (Violations can include failure to provide the leave or notice or to maintain mandated records.)
The new law is effective January 1, 2020, which gives employers little time to come into compliance. The Nevada Labor Commissioner will publish regulations in the future which will hopefully provide additional clarifications and guidance. Employers will want to work with payroll providers and with outside counsel in developing appropriate leave policies, considering the new law in Nevada.
SB 312 »
Oregon
Lawmakers Pass Paid Leave Law
On July 11, 2019, Oregon lawmakers passed HB 2005, establishing a paid family and medical leave act that will provide partial or full compensation to covered individuals that take family, medical, or safe leave. The bill is now awaiting Gov. Brown’s signature, and she has indicated that she will sign the measure. Oregon would then become the eighth state to pass a paid family leave law and the law would go into effect in January 2023.
Under the act, workers will receive up to twelve weeks of paid time off to recuperate from their own serious illness, to care for new adopted and foster children, or to address a domestic violence situation. The leave is generally funded by a new payroll tax with a 60/40 payment obligation for employees and employers, respectively. Employees will incur a new payroll tax not to exceed 1% of employee wages, up to a maximum of $132,900 in wages. Employers with 25 or more employees will be taxed to cover the remaining 40% of the obligation. Employers with fewer than 25 employees are exempt from paying the tax.
To be eligible for the leave, an employee must have earned at least $1,000 in wages during the previous year. While on leave, many workers will receive full wage replacement. This paid leave is in addition to paid sick leave, workers’ compensation benefits, and any PTO or vacation benefits provided by the employer, but the wage replacement offered under this act must be taken concurrently with Oregon Family Leave Act and federal Family and Medical Leave Act.
Employers should review the act and develop a plan for compliance. We will continue to monitor the Oregon Bureau of Labor and Industries as corresponding regulations assisting with compliance obligations.
HB 2005 »
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.