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December was a relatively busy month for new laws and administrative rulemaking in the employee benefits world. President Obama signed the 21st Century Cures Act into law. The IRS issued a reporting deadline reminder, two information reporting summaries, and Q&As on information reporting. A U.S. District Court issued a nationwide preliminary injunction regarding a portion of the Section 1557 regulations. The Centers for Medicare & Medicaid Services issued FAQs on broker compensation and discriminatory marketing practices. The Departments of Labor, Health and Human Services, and the Treasury issued FAQs on HIPAA special enrollment, women’s preventive services, and qualifying small employer health reimbursement arrangements. The Equal Employment Opportunity Commission issued an informal discussion letter regarding wellness programs under the ADA and GINA. The IRS issued final regulations about the premium tax credit and deferred finalizing the opt-out arrangement proposed rules to a later time.
UBA released three new advisors in December:
- 21st Century Cures Act
- Qualifying Small Employer Health Reimbursement Accounts
- FAQ on HIPAA Special Enrollment; QSE HRAs Released
UBA also updated existing guidance:
- Cafeteria Plans: Qualifying Events and Changing Employee Elections (previously called Cafeteria Plans: Change in Status and Changing Employee Elections)
- HRAs, HSAs, and HFSAs under the ACA
21st Century Cures Act
On December 13, 2016, President Obama signed the 21st Century Cures Act into law. Of the Act’s many components, employers should be aware of the impact the Act will have on the Mental Health Parity and Addiction Equity Act, as well as provisions that will affect the way certain small employers can use health reimbursement arrangements to reimburse individual premiums. There will also be new guidance for permitted uses and disclosures of protected health information under the Health Insurance Portability and Accountability Act (HIPAA).
IRS Reminder and Summaries
In December 2016, the IRS issued a reminder about its extension of the 2017 due date for employers and coverage providers to furnish information statements to individuals. The due dates to file those returns with the IRS are not extended. This IRS chart describes the upcoming deadlines. The IRS also issued two summaries: Information Reporting by Providers of Minimum Essential Coverage and Information Reporting by Applicable Large Employers.
IRS Q&As about Information Reporting by Employers on Form 1094-C and Form 1095-C
In December 2016, the IRS updated its longstanding Questions and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C that provides information about
- Basics of Employer Reporting
- Reporting Offers of Coverage and other Enrollment Information
- Reporting for Governmental Units
- Reporting Offers of COBRA Continuation Coverage and Post-Employment Coverage
- Reporting Coverage under Health Reimbursement Arrangements
The Q&A describes when and how an employer reports its offers of coverage and provides examples to illustrate the codes that employers should use. The updated Q&A provides information on COBRA reporting that had been left pending in earlier versions of the Q&A for the past year.
U.S. District Court Issues Nationwide Preliminary Injunction – No Impact on Employee Benefit Plan Requirements
On December 31, 2016, the U.S. District Court for the Northern District of Texas granted a preliminary injunction sought by several states and private health care providers. The court issued a nationwide injunction that prevents the U.S. Department of Health and Human Services (HHS) and HHS’ Secretary from enforcing the Patient Protection and Affordable Care Act’s Section 1557 regulations that prohibit discrimination based on gender identity or pregnancy termination.
Practically speaking, until this litigation is resolved, healthcare providers and states will not face enforcement by HHS if they do not comply with the regulations that prohibit discrimination based on gender identity or pregnancy termination.
Healthcare providers and states should continue to comply with all other provisions of the Section 1557 regulations. This would include compliance with any portion of the Section 1557 regulations that impact employee benefit plans. On January 3, 2017, HHS released the following statement: “HHS’s Office for Civil Rights will continue to enforce the law – including its important protections against discrimination on the basis of race, color, national origin, age, or disability and its provisions aimed at enhancing language assistance for people with limited English proficiency, as well as other sex discrimination provisions – to the full extent consistent with the Court’s order.”
CMS Frequently Asked Questions on Agent/Broker Compensation and Discriminatory Marketing Practices
In December 2016, the Centers for Medicare & Medicaid Services (CMS) issued a Q&A to address issuers’ attempts to discourage insurance offers to higher risk individuals by reducing or eliminating commissions to brokers for sales to higher risk individuals.
Federal regulations prohibit marketing practices that discourage higher risk individuals’ health insurance coverage enrollment, both inside and outside of the Marketplaces. In its Q&A, CMS concludes that a commission arrangement or other agent/broker compensation that is structured to discourage agents and brokers from marketing to and enrolling consumers with significant health needs constitutes a discriminatory market practice prohibited by federal regulations.
CMS provides the following example. If an issuer pays agents or brokers less through all forms of compensation for higher metal level plans (such as platinum and gold level plans), which are associated with higher utilization, than the issuer pays for lower metal level plans (such as bronze and silver level plans), then the payment arrangement is a failure to comply with the federal guaranteed availability provisions and qualified health plan marketing standards.
CMS will enforce this guidance for policy years beginning on January 1, 2018, in an individual or merged market, and plan years beginning after April 1, 2017, in a small group market in a state that permits quarterly rate updates. For non-grandfathered coverage offered with a plan or policy year beginning on or after such dates, issuer agent/broker compensation arrangements and accompanying marketing and distribution practices must comply with CMS’ guidance, regardless of whether coverage is offered through or outside of the Marketplaces.
FAQs on HIPAA Special Enrollment; QSE HRAs Released
On December 20, 2016, the Department of Labor (DOL), Department of Health and Human Services (HHS), and the Department of the Treasury (collectively, the Departments) issued FAQs About Affordable Care Act Implementation Part 35. The FAQs cover a new HIPAA special enrollment period, an update on women’s preventive services that must be covered, and clarifying information on qualifying small employer health reimbursement arrangements (QSE HRAs).
EEOC Informal Discussion Letter
In December 2016, the Equal Employment Opportunity Commission (EEOC) released one informal discussion letter to address wellness programs under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). These letters are customarily released to the public within a few months of being provided to the initial addressee.
The letter confirmed that the ADA wellness rules apply only to wellness programs that require a medical exam or answers to disability-related questions, or both. The ADA wellness program rules does not apply if the same incentive can be earned with or without a medical exam or answering disability- related questions. Further, employers may offer incentives only to employees who enroll in the employer-sponsored group health plan and complete wellness activities; if the incentive is the same across all the employer’s group health plans, then the employer must use the lowest-cost option to calculate the applicable incentive limit.
IRS Premium Tax Credit Regulation VI
On December 19, 2016, the IRS issued final regulations relating to the health insurance premium tax credit.
If an individual declines enrollment in affordable, minimum value employer-sponsored coverage for a year, and the individual is not given an opportunity to enroll in employer-sponsored coverage for one or more succeeding years, the individual is not disqualified from premium tax credits for the succeeding years. For purposes of the employer shared responsibility penalty, a large employer may be treated as not having offered coverage for those succeeding years.
On a separate issue, although the proposed rule addressed the effect of payments made available under opt-out arrangements on an employee’s required contribution for purposes of premium tax credit eligibility and an exemption from the section 5000A individual shared responsibility provision, the final regulations do not finalize regulations on the effect of opt-out arrangements on an employee’s requirement contribution.
Per the final regulations, the Treasury Department and the IRS continue to examine the issues raised by opt-out arrangements and expect to finalize regulations later. Until final regulations are applicable, individuals and employers can continue to rely on the proposed rule and the guidance provided in Notice 2015–87.
Question of the Month
Q. Under the ACA, which employers must report information on Form W-2 and what information must be reported?
A. The Affordable Care Act requires employers to report the cost of coverage under an employer- sponsored group health plan.
Reporting the cost of health care coverage on Form W-2 does not mean that the coverage is taxable.
Employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations, and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). Federally recognized Indian tribal governments are not subject to this requirement.
Employers that are subject to this requirement should report the value of the health care coverage in Box 12 of Form W-2, with Code DD to identify the amount. There is no reporting on Form W-3 of the total of these amounts for all the employer’s employees.
In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. See the chart below from the IRS’ web page and its questions and answers for more information.
Download the recap here.