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2 About the Webinar Lines Are Muted Use Arrow To Minimize Menu View Slides in Full Screen Mode Enter Questions for Q&A Session 2

3 Today s Speaker As Crawford Advisors GC and Vice President Compliance, Mr. Haynes advises employers and plan sponsors in a variety of health and welfare benefit plan compliance matters, including, but not limited to, tax qualification and other Internal Revenue Code issues, PPACA, ERISA, COBRA and HIPAA portability, security and privacy issues. Mr. Haynes lectures frequently and has published many articles on health and welfare benefit plan compliance topics. Patrick Haynes Education Temple University School of Law, LL.M. Rutgers University School of Law, J.D. Rutgers University School of Business, M.B.A. Rutgers University College of Arts & Sciences, B.A. Admitted to Practice U.S. Supreme Court Federal and State Courts of New Jersey Pennsylvania Connecticut District of Columbia Practice Areas Employee Benefits & Exec Comp, ERISA, COBRA, HIPAA, 125, and 105, 106, 129, 132 3

4 Topics Raised by Your Questions 1 Wellness Programs: EEOC Final Regulations Wellness penalties / rewards / maximums 2 IRS Tax Guidance Taxes for wellness rewards Taxes for gift cards, gym memberships, etc. 3 SBCs Updates & Changes Affecting Your Next Renewal 4 HIPAA Privacy & Security 5 HSA, FSA, HRA best approach 6 Grab Bag 4

5 Wellness Changes You ve been reading our blog updates (E.g. May 17, 2016) and have been considering what these wellness changes mean for your next renewal (for renewals on or after 1/1/2017). Changes for 1/1/ EEOC Final ADA Rulesrelates only to the Employee (Wellness rules) 30% differential based upon the cost of self-only coverage Limit is calculated based on self-only cost (even if enrolled in family coverage) 5

6 Wellness Programs EEOC Final GINA Rules EE + Spouse capped at 30% of the cost of self-only coverage times two (2) ER may offer incentive in return for spouse s information if: Part of wellness program under GHP Questions ask only about spouse s past or current health status ( manifestation of disease and disorder ) No family medical history or genetic test results No health or genetic information about employee s children Maximum incentive does not exceed 30% of total cost of self-only coverage for each employee and spouse Total combined incentive cannot exceed twice the amount of 30% of the cost of self-only coverage (calculated in same manner as ADA rules); no apportionment (as was proposed) 6

7 Use of a New Notice Warning Style Notice to Employee Plan Participants NOTICE REGARDING WELLNESS PROGRAM [Name of wellness program] is a voluntary wellness program available to all employees. The program is administered according to federal rules permitting employer-sponsored wellness programs that seek to improve employee health or prevent disease, including the Americans with Disabilities Act of 1990, the Genetic Information Nondiscrimination Act of 2008, and the Health Insurance Portability and Accountability Act, as applicable, among others. If you choose to participate in the wellness program you will be asked to complete a voluntary health risk assessment or HRA that asks a series of questions about your healthrelated activities and behaviors and whether you have or had certain medical conditions (e.g., cancer, diabetes, or heart disease). You will also be asked to complete a biometric screening, which will include a blood test for [be specific about the conditions for which blood will be tested]. You are not required to complete the HRA or to participate in the blood test or other medical examinations. However, employees who choose to participate in the wellness program will receive an incentive of [indicate the incentive] for [specify criteria]. Although you are not required to complete the HRA or participate in the biometric screening, only employees who do so will receive [the incentive]. 7

8 Incentives Incentives to an Employee who answers disability-related questions or undergoes medical examinations as part of a wellness program in order to earn a reward or avoid a penalty, are limited to the following: 30% of the total cost for self only coverage 30% of the lowest cost self only coverage plan if multiple plans are offered 30% of the cost that a 40-year-old non-smoker would pay for self-only coverage under the second lowest cost Silver Plan on the State or federal health care Exchange Spouses participation may not exceed 30% of the total cost of self-only coverage (same for EEs) 8

9 Tax Treatment of Wellness Rewards Cash, Cash-Equivalent Reward Coverage such as screenings and other medical care excluded De minimis fringe benefits = t-shirts, coffee cups Taxable benefits = Gift cards, PTO, gym memberships, rewards 9

10 Example: ER s FAQs to taxation of wellness rewards Q: Why do I see Weight Watchers on my paycheck if the program is free? A; The fees ABC-Employer pays to Weight Watchers on your behalf are considered taxable income and, to offset these taxes, ABC-Employer provides you with additional income. You see this as a separate line item on your paycheck stub. Your net pay isn t affected. Q: What **Wellness*** rewards are considered taxable? A: The cumulative value of items purchased on **Wellness-Platform** with Wellness-Bucks, gym subsidies and gym rebates is considered taxable. Q: Do I pay taxes on **Wellness** rewards? A: No. ABC-Employer pays the taxes for all *Wellness* rewards by adding money (gross up) to your paycheck. Each month, ABC processes a gross up record (including rewards received by your spouse/domestic partner) for *Wellness* rewards you received in the previous month. This ensures that all taxes are properly reported and reflected on your paycheck. Q: How is this reflected on my paycheck? A: Taxable reward earnings are shown in the box Taxable Benefits under a description of *Wellness- Earned-Points. This amount shows the taxable reward value. Under Hours and Earnings, an item with the description of Gross Up *Wellness* Points lists the amount that offsets the taxes. This amount is 63% of the taxable reward value listed in Taxable Benefits. For example, Laura receives a gym subsidy of $35 each month. Her Taxable Benefit (*Wellness-Earned- Points) is $35, and her Gross Up in Hours and Earnings is shown too. (Example: We ll gross Laura up with an additional $22.05 to account for the tax on $35 and the tax on the gross-up too, ensuring her net pay isn t affected). 10

11 QUIZ. Which of the following are taxable to your employees? A. T-shirts B. Screenings C. Gift cards D. Gym memberships E. C and D 11

12 Wellness Programs: Taxation of Rewards IRS Chief Counsel Advice (CCA) memo confirms taxability in 3 scenarios CCA (April 14, 2016) 1. Cash wellness rewards are always taxable No de minimis exception Includes gift cards 2. Gym fees and other non-excludable wellness rewards Payment of EE s gym membership fees is a nonexcludable cash benefit that must be included in income and subject to employment taxes Contrast with example of de minimis reward: T-shirt 12

13 Wellness Programs: Taxation of Rewards 3. No double-dipping Imagine - salary reductions taken pre-tax as wellness program premiums, and then returned to the EE as a premium reimbursement or reward under the wellness program (e.g., for completing a health risk assessment) CCA memo confirms that the return of these amounts to the EE (even if called a wellness program reward) is taxable income IRS notes that Rev. Rul previously addressed the reimbursement of pretax premiums, and applies here as well Tip: There are still fly-by-night brokers/agents selling these plans today. Be careful! 13

14 2017 Updates/Changes #3 Final SBC template and related materials Released April 2016; use for first open enrollment period beginning on or after 4/1/2017 Changes include: Streamlined content, E.g., the removal of Q&A about Coverage Examples, which reduced the template to five (5) pages (SBC limit remains 8 pages/4 double-sided pages) An additional cost example for a foot fracture treated in an emergency room. Updated claims/pricing data for the coverage example calculator Adding disclosures about MEC and MV, including specific language explaining significance Rewording part of the Important Questions section Underlining any uniform glossary terms used in SBC (may use hyperlinks in electronic SBCs) 14

15 HIPAA Privacy & Security: HHS FAQ May 2016 FAQ clarifies flat-fee for electronic copies of PHI Flat fee of up to $6.50 fee is one method for assessing fees for electronic copies; it is not a limit on calculating actual cost or average cost under the other two permitted methods Can use different methods for different requests Remember (from March 2016 Q&A guidance): Costs are limited to: (1) labor to create and deliver copies; (2) supplies; (3) labor for explanation or summary (if agreed); and (4) postage Always must inform requestor in advance of approximate fee for requested copies 15

16 HIPAA Privacy & Security: Enforcement Resolution agreements continue, including: Improper disclosure/disposal of x-rays, PHI: $750,000 Provider sent x-rays to vendor without BAA Disclosure of patient PHI during TV filming: $2.2 million Hospital allowed TV crew virtually unfettered access, filming patients without authorization Phase 2 audits have begun Phase 2 audit protocol released in April Updates to audit webpage, including link to prescreening questionnaire: Protocol topics include risk analyses, BAAs, access to PHI, and periodic security updates 16

17 HIPAA Privacy & Security: Preparation Written Risk Assessment? Track all PHI created, received, stored, exchanged? HIPAA BAA with all vendors, carriers, claims payers, consultants? HR or IT policies? HIPAA? GLBA? Other privacy regs? Personnel Files Evidence of Insurability STD/FMLA paperwork s / Faxes from EEs, Spouses, Dependents Payroll software Access to HR records HR-offices, PCs, printers, faxes building and electronic access? Record retention (onsite & offsite and cloud-based) 17

18 HSA, HCFSA, HRA best approach? For 2017, Non-ALEs (smaller than 50 FTEs) can offer a stand-alone-hra. See the new 21 st Century Cures Act. 2016: $2,600 18

19 Grab Bag including other Federal Mandates for GHPs Mental health parity DOL released non-exhaustive list of NQTLs (Non- Quantitative Treatment Limitations) that could violate MHPA/ MHPAEA provisions (if plan does not impose similar limits on medical and surgical benefits) Examples Preauthorization and pre-service notification requirements Fail-first, probability of improvement, and patient noncompliance provisions Written treatment plan Residential, geographical, and licensure requirements 19

20 Other Federal Mandates for GHPs Agency FAQs: Mental health parity; WHCRA Mental health parity (3 FAQs) Parity in quantitative limitations and financial requirements cannot be calculated across insurer s book of business; must be as plan-specific as possible (given available data) Explains plan documents that individuals can request (under ERISA and MHPAEA disclosure rules) to assess a plan s MHPAEA compliance for NQTLs Confirms MHPAEA applies to medication-assisted treatment for opioid use disorder WHCRA (1 FAQ) Clarifies scope of reconstructive surgery coverage DOL Checklist for Mental Health Parity Warning Signs- Plan or Policy Non-Quantitative Treatment Limitations (NQTLs) that Require Additional Analysis to Determine Mental Health Parity Compliance 20

21 Grab bag continued 2017 Updates/Changes Code 4980H IRS announces 2017 indexed affordability percentage Rev. Proc (Apr. 11, 2016) Increases to 9.69% for 2017 (statutory 9.5% was indexed to 9.56% for 2015 and 9.66% for 2016) Consider wellness rewards, smoking penalities, and optout credits in your affordability math Estimator tools available for individuals and ERs - including an ER-shared responsibility estimator For 2016 and forward (does not reflect 2015 transition relief) Enables estimates of: ALE determination; maximum potential penalties under subsections (a) and (b); and full-time EE status under monthly and look-back methods Tool gives only an estimate (and isn t perfect) 21

22 IRS Information Letters (Federal Tax Rules) Cafeteria plans: 3 letters affirm existing tax rules Health care FSAs cannot reimburse insurance premiums No income exclusion for reimbursements to EE of health premiums paid pre-tax by EE s spouse Substantiation is required before HCFSA reimburses expenses, and TPA s request was reasonable Domestic partner benefits: Affirms existing tax rules Federal tax treatment has not changed Domestic partner is not treated as EE s spouse Coverage provided to EE s domestic partner is not excludable from EE s income unless partner qualifies as EE s tax dependent 22

23 Questions If you have any further questions about the information discussed in this webinar please feel free to contact us at: Crawford Advisors, LLC HQ: 200 International Circle Suite 4500 Hunt Valley, MD Sweetbay Drive Suite 10 Salisbury, MD King of Prussia Road Suite 650 Radnor, PA Granite Run Drive Suite 250 Lancaster, PA W. Executive Parkway Lehi, UT (800) Download Slides Questions & Requests 23