Understanding & Addressing Your 2019 Health and Welfare Benefits Compliance Obligations

Transcription

1 Understanding & Addressing Your 2019 Health and Welfare Benefits Compliance Obligations NOVEMBER 15, 2018 PRESENTERS Carl Pilger, Esq. Director, National Employee Benefit Compliance Services EPIC Insurance Brokers & Consultants Carl leads the Compliance Practice for EPIC s national Employer Services Platform. Carl has more than 20 years experience as an ERISA attorney consulting and advising clients on ERISA and ACA compliance. Carl is a subject matter expert in the ACA, having traveled the country speaking to numerous industry groups regarding the law s complexities. Kris Beale Senior Compliance Consultant EPIC Insurance Brokers & Consultants Kris provides compliance support for private and public employers on a wide variety of employee benefits matters including the ACA, Internal Revenue Code, ERISA, COBRA, HIPAA, municipal ordinances, plan documentation, DOL audits and more. Kris has over 18 years of experience in the area of employee benefits compliance. Kenneth Powell, J.D. Consultant, Compliance EPIC Insurance Brokers & Consultants Ken provides guidance on employee benefits issues, including those arising from merger and acquisition transactions. With over 10 years of industry experience, Ken supports EPIC clients and employee benefit consulting teams by reviewing plan documents, contracts, and merger and acquisition agreements. In addition, Ken speaks publicly on compliance topics, conducts employee training, and publishes advisories and white papers. 2 1

2 AGENDA Top Employee Benefit Issues for 2019 ACA Employer Shared Responsibility Rules Health Coverage Reporting Refresher Letter 226J: IRS Employer Shared Responsibility Payment Assessments Ongoing Compliance Obligations DOL Non-Compliance Penalties 2019 ACA Affordability, Penalties and Federal Plan Limits 3 TOP EMPLOYEE BENEFIT ISSUES FOR

3 WHAT TO EXPECT IN WASHINGTON IN 2019 Democratic Control of U.S. House of Representatives Could provide greater agency review and oversight which might lead to slowdown on regulatory and enforcement activity Most believe Alexander Acosta likely to remain Secretary of U.S. Department of Labor Less likely that any serious ACA reform will occur Texas court ruling on constitutional challenge likely to come soon with midterm elections concluded Any ruling against ACA constitutionality likely to result in immediate appeal; ultimately could land before Supreme Court Lengthy process unlikely to conclude soon 5 TOP EMPLOYEE BENEFIT ISSUES FOR 2019 Employer Shared Responsibility Assessments and Appeals The IRS continues to issue penalty letters for both A & B employer shared responsibility provisions under ACA No signs program will slow down; upcoming round will focus on 2016 plan years Key takeaways Do not ignore Letter 226J; seek extension to answer Gather and review 2016 Forms 1094-C & 1095-C (filed in 2017); coordinate with vendor Consider engaging legal counsel 6 3

4 TOP EMPLOYEE BENEFIT ISSUES FOR 2019 Wellness & Well-being Programs Face Uncertainty Highly publicized case resulted in court striking down incentive provisions from EEOC wellness regulations that were originally effective January 1, 2017 As of January 1, 2019, employers offering incentives or imposing penalties will need to monitor EEOC enforcement activity and sub-regulatory guidance We expect EEOC investigation and enforcement activity to not show any marked increase given the agency drafted the original regulations in the first place Employers will need to monitor developments for new regulations, but given stated timeline prior to court order, we feel it is unlikely new regulations will issue in 2019 Key considerations Offer incentives/impose penalties below the previously acceptable 30% level Potentially redesign plans to eliminate incentives Potentially revert to program designs pre-dating EEOC regulations 7 TOP EMPLOYEE BENEFIT ISSUES FOR 2019 ACA Health Insurance Premium Tax (HIT) to Return in 2020 The 2019 moratorium on this tax will expire unless further Congressional action extends it; remains to be seen to what extent new split in Congress will impact this and other matters Absent an extension, the tax, which will be passed through by carriers, will spur premium increases for 2020 renewals (likely to be ~ 4% - 7% given similar activity in prior years) Employers with fully insured group health plans will need to include in budgeting and planning process 8 4

5 TOP EMPLOYEE BENEFIT ISSUES FOR 2019 Likely Expansion of Health Savings Accounts (HSAs) Allow HSAs to reimburse for over-the-counter drugs Increase amount an individual can contribute to HSA to match annual out-ofpocket limit for HSA-qualified HDHP ($6,650 for individuals and $13,300 for families) Allow HDHP to pay up to $250 for certain specified services (e.g., telemedicine, primary care visits) below HDHP deductible limit Allow individuals with access to on-site health clinics provided by employer to remain eligible to contribute to HSA Make individual eligible to contribute to HSA if individual s spouse has HFSA, but only if spouse s HFSA cannot reimburse that individual s medical expenses Allow HFSA and HRA to fund an individual s HSA under certain situations 9 TOP EMPLOYEE BENEFIT ISSUES FOR 2019 Likely Expansion of Health Savings Accounts (HSAs) Individuals entitled to Medicare Part A could contribute to HSA if they have HDHP Spousal catch-up contributions could be made to same HSA account, rather than separate accounts for each spouse Medical expenses incurred after HDHP is in effect but before HSA account opened, could be reimbursed as long as HSA account established within 60 days of HDHP effective date Unused balances in HFSA could be carried forward to following year (up to three times annual HFSA contribution limit) Certain sports and fitness expenses including gym memberships could be treated as qualified medical expenses, up to $500 a year for individual and $1,000 a year for joint return 10 5

6 TOP EMPLOYEE BENEFIT ISSUES FOR 2019 Likely Expansion of Health Savings Accounts (HSAs) Employers to permit employees with an HFSA or HRA and who enroll in a qualifying HDHP with an HSA to transfer balances from HFSA or HRA to HSA, up to $2,650 for individuals and $5,300 for families 11 TOP EMPLOYEE BENEFIT ISSUES FOR 2019 HRA expansion Earliest effective date January 1, 2020 Will allow HRA to be integrated with individual coverage; currently disallowed; can offer excepted benefits (e.g., stand-alone vision) Will deem HRAs to be excepted benefits subject to certain proposed requirements Individual must be enrolled individual health insurance that provides greater than excepted benefits Individual must prove enrollment in individual coverage initially and when seeking reimbursement from HRA Employer cannot offer same class of employees traditional group health insurance and integrated HRA/individual insurance option Must offer integrated HRA/individual insurance to all members of offered class Must allow employees to opt out and waive future reimbursements to preserve eligibility for Marketplace premium tax credit DOL would deem individual plan to not be ERISA plan as long as employer did not help select the plan 12 6

7 TOP EMPLOYEE BENEFIT ISSUES FOR 2019 Will allow for certain limited excepted benefits HRAs Individuals must be eligible for group health plan sponsored by employer $1,800 limit indexed annually (carryover allowed and not capped) Cannot reimburse for premiums for other traditional group health plan coverage Must be uniformly available to all similarly situated individuals Can use for short-term limited duration insurance, COBRA and excepted benefits (individual or group) Regulations prohibit employer from offering integrated HRA/individual coverage option and excepted benefits HRA option simultaneously 13 TOP EMPLOYEE BENEFIT ISSUES FOR 2019 Save American Workers Act House bill targets many critical ACA provisions and patterns off of failed 2017 efforts to repeal and replace ACA Suspends employer mandate from , eliminates ESR penalties for entire period Redefines full-time employee as someone regularly scheduled to work 40 hours or more per week Greatly simplifies employer reporting and makes much of it voluntary Delays Cadillac Tax to 2023 Repeals tax on tanning services Following mid-term elections, this bill could get more consideration 14 7

8 EMPLOYER SHARED RESPONSIBILITY RULES BACKGROUND Play or Pay A Penalty An applicable large employer (ALE) that fails to offer minimum essential coverage ( MEC ) to full-time (FT) employees and their dependents (children) may be subject to a penalty under Internal Revenue Code (IRC) section 4980H(a) if a FT employee enrolls in Marketplace coverage and receives a premium tax credit (aka subsidy ) for the coverage. B Penalty An ALE that offers MEC to its FT employees (and dependents) may be subject to a penalty under IRC section 4980H(b) if a FT employee receives a subsidy for Marketplace coverage due to the employer s failure to offer group coverage that is affordable and provides minimum value. An employer may choose to comply ( play ) with the employer shared responsibility provisions in order to avoid the possibility of paying a penalty, which can be substantial... this choice is known as Play or Pay 16 8

9 DEFINING ALE STATUS Who is an ALE? ALE is employer with 50 or more full-time (FT) and full-time equivalent (FTE) employees A FT employee for any calendar month is an employee who has on average at least 30 hours of service per week during the calendar month, or at least 130 hours of service during the calendar month To determine the number of FTEs: Combine the number of hours of service of all non-ft employees for the month but do not include more than 120 hours of service per employee Divide the total by 120 If 50 or more FT and FTE employees, employer is an ALE and is subject to shared responsibility rules and reporting obligations 17 DEFINING ALE STATUS Who is an ALE? ALE determination made on a controlled group basis and based on prior calendar year employee count Liability for, and the amount of, the excise tax is computed and assessed separately for each ALE member Each ALE member is responsible for health coverage reporting Example: Company A has 40 full-time employees and it is part of a controlled group that includes Company B, which has 20 full-time employees Both Companies A and B are ALEs, and both must Play or Pay and complete required health coverage reporting 18 9

10 HEALTH COVERAGE REPORTING REFRESHER 2019 ACA REPORTING CYCLE 2018 Forms 1094-C and 1095-C and Instructions Minor changes and clarifications, but essentially same as 2017 forms o First name, middle initial, and last name to be broken out into separate fields o Reporting failure penalty rises to $270 per violation, with a maximum penalty of $3,282,500 Taxpayers should NOT attach Form 1095-C to income tax returns and do NOT need to wait to receive 1095-C before filing individual return 20 10

11 FILING WITH THE IRS How & When to File Returns must be filed with IRS the year after the reporting year by: o February 28, if filing by paper o March 31, if filing electronically (April 1, 2019, since March 31 falls on a Sunday) Employers filing fewer than 250 Forms 1095 may file by paper Employers filing 250 or more Forms 1095 must file electronically o Employers can request electronic filing waiver by submitting IRS Form 8508 at least 45 days before the due date of the returns o Must use IRS e-filing system - ACA Information Return system ( AIR ) 21 REPORTING FAILURE PENALTIES Failure to file information return with IRS $270 per return; $3,282,500 maximum per calendar year Failure to provide correct individual statement $270 for each statement; $3,282,500 maximum per calendar year Increased penalties for intentional disregard of the requirement IRS can reduce penalties in certain circumstances 22 11

12 EXTENSIONS TO FILE Filing with IRS Automatic 30-day extension by submitting IRS Form 8809 on or before due date for IRS filing After automatic extension, additional 30-day extension possible under certain hardship conditions Providing to individuals For a 30-day extension, send letter to IRS postmarked by date on which individual statements due 23 W-2 HEALTH CARE COST REPORTING W-2 Reporting Employers must continue to report value of group health coverage using Code DD in Box 12 of Form W-2 Applies to employers with insured or self-funded health plans Still informational only; no adverse tax consequences Remains optional for employers filing fewer than 250 W-2s in previous tax year o Examples: Company A issued 220 Forms W-2 in 2017, so Company A is not required to report health care cost on 2018 Forms W-2 Company B issued 400 Forms W-2 in 2017; Company B must report health care cost on 2018 Forms W-2 Determination of health coverage value to report o Fully-insured = premium rates o Self-funded = COBRA equivalent rates 24 12

13 LETTER 226J: IRS EMPLOYER SHARED RESPONSIBILITY PENALTY ASSESSMENTS EMPLOYER SHARED RESPONSIBILITY PENALTIES Employer Shared Responsibility Assessments and Appeals The IRS began penalizing employers that failed to comply with their employer shared responsibility (ESR) obligations under the Affordable Care Act (ACA) IRS issues Letter 226J to propose and assess ESR penalties and will be addressing 2016 calendar year filings in its latest round of letters Letter 226J explains how the IRS calculated the proposed penalty and how employers can dispute any or all of the assessment Key takeaways Do not ignore Letter 226J Respond to IRS by date shown on Letter 226J; Can request more time by contacting IRS Review Form 1094-C for applicable year; coordinate with vendor Consider engaging legal counsel 26 13

14 EMPLOYER SHARED RESPONSIBILITY PENALTIES Employer Shared Responsibility Assessments and Appeals Dispute IRS calculations using Form (included with Letter 226J) Must attach signed statement explaining disagreement Describe any desired changes to original Forms-1094-C; DO NOT RE-FILE Make changes on Employee PTC Listing included with Letter 226J Use same codes as on Form 1094-C and 1095-C; DO NOT FILE CORRECTED FORMS 1095-C Use only one code even if more than one applies Include additional supporting documentation Include tax year and EIN on top right corner of signed statement and all submitted documentation IRS will review submission 27 ONGOING COMPLIANCE OBLIGATIONS 14

15 PCORI FEE Patient-Centered Outcomes Research Institute (PCORI) Fee Applies to all group health plans, unless primarily excepted benefits Plan administrator responsible for reporting and payment o Carrier pays for insured plans; plan sponsor pays for self-funded plans o Employer responsible for an HRA integrated with fully-insured health plan o Self-funded plans with an HRA component only pay fee once Reporting and Payment o Annually by July 31 following calendar year in which plan year ends o Report and pay using Form 720 Amount of Fee per covered life o $2.26 for plan year ending 10/1/16 9/30/17 o $2.39 for plan year ending 10/1/17 9/30/18 o $2.45 for plan year ending 10/1/18 9/30/19 PCORI does not apply to plan years ending after 9/30/19; last fee for calendar year plan applies to plan year ending 12/31/18 (due by July 31, 2019) 29 ANNUAL REQUIREMENTS FOR 2018 Report cost of 2018 health coverage on Forms W-2 by January 31, 2019 (small employers exempt) Periodically test cafeteria plan benefit components for IRC nondiscrimination requirements (e.g., Health Care FSAs, Dependent Care FSAs, pre-tax premium contributions, Health Savings Accounts) Disclose Medicare Part D creditable or non-creditable coverage status to CMS within 60 days of start of plan year (March 1, 2019 for calendar year plans) Distribute 2018 Forms 1095 to employees and self-funded participants by January 31, 2019 (ALEs and coverage providers) File 2018 Form(s) 1094 and 1095 with IRS by February 28, 2019 (if filing via paper) or April 1, 2019 (if filing electronically) 30 15

16 ANNUAL REQUIREMENTS FOR 2018 Distribute 2018 summary plan description(s) (SPD) no later than 90 days after enrollment in plan (March 31, 2019 for calendar year plans) Distribute Summary of Material Reductions (SMR) for mid-year plan reductions in health benefits (if applicable) no later than 60 days after change Pay and report PCORI fee (self-funded plans) by July 31, 2019 File Form 5500 reports (July 31, 2019, for calendar plan years ending December 31, 2018) Distribute Summary Annual Report (SAR) within two months after Form 5500 due date (September 30, 2019, for forms due July 31, 2019) 31 ANNUAL REQUIREMENTS FOR 2018 Distribute Summary of Material Modifications (SMM) for 2019 plan changes within 210 days after effective date of change (e.g., July 31, 2019, for January 1, 2019, plan year); or earlier (e.g., open enrollment for 2019); or distribute revised SPD Distribute Medicare Part D Notice of Creditable or Non-creditable Coverage for 2020 calendar year to plan participants before October 15, 2019 Distribute 2019 health plan notices and Summaries of Benefits of Coverage (SBCs) at OE and later enrollments for 2019 coverage Important note: Separate deadlines apply to multiple employer welfare arrangements (MEWAs) and certain event-triggered federal health plan notices (e.g., Marketplace coverage notice, COBRA notices, qualified medical child support notices (QMCSOs)) 32 16

17 DOL NON-COMPLIANCE PENALTIES INCREASED DOL NON-COMPLIANCE PENALTIES* REQUIREMENT Failure to file an annual report (Form 5500) with DOL (unless filing exemption applies) 2018 PENALTY Up to $2,140 per day Failure of multiple employer welfare arrangement (MEWA) to file annual report (Form M-1) with DOL Up to $1,558 per day Failure to furnish plan-related information requested by DOL *Under ERISA, administrators of employee benefit plans must furnish to DOL, upon request, any documents relating to the employee benefit plan, including but not limited to, the latest summary plan description (including any summaries of plan changes not contained in the summary plan description), and the bargaining agreement, trust agreement, contract or other instrument under which the plan is established or operated. Up to $152 per day, but not to exceed $1,527 per request * Penalties will increase again in early January

18 INCREASED DOL NON-COMPLIANCE PENALTIES* REQUIREMENT Failure to provide annual notice regarding CHIP coverage opportunities 2018 PENALTY Up to $114 per day for each failure (each employee is a separate violation) *This notice applies to employers with group health plans that cover residents of states that provide a premium assistance subsidy under CHIP. Failure to timely disclose information to a state regarding group health plan coverage of an individual who is covered under a Medicaid or CHIP plan Up to $114 per day (each participant/beneficiary is a separate violation) Failure to provide Summary of Benefits and Coverage (SBC) Up to $1,128 per failure to provide the SBC * Penalties will increase again in early January INCREASED DOL NON-COMPLIANCE PENALTIES* REQUIREMENT 2018 PENALTY Failure by any health plan sponsor (or any health insurance issuer offering health insurance coverage in connection with the plan), to comply with the requirements of the Genetic Information Nondiscrimination Act (GINA) for health plans $114 per participant or beneficiary per day during noncompliance period Minimum penalty of $2,847 per participant or beneficiary for de minimis failures not corrected prior to notice from the DOL Minimum penalty of $17,084 per participant or beneficiary for failures which are not corrected prior to notice from the DOL and are not de minimis $569,468 cap on unintentional failures * Penalties will increase again in early January

19 2019 ACA AFFORDABILITY, PENALTIES AND FEDERAL PLAN LIMITS 2019 ACA AFFORDABILITY AND PENALTIES ACA affordability percentage increased to 9.86% for 2019 Affordability federal poverty level (FPL) safe harbor for 2019 is $99.75 per month Employer Shared Responsibility Penalties Penalty Annual Monthly Annual Monthly Annual Monthly Annual Monthly IRC 4980H(a) IRC 4980H(b) $2,160 $ $2,260 $ $2,320 $ TBD TBD $3,240 $ $3,390 $ $3,480 $ TBD TBD 38 19

20 2019 FEDERAL PLAN LIMITS Health Savings Accounts (HSAs) Maximum contribution: $3,500 self-only/$7,000 family High Deductible Health Plans (HDHPs) Minimum deductible: $1,350 self-only/$2,700 family OOP maximum: $6,750 self-only/$13,500* family * Must embed self-only limits OOP Maximum for Essential Health Benefits $7,900 self-only/$15,800 family Applies to non-grandfathered plans Self-only limits apply, even if enrolled in family coverage FEDERAL PLAN LIMITS Health Flexible Spending Accounts (HFSAs) 2018: $2, : TBD Dependent Care Assistance Programs (DCAPs) 2018: $5,000 if single or married and filing joint returns; $2,500 if married and file separate tax returns Lower limits for married employees when one is a student or incapable of self care 2019: same as above Qualified Transportation Plan Benefits Benefit Type Parking $260/mo TBD Transit pass/commuter Vehicle $260/mo TBD 40 20

21 QUESTIONS? THANK YOU FOR ATTENDING! Please complete the webinar survey 41 EPIC is an insurance brokerage and benefits consulting firm and does not provide tax or legal advice to clients. Therefore it is important to consult legal counsel regarding this information to determine how it affects your company and what the company needs to do to comply