Benefits Leader Your Guide to Health & Welfare Compliance

Transcription

1 Benefits Leader Your Guide to Health & Welfare Compliance 4 th Quarter December 2014 Recent Developments in Same-Sex Marriage Laws FEDERAL REGULATORY ACTIONS AFFECT EMPLOYEE BENEFITS Last year in a case known as U.S. v. Windsor, the United States Supreme Court struck down a federal law which had defined marriage as a legal union between one man and one woman as husband and wife. As a result of that decision, the federal government is required to recognize marriages that are legally performed under state law including marriages between individuals of the same sex. This ruling applies to all federal laws and regulations. The Windsor case held that the federal prohibition on same-sex marriage violated the equal protection clause of the Fifth Amendment because it treats legally married, same-sex couples differently than opposite-sex couples. After the Windsor decision, federal agencies have issued numerous regulations and guidance addressing the effect of the decision on other federal laws. This means that employer sponsored plans with benefits that are subject to federal law (and not state law) are also required to offer coverage to same-sex spouses. This includes any selffunded plan that is subject to ERISA (not a government or church plan) and any cafeteria plan. IRS Revenue Ruling adopted a state of celebration rule, wherein same-sex marriage is recognized for federal tax purposes if the marriage was validly entered into, even if the couple resides in a state where same-sex marriages are not recognized. The ruling also confirmed the position that domestic partnerships and civil unions do not constitute marriages, and individuals who enter these unions are not spouses for purposes of the federal tax code. DOL Technical Release also adopted the state of celebration rule for ERISA-related regulations. In addition, a proposed rule announced in June 2014 would modify FMLA regulations to use a state of celebration approach for the purpose of ensuring that same-sex couples who have legally married will have consistent FMLA rights regardless of where they live. Under the proposed rule, eligible employees may take FMLA leave to care for a same-sex spouse with a serious health condition, take qualifying exigency leave due to a same-sex spouse s military service, and use other protected leave for family members where the relationship is based on a same-sex marriage. Inside this Issue Recent Developments in Same-Sex Marriage Laws New IRS Rules Allow More Mid-Year Election Changes Final Rules Releases for Standalone Dental and Vision Plans Is Your Organization Ready for 2015?

2 Benefits Leader: Your Guide to Health & Welfare Compliance December Employers with an opposite-sex definition of spouse should consider updating their FMLA policies now to conform with the proposed rule. Employers are free to adopt leave policies that are more generous than what is currently required by the FMLA. RECENT CASE LAW Since Windsor, lawsuits have been filed across the country seeking to overturn state marriage laws that prohibit same-sex marriage, many relying on the reasoning used in the Windsor decision. As a result, same-sex marriage is now legal in many more states. Currently, marriage of same-sex couples is legal in 33 states and the District of Columbia (see map below). In at least 4 more states, recent court decisions have ruled against bans on same-sex marriage and in 6 states there has been recent court action to legalize same sex marriage. In the meantime, private employers in states where same-sex marriage is legal and which offer insured benefits, should verify that their welfare plan documents do not unlawfully discriminate against same-sex married couples. Employers subject to ERISA with selffunded benefits should also review their plans to ensure that these changes were made last year. Employers who are not subject to ERISA and do not offer insured plans will be subject only to state discrimination rules that address discrimination based on sexual orientation. New IRS Rules Allow More Mid-Year Election Changes EMPLOYEES ENROLLING IN MARKETPLACE PLANS OR REDUCING HOURS CAN DROP GROUP COVERAGE Cafeteria plans allow employers to offer their employees qualified benefits, such as group health insurance coverage, to which employees may contribute on a pre-tax basis. Generally, employees are only permitted to make changes to their plan elections at the beginning of each plan year during the open enrollment period. There are some additional circumstances when the Internal Revenue Code allows employees to make mid-year election changes such as changes in employment status that result in loss of eligibility, family status changes, and eligibility to enroll in another group health plan. Due to the employer shared responsibility provisions of the Affordable Care Act, certain large employers are required to maintain coverage for full-time employees during a stability period that can last PROPOSED RULE TO AUTHORIZE MID- YEAR CHANGES Notice corrects this inconsistency by authorizing plan sponsors to allow group health plan participants to revoke a coverage election mid-year in order to enroll in a marketplace plan, under the following circumstances: Where the revocation is due to reduction in hours of service 1. A full-time employee (reasonably expected to work at least 30 hours per week) experiences a change in hours and is reasonably expected to work fewer than 30 hours per week after the change; 2. The employee remains eligible for coverage through the group health plan; and 3. The employee and any related individuals enroll in another plan providing minimum essential coverage no later than the first day of the second month after the month in which the election revocation occurred. Where the revocation is due to enrollment in a state or federal marketplace health plan 1. The employee seeks to enroll in a Qualified Health Plan through a state or federal health insurance marketplace during its annual open enrollment period (or is eligible for a special enrollment period); and 2. The employee and any related individuals enroll the marketplace plan effective immediately (i.e., on the next day) after termination of the employer-sponsored coverage. Under either scenario, the employer may rely on a reasonable representation by the employee that he or she has enrolled or intends to enroll, along with any related individuals, in another plan that satisfies the above requirements. These election change provisions do not apply to contributions to health FSAs. up to one year. In some cases, employees who experience a reduction of hours may wish to enroll in coverage other than the group health plan because of a reduction in their pay that corresponds with the reduction in hours. Under

3 Benefits Leader: Your Guide to Health & Welfare Compliance December COMPLIANCE UPDATE IRS INCREASES HEALTH FSA CONTRIBU- TION LIMITS FOR 2015 When employers use health flexible spending arrangements (Health FSAs), employees can set aside pretax funds to pay for qualified medical expenses. Employers who offer Health FSAs must set a limit on the amount of money that can be withheld from the employee s paycheck on a pre-tax basis to fund the FSA. For the 2015 tax year, no more than $2,550 can be contributed to a Health FSA. This represents an increase of $50 from the limit in If you have already started your January 1, 2015 open enrollment and would like to increase your employees maximum contribution to a Health FSA from $2,500 to $2,550, please contact your Medcom Account Manager. current regulations, these employees would not be permitted to make a change except at the end of the plan year because their eligibility for coverage would not be affected by the reduction in hours. In addition, due to the availability of new health plans on state or federal health insurance marketplaces, some employees may wish to drop their employer-sponsored plans and enroll in a marketplace plan. This poses unique difficulties when participants are enrolled in an employer-sponsored plan that does not follow a calendar year, because state and federal marketplace plans are effective January 1st. Under current regulations, an employee participant in a non calendar year plan would not be permitted to drop coverage mid-year in order to enroll in one of these marketplace options. The participant would be required either to have overlapping coverage for part of the year, or a gap in coverage. This problem does not affect employees on calendar-year employer-sponsored plans. CHANGES EFFECTIVE IMMEDIATELY Although the Treasury Department and the IRS intend to amend the applicable regulations to reflect this change, the guidance provided in Notice is immediately effective. AMENDING YOUR CAFETERIA PLAN Notice only permits these mid-year elections; it does not require them. If an employer wants to add one or both of these election change opportunities to its cafeteria plans, the plan must be amended to reflect these provisions on or before the last day of the plan year. The amendment may be retroactive to the beginning of the plan year, but not earlier. Exception: For plan years beginning in 2014, the cafeteria plan may be amended to adopt the new permitted election changes at any time on or before the last day of the plan year that begins in Although the plan may be amended retroactively as described above, elections cannot be retroactively revoked. Final Rules Released for Standalone Dental and Vision Plans LIMITED EXCEPTED BENEFITS ARE EXEMPT FROM MANY PROVISIONS OF HIPAA AND THE AFFORDABLE CARE ACT (HEALTHCARE REFORM) Excepted benefits are benefits that are exempt from many provisions of federal laws that regulate group health plans such as: HIPAA s portability of coverage and nondiscrimination rules; the Affordable Care Act s rules for covering preventive services and dependents under age 26, and dollarlimit prohibitions; and mental health parity requirements. A subset of excepted benefits called limited excepted benefits include limited-scope vision or dental benefits. REQUIREMENTS TO QUALIFY AS A LIMITED EXCEPTED BENEFIT In order to quality as a limited excepted benefit, limited scope dental and vision plans must be: Plans offered under a separate policy, certificate, or contract of insurance from group health coverage; or Not an integral part of the group health plan.

4 Benefits Leader: Your Guide to Health & Welfare Compliance December Until recently, these requirements meant that for self-funded benefits, participants had to be able to decline the coverage, and they had to be charged an additional premium for the coverage. The final rules issued in September 2014 allow limited-scope vision and dental benefits to qualify as limited excepted benefits as long as participants are given the right to decline coverage (regardless of whether a separate contribution is charged). In addition, these rules clarified that plans offered under a separate policy could include self-funded plans with a separate claims administrator. This will avoid the need for a coordination of any deductibles or out-ofpocket limits when employers are offering self-funded medical, dental and vision using separate claims administrators. Is Your Organization Ready for 2015? Enforcement of many important Affordable Care Act provisions begin January 1, Here is a brief summary: Determine whether the organization is an Applicable Large Employer, and how many employees are full-time. Shared responsibility requirements apply to employers with 100 or more full-time employees, including full-time equivalent employees, in These employers are required to offer coverage to full-time employees. those working 30 or more hours per week on average. Regulations describe the methods employers must use to measure the number of employees and to count the number of hours they work to determine who must be considered full-time. Determine which employees are common law employees and not employees of a staffing agency or independent contractors. Generally, an individual is a common law employee if the employer controls the method and means by which the employee performs his or her job. The ACA regulations allow employers to consider an offer of coverage made by the staffing agency as an offer made by the employer as long as the employer pays additional fees for those employees who are enrolled in the staffing agency s coverage. With this contractual provision in place, employers using staffing agencies do not have to determine common law employee status or risk paying penalties for failing to offer these employees coverage. If the employer misclassifies a common law employee as an independent contractor, the employer could be subject to a penalty for failure to offer coverage to that employee. Begin offering group health coverage to at least 70% of full-time employees. Applicable large employers with 100 or more full-time employees, including full-time equivalents, will face a penalty in 2015 of $2,000 per full-time employee (less the first 80 full-time employees) if coverage is not offered to at least 70% of all full-time employees. Coverage that is not affordable or does not provide minimum actuarial value will also subject the employer to penalties $3,000 per employee receiving a subsidy or tax credit from a health insurance marketplace. Review and update plan documents. Many plan documents, summary plan descriptions and employee handbooks define eligibility based on the number of hours an employee regularly works. These documents should be updated to reflect the requirements of the Affordable Care Act for full-time, part-time and variable hour employees.

5 Benefits Leader: Your Guide to Health & Welfare Compliance December Medcom Services Fringe Benefit Administration HSA - Health Savings Accounts FSA - Flexible Spending Accounts HRA - Health Reimbursement Arrangements Dependent Care Assistance Plans Commuter Benefits Health & Welfare Compliance Health & Welfare Compliance Audits Wrap Plans Form 5500 Filing Nondiscrimination Testing HIPAA Privacy Policies Actuarial Services Renewal Analysis Pay or Play Analysis IBNR Reserve Calculation Funding Analysis Certified COBRA Premiums Premium Billing COBRA Administration Retiree Billing Administration Direct Billing 2014 Medcom, All rights reserved. Information and articles are general in nature and are not intended to constitute legal or tax advice in any particular matter. Medcom is not a law firm and is not giving legal or tax advice. It does not warrant and is not responsible for errors or omissions in the content on its website or in its newsletters. For further information regarding Medcom s professional health and welfare compliance services, please contact us at MedcomCompliance@medcom.net.