Technology: Protect More Than Just Your Employee's Health

Original post ubabenefits.com

As competition heats up in the job market, companies are always searching for that one great perk that might sway a potential candidate to choose them over anyone else. Whether it's health insurance, retirement, paid time off, or even wellness, there's something that's more in demand today than there was yesterday. Companies now have a new benefit they can more easily provide to their employees -- identity theft protection.

According to an article on the website of Employee Benefit News titled, "Regulatory Clarity Makes ID Protection A More Attractive Employee Benefit," identity theft is not only the fastest growing crime in America, but also the fastest growing consumer complaint. The article states that more than 13 million Americans have their identity stolen every year. That equates to one person every three seconds.
Offering this type of theft protection to employees was only given a passing glance by companies a few years ago and was unheard of more than a decade ago. Yet today, employees are signing up for this protection themselves and looking to employers to add it as one of their benefits.

Fortunately, the IRS tried to clear up any confusion regarding how employees would be taxed for this perk if offered by their employer. By doing so, it paved the way for companies to reconsider this benefit. Before the end of 2015, the IRS said it would allow preferential tax treatment for employer-provided identity theft benefits regardless of whether there was an actual breach in data. Previously, this was only available if there was a data breach and then only if an individual's personal information might have been affected.

According to the article, it's anticipated that identity theft protection will be one of the fastest growing voluntary benefits. In addition, identity theft is, regrettably, most likely here to stay so it behooves companies to get ahead of the curve and offer it to their employees before a competitor does. Besides the benefit to employees of protection in the event of identity theft and assistance in restoring their identity, it also benefits employers. This is because an employee will be able to concentrate more on his or her job instead of worrying how they're going to fix the problem or even take time off from work.

The good news for both employer and employee is that if identity theft protection is offered, it should not increase their federal tax liability. State and local taxes may still apply and there are other exclusions such as if cash is received in lieu of protection. Because of all the various implications all parties should consult with a tax professional before implementing these benefits.

Compliance Recap: January 2016

Original post ubabenefits.com

January was a very quiet month for compliance, on the heels of the multitude of delays that came at the end of December 2015. The IRS updated its FAQs related to 6055 and 6056 reporting under the Affordable Care Act (ACA).

UBA Guides and Compliance Documents

UBA updated the popular "Play or Pay Penalty and Counting Employees Guide" to reflect updates to affordability percentages; indexed penalty amounts; expiration of certain transition relief; information for educational institutions; clarifications on how disability and workers' compensation is factored into full time status determination; inclusion of flex credits, HRAs, and opt-out waivers when calculating affordability; and clarification on how to factor wellness incentives or penalties into affordability.

UBA created a reference chart on the applicable 2015 and 2016 ACA affordability percentages and indexed dollar amounts.

UBA updated the previously shared template letter that employers may use to draft written communication to employees regarding what to expect in relation to IRS Forms 1095-B and 1095-C, and what employees should do with a form or forms they receive.

UBA created a template consent form that employers may provide to employees, so that employees may consent to receive their employer-provided 1095-C or 1095-B forms electronically.

UBA has updated a previously-written guide on how to handle leaves of absence under the ACA rules for applicable large employers.

IRS Updates FAQs

The long-standing IRS FAQs related to reporting under sections 6055 and 6056 on requirements provided by the Patient Protection and Affordable Care Act (ACA) have been updated in January 2016 to reflect new information. Final instructions for both the 1094-B and 1095-B and the 1094-C and 1095-C were released in September 2015, as were the final forms for 1094-B, 1095-B, 1094-C, and 1095-C. On December 28, 2015, in Notice 2016-04, the IRS extended the information reporting due dates for insurers, self-insuring employers, other health coverage providers and applicable large employers. The updated FAQs take the information from Notice 2016-04 into account.

The 6056 FAQ, which discusses information reporting for applicable large employers (ALEs), and the6055 FAQ, which discusses reporting on minimum essential coverage (MEC), clarify that the deadlines for fixing mistakes on forms has been extended due to the overall extension for information reporting. For statements furnished to individuals under sections 6055 and 6056, any failures that reporting entities correct by April 30 and October 1, 2016, respectively, will be subject to reduced penalties.

The 6056 FAQ also clarified that an employer may only issue one 1095-C per full-time employee.

Question of the Month

Q. May an ALE use wellness incentives when determining its plan's affordability?

A. When calculating affordability of employer coverage when incentives or penalties are offered through a wellness program, employers must assume each employee fails to satisfy the requirements of the wellness program, unless it is a non-discriminatory wellness program related to tobacco use. For nondiscriminatory tobacco use incentives, the affordability calculation can assume all employees earn the incentive or are not charged the penalty.

ACA Penalties and Taxes and Fees — Oh My!

Original post ubabenefits.com

Employers breathed a sign of relief when the looming Cadillac tax was delayed. But are you subject to other fees and penalties under the ACA? The ACA has introduced a multitude of new fees that employers must pay, in addition to penalties for non-compliance with employer shared responsibility rules. These dollar amounts change annually, as does the percentage amount used to calculate affordability in relation to the ACA. UBA’s new ACA Advisor, “Patient Protection and Affordable Care Act Fees, Penalties” gives a quick reference summary of the key 2015 and 2016 fees and penalties associated with the ACA.

For more detail, a recent IRS Notice (read the complete UBA analysis of this “potpourri” update) reviewed penalties and calculations related to affordability. Currently, the affordability of coverage is defined as costing no more that 9.5 percent of household income (or 9.5 percent of wages or of the federal poverty level) and it is adjusted annually. The IRS will be amending regulations to reflect these adjustment amounts and will update the percentage via IRS notice in future years. For 2015 this is set at 9.56 percent and for 2016 it is set at 9.66 percent.

Under the ACA, an Applicable Large Employer (ALE) must offer minimum essential coverage to most of its full-time employees (and dependents) or pay a $2,000 per year ($166.67 per month), indexed, penalty on all of its full-time employees, if even one employee receives a premium tax credit. An ALE must also offer minimum value, affordable coverage to its full-time employees or pay a penalty of $3,000 a year ($250 per month), indexed.

The indexed amounts for the $2,000 penalty, based on calendar years, are:

2015: $2080

2016: $2160

The indexed amounts for the $3,000 penalty, based on calendar years, are:

2015: $3,120

2016: $3,240

Under the ACA, any hour for which an employee is paid or entitled to payment must be counted as an hour of service. This includes:

  • An hour worked
  • Vacation
  • Holiday
  • Sick time
  • Incapacity (including disability)
  • Layoff
  • Jury duty
  • Military duty
  • Paid leave

These rules are intended to mimic other federal regulations, but are not intended to credit hours to individuals who are terminated from employment. The IRS clarified that an hour of service does not include:

  • An hour for which an employee is paid during which no duties are performed, if the payment is made to comply with workers’ compensation, unemployment, or disability insurance laws.
  • An hour of service for a payment which reimburses an employee for medical or medically related expense incurred by the employee.

The IRS confirmed that there is no 501-hour limit on hours of service required to be credited to an employee on account of a continuous period of time during which the employee performs no service, if the hours would otherwise qualify as hours of service (such as for a leave of absence).

Periods during which an individual is not performing services but is receiving payments from short-term disability or long-term disability will result in hours of service, if the individual retains status as an employee, unless the payments are made from an arrangement to which the employer did not contribute directly or indirectly. Disability paid for by the employee with after-tax contributions would be an arrangement to which the employer did not contribute, and would not result in hours of service. Workers’ compensation payments under state or local government programs are not hours of service.

Even if you have mastered the affordability provisions and penalty calculation, download UBA’s quick reference guide to keep a summary of all the ACA fees and penalties handy, including the Transitional Reinsurance Fee (TRF) and the Patient-Centered Outcomes/Comparative Effectiveness Fee (PCORI)—and the myriad of due dates.


What employees need to know now to file tax forms for PPACA

Original post benefitspro.com

The Patient Protection and Affordable Care Act (PPACA) reporting deadlines are rapidly approaching, presenting a major administrative burden for employers who face penalties for failing to report in a timely and accurate manner.

While there has been significant discussion of employer roles and responsibilities, employees have been largely left out of the equation.

However, many employees will soon be receiving new forms that are critical to their ability to file their tax returns and to their employers’ ability to accurately fulfill their own reporting requirements.  Among these are Forms 1095-A, 1095-B, and 1095-C.

With this in mind, it is important for employers to educate individual taxpayers on what they are required to do and when and how to complete these requirements in the easiest and most efficient manner.

1095-C

The most commonly received form will be the new 1095-C, which millions of Americans will be receiving for the first time this year.

This new government form is used to tell the Internal Revenue Service that you were eligible for insurance coverage under the Affordable Care Act and whether you took advantage of or waived this coverage.

This form will be sent by employers no later than March 31 to all eligible full-time employees who worked for a company with a total of 100 or more full-time or full-time equivalent employees in 2015. For the purposes of this form, full-time is any employee working 30 or more hours per week or 130 hours in a calendar month.

According to the IRS guidance, Form 1095-C helps to determine whether both the employer and the employee have complied with the “shared responsibility” clause of the ACA.

The form also determines whether an individual or family qualifies for the Premium Tax Credit, which reduces the burden of purchasing health insurance.

Anyone who does not have coverage elsewhere and chose to decline employer-sponsored health care coverage will be required to pay a penalty for not carrying coverage--this penalty will be assessed on their tax return.

For 2015, the penalty for declining all health care coverage is $325 per uninsured adult and $162.50 per uninsured child or 2 percent of household income, whichever is greater up to a family maximum of $975.

The penalty will increase to $695 per uninsured adult and $347.50 per child or 2.5 percent of household income up to a family maximum of $2,085 in 2016, and will continue to rise with inflation year-over-year.

However, the IRS offers special exemptions based on income, circumstance and membership in certain groups, so those without coverage should research their options or consult a tax professional. (The most common exemption is for those who declined employer-sponsored coverage that would have cost more than 8 percent of their total household income.)

Health care exemptions can be claimed by filing IRS form 8965 with your taxes. As previously noted, the form also determines who may be eligible for premium credits to help defray the expense of coverage.

Employers are required to submit insurance coverage information, along with social security numbers and other identifying employee information to the IRS, and employee failure to disclose a waiver of coverage may result in an audit and penalties greater than the ACA individual mandate penalty.

1095-B

Form 1095-B essentially serves the same purpose as form 1095-c, but is used by and sent to employees of companies with fewer than 100 employees.

It may also be sent directly by an insurer to certify that individuals/families had non-employer sponsored coverage in place in 2015.  This coverage may have come from:

  • Government health care plans such as Medicare Part A, Medicare Advantage, Medicaid, the Children's Health Insurance Program, and Tricare for military members, veterans’ medical benefits and plans for Peace Corps volunteers.
  • Health coverage purchased through the "Marketplace" -- Web-based federal and state insurance markets set up under the Affordable Care Act.
  • Any individual health insurance policy in place before the Affordable Care Act took effect.

Depending on the way a health care plan is structured, some employees may receive both a 1095-B and a 1095-C.

1095-A

Form 1095-A is only applicable to those who purchased their health care coverage through ACA’s health care exchanges.

This form plays a critical role in reconciling the Advanced Premium Tax Credits (also known as APTCs)--a yearly stipend based on modified adjusted gross income designed to help lower-income individuals and families defray the cost of purchasing exchange-based health insurance--for 2015 and in determining future credits for 2016.

Per IRS and ACA requirements, any excess APTC received in the previous year must be repaid through income tax.

What to do with these forms

Like the more familiar W-2 or 1099 forms, the 1095-A, B, and C will be needed to file a 2015 tax return for anyone who receives it.

Those using a tax preparer will need to bring it with them along with their other filing documents, and those doing their own taxes or using tax preparation software will need to keep this document with their tax records in case of any further inquiry /audit by the IRS.

Help is available

Of course, this is just one important factor in gaining a more thorough understanding of the complexities of the ACA.  While the IRS has worked to streamline the process as much as possible, many employers and employees are struggling to understand and keep pace with changing requirements.

However, for quick questions, there are many good resources available to both employers and employees.  One of the best is the IRS website.

As in all tax-related issues, the most important factors in handling ACA reporting for all groups are to know what’s coming, prepare in advance, keep excellent records, take note of deadlines and avail yourself of helpful resources.


ACA Cadillac Tax: IRS Issues Next Installment of Preliminary Guidance

Originally posted by ubabenefits.com

In February, employers, administrators and others got to see some preliminary thoughts the Internal Revenue Service (IRS) has about the so-called “Cadillac Tax,” included in the Affordable Care Act (ACA). That initial glimpse came when the IRS issued Notice 2015-16. At the end of July, the IRS issued its second installment, Notice 2015-52. After considering the comments its receives in connection with both Notices, the IRS expects to issue proposed regulations, at which time comments will again be requested and considered before any final rules are imposed. If you would like to send comments to the IRS concerning any of the proposals in Notice 2015-52, email those comments to Notice.comments@irscounsel.treas.gov with “Notice 2015-52” in the subject line no later than October 1, 2015.

What is the “Cadillac Tax?”

The ACA added a new excise tax under section 4980I of the Internal Revenue Code (“Code”) that applies to tax years after December 31, 2017. The tax seeks to discourage high-cost health plans and applies, in general, when the aggregate cost of employer-sponsored coverage – referred to as “applicable coverage” – exceeds a statutory dollar limit. That excess is subject to a 40 percent nondeductible excise tax.

Notice 2015-15

IRS Notice 2015-16 describes potential approaches regarding a number of issues under Code § 4980I. These include (1) the definition of applicable coverage, (2) the determination of the cost of applicable coverage, and (3) the application of the dollar limit to the cost of applicable coverage to determine any excess benefit subject to the excise tax. Read a more detailed discussion of the contents of that notice.

Notice 2015-52

Notice 2015-52 builds on Notice 2015-16 by addressing additional issues under § 4980I, including:

  • Who is liable for the excise tax

The liability for the tax will fall on “coverage providers.” For insured plans, this generally will be insurance carriers. For coverage under HSAs or Archer MSAs, the coverage provider will be employers. The third category of coverage provider is “the person that administers the plan benefits.” This category will capture self-funded plans, but the IRS is not sure how it should be defined and seeks comments on two approaches discussed in the Notice.

  • Issues for employers that are part of groups of organizations under common control

The IRS recognizes that for employers that are part of controlled groups, a number of issues will have to be addressed. These include identifying (1) the coverage made available by employers in the group, (2) the employers that will be responsible to calculate and report the excess benefit, and (3) the employers liable for improperly calculating the tax. The IRS requests comments on all of these issues.

  • Pass-throughs and gross-ups concerning the tax

The IRS recognizes that coverage providers liable for the tax may, nonetheless, pass the cost of the tax along to others that may reimburse the coverage provider for having to pay the tax. The IRS addresses the tax treatment of these pass-throughs and reimbursement payments, including how to calculate gross-ups of those payments for tax purposes.

  • Notice and payment of the tax

Under Code § 4980I, employers must (1) calculate the excess benefit subject to the tax and the share of that excess benefit for each coverage provider, and (2) notify the IRS and the coverage providers of those amounts. The IRS is looking for input on the form and timing of those notice requirements, among other issues. Also, as with the PCORI fee, the IRS intends to designate Form 720 as the method to pay the tax.


Simplifying the Administration of Cafeteria Plan Election Changes

Originally posted by ubabenefits.com

Election change requests are the most rule-centric item encountered in the day-to-day administration of a cafeteria plan. Most cafeteria plans, although not required to do so, allow election changes to the fullest extent permitted by law. But what makes these requests so tedious is the fact that administrators and employees must ‘prove the exception’ to the general rule that cafeteria plan elections are irrevocable and cannot be modified mid-year.

Usually, employees will request a change to their cafeteria plan election for a “life event” that is fairly straightforward – e.g., marriage, divorce, new child, etc. But for other “change in status” events, the governing IRS regulations can be nuanced with no definitive answer as to whether an election change is permitted. While implementing administrative procedures to help make these determinations is important, the process is incomplete without a general understanding of the change in status rules to fill in the gaps.

The Change in Status Regulations

Although its name sounds like a George Orwell novel, the “life events” described in the Change in Status Regulations are much more mundane. The IRS has identified six categories of change in status events in the regulations. These are: (1) a change in legal marital status; (2) a change in the number of dependents; (3) a change in employment status; (4) when a dependent satisfies or ceases to satisfy dependent eligibility requirements; (5) a change in residence, and; (6) the start or termination of an adoption proceeding (where adoption assistance is provided through the cafeteria plan).

Any event not falling within one of these six event categories cannot serve as the basis for an election change. However, the Change in Status Regulations do not provide a complete list of permissible events within each category. For example, the change in employment status category describes events where the employee, employee’s spouse, or the employee’s dependent loses or gains eligibility status for the applicable benefit. Terminations, new jobs, leaves of absence, and changes in worksite are all identified as a change in employment status event. But a change in employment event may also occur if a spouse loses coverage due to a reduction of hours or an employee becomes eligible for benefits at a second employer.

An employee walks into HR . . .

From a plan administration perspective, the first consideration should be whether the terms of the cafeteria plan permit a change to the election for the event that occurred. Cafeteria plans are permitted to allow an election change for any of the events covered by the Change in Status Regulations, but are not required to do so. Instead, plan sponsors may restrict the number of event categories or narrow the types of events where an election change is allowed in each category. What the cafeteria plan cannot do is create additional event categories or have more lenient requirements than the Change in Status Regulations.

The eligibility criteria for the underlying insurance policies and plan documents of the component benefits should also be reviewed. These documents are critical in the determination process because the IRS requires that an election change be consistent with the change in status event (which must have already occurred). Generally, the consistency requirement means the election change must reflect the event. For example, a recently divorced employee’s election change request to move from employee-only to family coverage would not be “consistent” with the divorce and the request should be denied.

Administrators should then substantiate the reason for the change in election. This requirement may be satisfied by obtaining an employee’s certification that the event occurred and, unless there is reason to believe it did not, no additional follow-up is required.

Once the employee has certified the date of the event, administrators should re-visit the plan document to determine whether the change request is subject to any time requirements. Cafeteria plans normally impose a 30-60 day window for requesting the election change. Plans with extended time limits, or none at all, may find it difficult to satisfy the consistency requirement because there may no longer be a causal connection between the change in status event and election change request.

Additional Considerations

Change in status events are not the only occasions where cafeteria plan participants may be permitted to revoke or modify an election, although they are the most common. Events such as changes to the cost or coverage of a group health plan, HIPAA special enrollment rights, FMLA, COBRA qualifying events, and funding of an HSA with pre-tax contributions all have unique rules and considerations. Some events may allow an election change for one component benefit of the cafeteria plan but not the other (e.g., dependent care FSA vs. health FSA) or affect an employee’s ability to make pre-tax contribution.

Even the most detailed procedures and checklists will not exhaust all of the variables administrators must account for when reviewing election change requests. However, using a checklist or similar document will focus your approval determination toward ensuring that a cafeteria plan election change is permitted and meets the IRS’s requirements. Unique circumstances are bound to occur within any workforce and a consistent process will aide in the identification of issues that need to be considered further or require the assistance of legal counsel.


IRS Makes it Riskier to Maintain Individually-Designed Retirement Plans

Originally posted by ubabenefits.com

The Internal Revenue Service just made it riskier to maintain a tax-qualified individually-designed retirement plan by eliminating the five-year determination letter remedial amendment cycle for these plans, effective January 1, 2017.

Although determination letters are not required for retirement plans to maintain tax-qualified status under the Internal Revenue Code, virtually all employers sponsoring individually-designed retirement plans have long relied on the Internal Revenue Service’s favorable determinations that their plans meet the Code’s and the IRS’ vexingly complex – and ever-changing – technical document requirements. A plan risks losing tax-qualified status (and all the favorable tax treatment that goes along with that status) if the plan document is not timely amended to reflect frequent, sometimes obscure, Code and regulatory changes. In light of that, the IRS has long offered a program for reviewing and approving those plan documents – often conditioning its favorable determination letter on the employer’s adoption of one or more corrective technical amendments. The current program, established in 2005, has provided for a five-year remedial amendment cycle which effectively extended the period of time during which a plan could be amended under certain circumstances to retroactively comply with the ever-changing qualification requirements. Under this determination letter program, employers have filed for determination letters for their individually-designed plans every five years and had an opportunity to fix plan document issues raised by the IRS on review.

The IRS announced elimination of the five-year determination letter remedial amendment cycle in Announcement 2015-19 and said that determination letters for individually-designed plans will be limited to new plans and terminating plans. A transition rule applies for certain plans currently in the five-year cycle (i.e., employers with “Cycle E” or “Cycle A” plans may still file for determination letters) but, effective July 21, 2015, the IRS will not accept off-cycle applications except for new plans and terminating plans.

The IRS said that plan sponsors will be permitted to submit determination letter applications “in certain other limited circumstances that will be determined by Treasury and the IRS” but did not give a hint as to what those circumstances might be. The IRS intends to periodically request comments from the public on what those circumstances ought to be and to then identify those circumstances in future guidance.

In addition, the IRS said that it is “considering ways to make it easier for plan sponsors to comply with the qualified plan document requirements” which might include providing model amendments, not requiring amendments for irrelevant technical changes, or permitting more liberal incorporation by reference.

Comments on the issues raised in the Announcement – e.g., what changes should be made to the standard remedial amendment period rule, what considerations ought to be taken into account regarding interim amendments, and what assistance should be given to plan sponsors wishing to convert to pre-approved plans – may be submitted to the IRS until October 1, 2015.


IRS Releases Information and Forms for Satisfying the Individual Mandate and Claiming 2014 Premium Tax Credits

Originally posted February 5, 2015 by Linda Rowings on www.ubabenefits.com.

Although employers are not required to offer coverage during 2014, individuals are generally required to have health coverage during 2014 and must report on that coverage through their 2014 federal income tax return. In many cases, the employee will be able to simply state through a “yes/no” question on their federal income tax form that all individuals claimed on the tax form had minimum essential coverage during all of 2014. Individuals will not be required to attach proof of coverage, and employers and insurers are not required to supply proof of coverage provided during 2014. Individuals may wish to maintain evidence of coverage (such as pay stubs showing deductions for premiums or explanations of benefits) in case they are audited, but this is not required.

Individuals who did not have the needed coverage for the entire year, or who are claiming an exemption from the individual mandate, must use Form 8965 to claim an exemption or determine their penalty (which is determined on a month-by-month basis). The penalty for failing to have coverage in 2014 is the greater of 1% of income and $95 per person or $295 per family.

Individuals who received a premium tax credit/subsidy will need to complete Form 8962. Both state and federally-run Marketplaces will provide all individuals who had coverage through the Marketplace with a Form 1095-A. This form will include information the person will need to complete the Form 8962, including the employee’s monthly premium and tax credit received, so that the employee can reconcile the premium tax credit already applied toward premium payments with the tax credit amount that they are actually due. Individuals who have not received their full premium tax credit will receive the balance as a tax refund, while those who have received a larger estimated subsidy than they were entitled to will owe additional taxes. The amount that must be repaid is capped, and the IRS has said it generally will waive penalties that may be due for late payment of the amount owed or for failing to pay estimated taxes.

Although employers are not obligated to help employees with these new requirements, for those that wish to do so, the IRS has created a summary and issued Publication 5187 to explain the individual mandate requirements and premium tax credit rules.


Compliance Recap | January 2015

 

Originally posted January 31, 2015 by the United Benefit Advisors, LLC.

IRS Releases Information and Forms for Satisfying the Individual Mandate and Claiming 2014 Premium Tax Credits

Although employers are not required to offer coverage during 2014, individuals are generally required to have health coverage during 2014 and must report on that coverage through their 2014 federal income tax return. In many cases, the employee will be able to simply state through a "yes/no" question on their federal income tax form that all individuals claimed on the tax form had minimum essential coverage during all of 2014. Individuals will not be required to attach proof of coverage, and employers and insurers are not required to supply proof of coverage provided during 2014.
Individuals may wish to maintain evidence of coverage (such as pay stubs showing deductions for premiums or explanations of benefits) in case they are audited, but this is not required.
Individuals who did not have the needed coverage for the entire year, or who are claiming an exemption from the individual mandate, must use Form 8965 to claim an exemption or determine their penalty (which is determined on a month-by-month basis). The penalty for failing to have coverage in 2014 is the greater of 1% of income and $95 per person or $295 per family.
Individuals who received a premium tax credit/subsidy will need to complete Form 8962. Both state and federally-run Marketplaces will provide all individuals who had coverage through the Marketplace with a Form 1095-A. This form will include information the person will need to complete the Form 8962, including the employee's monthly premium and tax credit received, so that the employee can reconcile the premium tax credit already applied toward premium payments with the tax credit amount that they are actually due. Individuals who have not received their full premium tax credit will receive the balance as a tax refund, while those who have received a larger estimated subsidy than they were entitled to will owe additional taxes.
The amount that must be repaid is capped, and the IRS has said it generally will waive penalties that may be due for late payment of the amount owed or for failing to pay estimated taxes.
Although employers are not obligated to help employees with these new requirements, for those that wish to do so, the IRS has created a summary and issued Publication 5187 to explain the individual mandate requirements and premium tax credit rules.

U.S. Supreme Court to Hear Same-Sex Marriage Cases
On January 16, 2015, the U.S. Supreme Court agreed to decide whether states that do not allow same-sex individuals to marry, or that refuse to recognize marriages of same-sex couples that were legally performed in another state or country, are violating the U.S. Constitution. In June 2013, the Supreme Court ruled that the Defense of Marriage Act (DOMA), which provided that for federal law purposes marriage could only be between a man and a woman, was unconstitutional. Because the 2013 Supreme Court decision only addressed federal laws, over the past year-and-one-half many lawsuits have been filed challenging the legality of state bans on same-sex marriage. Most of the Courts of Appeals that have considered these cases have ruled that state bans violate the U.S. Constitution (which overrides a state constitution), and currently same-sex marriages are recognized in about two-thirds of the states. However, the Court of Appeals for the Sixth Circuit, which governs Kentucky, Michigan, Ohio and Tennessee, found the state bans to be permissible.
The Supreme Court has now agreed to decide which interpretation is correct. A decision is expected in late June 2015.
Until that decision is reached, the current laws generally will continue to apply. Based on the 2013 court ruling, employers in all states should be treating both same-sex and opposite-sex spouses equally for purposes of access to tax-free payment of group health premiums -- that is, income should no longer be imputed for coverage provided to same-sex spouses and their children. Income should continue to be imputed if domestic partners are covered.
Employers should remember that they need to administer their plans according to the plan's terms. This means that the employer should review the plan or policy to see how "spouse" is defined. Many plans simply state that employee's "spouse" or "lawful spouse" is eligible -- in that case, if the employee was legally married to a same-sex spouse in any state, in most cases the spouse is eligible under the plan. If the plan states that only opposite-sex spouses are eligible, and the employee or employer is located in a state that recognizes same-sex spouses, the employer should discuss the situation with local counsel.

2015 Federal Poverty Guidelines
The Department of Health and Human Services has published the 2015federal poverty level (FPL) guidelines. These numbers are used when determining whether a person is eligible for a premium tax credit. For 2015, in most states FPL is $11,770 for a single person and $24,250 for a family of four. This compares to $11,670 for a single person and $23,850 for a family of four in 2014. FPL in Alaska for 2015 is $14,720 for a single person and $30,320 for a family of four and in Hawaii it is $13,550 for a single person and $27,890 for a family of four.

Qualified Transportation Benefit Adjustments
In December 2014, Congress retroactively increased some of the limits for qualified transportation benefits. Because the increase occurred so late in 2014, questions were raised about how to handle related adjustments to income and FICA. On January 9, 2015, the IRS issued a Notice that provides a streamlined method for employers to handle FICA adjustments. Employees will make income adjustments on their individual tax returns.

Reminder
Each year, group health plan sponsors that provide prescription drug coverage to individuals eligible for Medicare Part D due to age, disability, or certain diseases must notify the Centers for Medicare & Medicaid Services (CMS) whether the coverage they offer is "creditable" or "non-creditable." Prescription drug coverage is "creditable" when it is actuarially equivalent to Medicare Part D prescription drug coverage or is better than the Medicare coverage. This reporting to CMS is in addition to the notices that must be provided to Medicare-eligible employees and dependents before October 15 of each year. (Because an employer may not be aware if an employee or dependent is or may soon become eligible for Medicare due to disability, for example, many employers provide this notice to all employees each fall.)The CMS notice is due within 60 days after the beginning of the plan year, which means that calendar year plans must submit this year's disclosure to CMS by March 1, 2015.
Reporting must be done online using the Disclosure to CMS Form on the CMS website. Instructions, including screen shots, are also available on that website.

Question of the Month

Q: What is a "plan year" and why does it matter?
A: Many of the requirements that apply to health plans take effect as of the start of a plan year. Under rules established by the U.S. Department of Labor, the "plan year" must be defined in the plan document or summary plan description (SPD). If the plan is large enough that a Form 5500 is needed, the plan year described in these documents should match the "plan year" on which the Form 5500 is filed. The policy renewal year may or may not be the same as the plan year. When deciding when new requirements will apply, the employer should use the first day of the plan year, not the policy renewal date, if the dates do not match. While most plans should have a plan document and SPD, if these documents do not exist, it is not entirely clear whether the policy year or the deductible year should be considered the plan year. To avoid this uncertainty, and meet other federal laws, employers without SPDs should seriously consider adopting them.

Download the complete January Compliance Recap here.

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Determining Minimum Value and Affordability

Source: United Benefit Advisors, LLC

The IRS has released final regulations that address how wellness incentives or penalties, contributions to a health reimbursement arrangement, and employer contributions to a Section 125 plan are applied to determine affordability. While these regulations were issued in connection with the individual shared responsibility requirement (also called the individual mandate), the agencies said that they expect to use the same approach when determining affordability for purposes of eligibility for the premium tax credit and the employer-shared responsibility/play or pay requirements.

The regulations provide that when deciding if the employee’s share of the premium is affordable:

  • Wellness incentives or surcharges, except for a non-smoking incentive, may not be considered. In other words, the premium for non-smokers will be used to determine affordability (even for smokers). Any other type of wellness incentive must be disregarded, even if the employee has earned one.
  • If an employer makes contributions to a health reimbursement arrangement (HRA) that the employee may use to pay premiums, the employee’s cost of coverage may be reduced by the employer’s current year contribution to the HRA, provided that the planned employer contribution is publicized before the enrollment deadline.
  • If an employer makes flex contributions through a Section 125 cafeteria plan, the employee’s required contribution may be reduced by flex contributions that (1) may not be taken as a taxable benefit, (2) may be used to pay for minimum essential coverage, and (3) may only be used to pay for medical care.

Because an employer’s contribution to a health savings account (HSA) generally may not be used to pay premiums, employer contributions to an HSA may not be used when determining affordability. For a complete checklist, download UBA's PPACA Advisor, “Preparing for 2015 - Key PPACA Requirements".

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