IRS increases retirement contributions for 2020

Workers who contribute to 401(k), 403(b), 457 and the federal government’s Thrift Savings Plans will be able to contribute up to $19,500 in 2020, according to a recent announcement from the Internal Revenue Service (IRS). Read the following to learn more about this increase in retirement contributions.


The IRS said this week that workers contributing to 401(k), 403(b), 457 and the federal government’s Thrift Savings Plans plans can add $19,500 next year, an increase from $19,000 in 2019.

The move could help workers save more for retirement, but it may be inconvenient for employers who’ve already started open enrollment, experts say. Employees are now able to set aside $500 more for retirement.

“Every penny counts when you’re saving for retirement, and the higher contribution limit is definitely going to help,” says Jacob Mattinson, partner at McDermott, Will & Emery, a Chicago-based law firm. “But since companies are in the midst of open enrollment, employers may have to go back in and change the entries for employees who want to contribute the max.”

There are about 27.1 million 401(k) plan participants using roughly 110,794 employer-sponsored 401(k) plans, the Employee Benefit Research Institute says. Ninety-three percent of employers offer a 401(k) plan, and around 74% of companies match workers’ contributions, according to data from the Society for Human Resource Management.

While the vast majority of employers do offer retirement savings plans, employees may still be struggling to sock away money. Around 70% of workers say debt has negatively impacted their ability to save for retirement, EBRI says.

“Thirty-two percent of workers with a major debt problem are not at all confident about their prospects for a financially secure retirement, compared with 5% of workers without a debt problem,” says Craig Copeland, EBRI senior research associate.

The IRS also upped contribution limits on Savings Incentive Match Plan for Employees plans, or SIMPLE retirement accounts, to $13,500 from $13,000. The agency did not change the contribution limits to IRAs, which remain at $6,000 annually.

SOURCE: Hroncich, C. (7 November 2019) "IRS increases retirement contributions for 2020" (Web Blog Post). Retrieved from https://www.benefitnews.com/news/irs-increases-retirement-contributions-for-2020


IRS Releases Information Letter on Employer Shared Responsibility Penalties under the ACA

An informational letter was just released by the Internal Revenue Services (IRS) in response to an inquiry of whether employer shared responsibility penalties (ESRPs) may be waived or reduced based on hardship or other factors. Read this blog post to learn more.


The Internal Revenue Services (IRS) released an information letter responding to an inquiry of whether employer shared responsibility penalties (ESRPs) may be waived or reduced based on hardship or other factors and whether the IRS will extend the transition relief for employers with fewer than 100 employees.

The letter notes that the law does not provide for waiver of ESRPs. While the IRS provided several forms of transition relief in 2015 and 2016, no transition relief is available for 2017 and future years. Although the January 20, 2017, executive order Minimizing the Economic Burden of the ACA Pending Repeal directs federal agencies to exercise authority and discretion to waive, defer, and grant exemptions from the ACA provisions, the ACA’s legislative provisions are still in force until Congress changes them.

SOURCE: Hsu, K. (7 November 2019) "IRS Releases Information Letter on Employer Shared Responsibility Penalties under the ACA" (Web Blog Post). Retrieved from http://blog.ubabenefits.com/irs-releases-information-letter-on-employer-shared-responsibility-penalties-under-the-aca


IRS updates rules on retirement plan hardship distributions

Updates to the hardship distribution regulations were recently finalized by the Internal Revenue Service (IRS). The new regulations are intended to make the requirements more flexible and participant friendly. Read the following article to learn more about these updated regulations.


Employers who allow for hardship distributions from their 401(k) or 403(b) plans should be aware that the Internal Revenue Service recently finalized updates to the hardship distribution regulations to reflect legislative changes. The new rules make the hardship distribution requirements more flexible and participant-friendly.

Hardship distributions are in-service distributions from 401(k) or 403(b) plans that are available only to participants with an immediate and heavy financial need. Plans are not required to offer hardship distributions. But there are certain requirements if a plan does offer hardship distributions. Generally, a hardship distribution may be made to a participant only if the participant has an immediate and heavy financial need, and the distribution is necessary and not in excess of the amount needed (plus related taxes or penalties) to satisfy that financial need.

An administrator of a 401(k) or 403(b) plan can determine whether a participant satisfies these requirements based on all of the facts and circumstances, or the administrator may rely on certain tests that the IRS has established, called safe harbors.

Over the last fifteen years, Congress has changed the laws that apply to hardship distributions. The new rules align existing IRS regulations with Congress’s legislative changes. Some of the changes are mandatory and some are optional. The new rules make the following changes. The following changes are required.

Elimination of six-month suspension.

Employers may no longer impose a six-month suspension of employee elective deferrals following the receipt of a hardship distribution.

Required certification of financial need.

Employers must now require participants to certify in writing or by other electronic means that they do not have sufficient cash or liquid assets reasonably available, in order to satisfy the financial need and qualify for a hardship distribution.

There were also some optional changes made to hardship distributions.

Removal of the requirement to take a plan loan.

Employers have the option, but are not mandated, to eliminate the requirement that participants take a plan loan before qualifying for a hardship distribution. In order to qualify for a hardship distribution, participants are still required to first take all available distributions from all of the employer’s tax-qualified and nonqualified deferred compensation plans to satisfy the participant’s immediate and heavy financial need. The optional elimination of the plan loan requirement may first apply beginning January 1, 2019.

Expanded safe harbor expenses to qualify for hardship.

The new hardship distribution regulations expand the existing list of pre-approved expenses that are deemed to be an immediate and heavy financial need. Prior to the new regulations, the list included the following expenses:

  • Expenses for deductible medical care under Section 213(d) of the Internal Revenue Code;
  • Costs related to the purchase of a principal residence;
  • Payment of tuition and related expenses for a spouse, child, or dependent;
  • Payment of amounts to prevent eviction or foreclosure related to the participant’s principal residence;
  • Payments for burial or funeral expenses for a spouse, child, or dependent; and
  • Expenses for repair of damage to a principal residence that would qualify for a casualty loss deduction under Section 165 of the Internal Revenue Code.

The new regulations expand this list of permissible expenses by adding a participant’s primary beneficiary under the plan as a person for whom medical, tuition and burial expenses can be incurred. The new regulations also clarify that the immediate and heavy financial need for principal residence repair and casualty loss expenses is not affected by recent changes to Section 165 of the Internal Revenue Code, which allows for a deduction of such expenses only if the principal residence is located in a federally declared disaster zone. Finally, the new regulations add an additional permissible financial need to the list above for expenses incurred due to federally declared disasters.

New contribution sources for hardships.

The law and regulations provide that employers may now elect to allow participants to obtain hardship distributions from safe harbor contributions that employers use to satisfy nondiscrimination requirements, qualified nonelective elective contributions (QNECS), qualified matching contributions (QMACs) and earnings on elective deferral contributions. However, 403(b) plans are not permitted to make hardship distributions from earnings on elective deferrals, and QNECS and QMACs are distributable as hardship distributions only from 403(b) plans not held in a custodial account.

As this list indicates, the new regulations make substantial changes to the hardship distribution rules.

The deadline for adopting this amendment depends on the type of plan the employer maintains and when the employer elects to apply the changes. Plan sponsors should work with their document providers and legal counsel to determine the specific deadlines for making amendments.

SOURCE: Tavares, L. (01 November 2019) "IRS updates rules on retirement plan hardship distributions" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/irs-updates-rules-on-401k-403b-plan-hardship-distributions


IRS Announces Health Insurance Providers Fee to Resume in 2020

Recently, the Internal Revenue Services (IRS) announced that the health insurance providers fee will resume in 2020. This fee is imposed by the Patient Protection and Affordable Care Act (ACA) and was suspended for 2019. Read this blog post from UBA to learn more.


As background, the Patient Protection and Affordable Care Act (ACA) imposes a fee on each covered entity (for example, health insurers or a non-fully insured MEWA) engaged in the business of providing health insurance for United States health risks.

There was a moratorium on the fee for 2017 and there is a suspension on the fee for 2019. Under IRS Notice 2019-50, absent legislative action, the fee will resume for 2020. According to an estimate by the American Academy of Actuaries, the fee will increase premiums by one to three percent in 2020.

SOURCE: Hsu, K. (29 October 2019) "IRS Announces Health Insurance Providers Fee to Resume in 2020" (Web Blog Post). Retrieved from http://blog.ubabenefits.com/irs-announces-health-insurance-providers-fee-to-resume-in-2020


Compliance Recap - October 2019

October was a relatively quiet month in the employee benefits world.

The U.S. District Court for the Northern District of Texas vacated portions of the current rule implementing Section 1557 that prohibit discrimination on the basis of gender identity and pregnancy termination. The U.S. Court of Appeals for the 9th Circuit affirmed a district court’s preliminary injunction of final rules regarding contraceptive coverage exemptions.

The Office for Civil Rights (OCR) and the Office of the National Coordinator for Health Information Technology (ONC) released the latest version of the Department of Health and Human Services (HHS) Security Risk Assessment Tool. The Internal Revenue Service (IRS) updated its webpage that has general information about the CP233J notice. The Treasury released its 2019-2020 Priority Guidance Plan.

UBA Updates

UBA released one new advisor: Health Reimbursement Arrangements Comparison Chart

UBA updated or revised existing guidance:

District Court Vacates Parts of ACA Section 1557 Nondiscrimination Rule

As background, the Patient Protection and Affordable Care Act (ACA) Section 1557 provides that individuals shall not be excluded from participation in, denied the benefits of, or be subjected to discrimination under any health program or activity which receives federal financial assistance from the Department of Health and Human Services (HHS), on the basis of race, color, national origin, sex, age, or disability. The current rule applies to any program administered by HHS or any health program or activity administered by an entity established under Title I of the ACA. These applicable entities are “covered entities” and include a broad array of providers, employers, and facilities. On May 13, 2016, the Department of Health and Human Services (HHS) issued a final rule (current rule) implementing Section 1557, which took effect on July 18, 2016.

On October 15, 2019, the U.S. District Court for the Northern District of Texas (District Court) vacated portions of the current rule implementing Section 1557 that prohibit discrimination on the basis of gender identity and pregnancy termination. The District Court remanded the vacated portions of the current rule to HHS for revision. While those portions of the current rule have been vacated, covered entities subject to Section 1557 may still face private lawsuits for discrimination based on gender identity and pregnancy termination.

Employers who are subject to Section 1557 should stay informed on this litigation because it is anticipated that the District Court’s ruling will be appealed to the Fifth Circuit Court of Appeals.

Please see our UBA Advisors “Update on Nondiscrimination Regulations Relating to Sex, Gender, Age, and More” and “Update on Nondiscrimination Regulations Relating to Sex, Gender, Age, and More – for Health Care Providers” for more information.

Court of Appeals Affirms Preliminary Injunction of Contraceptive Coverage Exemptions Final Rule

As background, the Patient Protection and Affordable Care Act (ACA) requires that non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual health insurance coverage provide coverage of certain specified preventive services, including contraceptive services, without cost sharing. The Treasury, Department of Labor (DOL), and Department of Health and Human Services (HHS) (collectively, the Departments) released two final rules on November 7, 2018, regarding contraceptive coverage exemptions based on religious beliefs and moral beliefs. These rules finalize the Departments’ interim final rules that were published on October 13, 2017.

On January 13, 2019, the U.S. District Court for the Northern District of California (California Court) granted a preliminary injunction that prohibits the final rules’ implementation and enforcement against California, Connecticut, Delaware, Hawaii, Illinois, Maryland, Minnesota, New York, North Carolina, Rhode Island, Vermont, Washington, Virginia, and the District of Columbia. On October 22, 2019, the U.S. Court of Appeals for the 9th Circuit affirmed the California Court’s preliminary injunction that prohibits the two final rules’ implementation and enforcement against the thirteen plaintiff states and the District of Columbia.

Read more about the status of the final rules.

OCR and ONC Release HHS Security Risk Assessment Tool Version 3.1

The Office for Civil Rights (OCR) and the Office of the National Coordinator for Health Information Technology (ONC) have released version 3.1 of the HHS Security Risk Assessment (SRA) Tool. The tool is designed to help small- to medium-sized health care organizations perform risk assessments regarding potential malware, ransomware, and other cyberattacks.

IRS Updates CP233J Notice Webpage

The Internal Revenue Service (IRS) updated its webpage titled “Understanding Your CP233J Notice.” The CP233J notice notifies employers of changes to the amount of the employer shared responsibility payment due to the IRS. The IRS webpage has general information about the notice including what the notice is, what an employer needs to do when it receives the notice, and answers to common questions.

The Treasury Releases 2019-2020 Priority Guidance Plan

The Treasury released its 2019-2020 Priority Guidance Plan (Priority Guidance Plan) that sets forth guidance priorities for the Treasury and the Internal Revenue Service (IRS) during the twelve-month period from July 1, 2019, through June 30, 2020. The Priority Guidance Plan lists several priorities, including guidance under Section 125 on health flexible spending accounts (HFSAs), guidance on contributions to and benefits from paid family and medical leave programs, and guidance on the Cadillac tax.

Question of the Month

Q: Has the Internal Revenue Service (IRS) released the 2020 health flexible spending account (health FSA) contribution limit (also known as the employee deferral limit) or the 1094 / 1095 reporting forms for 2019?

A: No. The IRS has not released the 2020 health FSA contribution limit and has not released the 1094 / 1095 reporting forms for 2019. The IRS has not indicated when it plans to release either the health FSA contribution limit or the 1094 / 1095 reporting forms. At a recent conference, IRS staff (in their unofficial capacity) said that the 1094 / 1095 reporting forms have been delayed, in part, because the IRS is considering whether to change the forms to reflect the fact that the individual mandate’s penalty is $0 as of 2019.

11/1/2019


IRS Publishes Proposed Rules on Affordability Safe Harbors and Nondiscrimination for ICHRAs

Proposed rules clarifying how employer shared responsibility provisions and Section 105(h) nondiscrimination rules apply to HRAs were recently published by the Internal Revenue Service (IRS). Read this informational blog post from UBA to learn more.


The Internal Revenue Service (IRS) published proposed rules clarifying how the employer shared responsibility provisions and Section 105(h) nondiscrimination rules apply to health reimbursement arrangements (HRAs) and other account-based group health plans that are integrated with individual health insurance coverage or Medicare.

Public comments on the IRS’ proposed rules are due by December 30, 2019. Because employers may want to offer individual coverage HRAs beginning on January 1, 2020, before the IRS publishes its final regulations, the IRS provides a time period within which employers may rely on the proposed regulations.

SOURCE: Hsu, K. (22 October 2019) "IRS Publishes Proposed Rules on Affordability Safe Harbors and Nondiscrimination for ICHRAs" (Web Blog Post). Retrieved from http://blog.ubabenefits.com/irs-publishes-proposed-rules-on-affordability-safe-harbors-and-nondiscrimination-for-ichras


IRS Releases Private Letter Ruling Regarding Section 213(d) Medical Care Expenses

A private letter ruling regarding DNA collection kits was recently released by the Internal Revenue Service (IRS). This letter addresses whether the price of these kits should qualify as Section 213(d) medical care expenses. Read this blog post from UBA to learn more.


The Internal Revenue Service (IRS) released a private letter ruling (Letter) regarding whether the price of a DNA collection kit – specifically services and reports related to a person’s health that are generated from analyzing the collected DNA – qualify as Section 213(d) medical care expenses.

Health services such as genotyping are medical care under Section 213(d) while reports that provide general information are not medical care. The IRS concluded that the DNA collection kit’s price must be allocated between health services that are medical care, such as genotyping, and the non-medical services, such as reports that provide general or ancestry information.

SOURCE: Hsu, K. (24 September 2019) "IRS Releases Private Letter Ruling Regarding Section 213(d) Medical Care Expenses" (Web Blog Post). Retrieved from http://blog.ubabenefits.com/irs-releases-private-letter-ruling-regarding-section-213d-medical-care-expenses


A 401(k) plan administrators’ guide to the recent IRS revenue ruling

A new ruling was recently released by the IRS. This new ruling provides 401(k) plan administrators with helpful guidance on reporting and withholding from 401(k) plan distributions. Continue reading this blog post from Employee Benefits News for more information on this new ruling.


The IRS recently issued revenue ruling 2019-19. The revenue ruling provides 401(k) plan administrators with helpful guidance on how to report and withhold from 401(k) plan distributions when a plan participant actually receives the distribution but for some reason, does not cash the check.

Unfortunately, this new guidance does not provide answers to the complex issues that 401(k) plan administrators face when the plan must make a distribution, but the plan participant is missing.

Let’s hope revenue ruling 2019-19 is just the first in a series of much-needed guidance from the IRS and the Department of Labor about how 401(k) plan administrators should handle the increasingly common administrative issues related to uncashed checks and missing plan participants.

There are many situations in which a 401(k) plan must make a distribution to a plan participant. For example, plans must distribute small benefit cash outs (e.g., account balances that are $1,000 or less) or required minimum distributions to plan participants who reach age 70 and a half. This may come as a surprise, but plan participants fail to actually cash these checks with some regularity.

In the ruling, the IRS confirmed that 401(k) plan administrators should withhold taxes on a 401(k) plan distribution and report the distribution on a Form 1099-R in the year the check is distributed to the participant, even if the participant does not cash the check until a later year.

Similarly, the participant needs to include the plan distribution as taxable income in the year in which the plan makes the distribution even if the participant fails to cash the check until a later year. While this guidance is not surprising, it does provide clarity to 401(k) plan administrators as to how they must withhold and report normal course and required plan distributions. In particular, 401(k) plan administrators should not reverse the tax withholding or reporting of the distribution when the participant receives the distribution and simply does not cash the check until a later year.

Unfortunately, this new IRS guidance has limited use because the ruling uses an example that specifically concedes that the plan participant actually received the plan distribution check, but simply failed to cash it. What should 401(k) plan administrators do when the participant may not have received the distribution check at all (e.g., a check is returned for an invalid address) or the plan itself does not have current contact information for the participant?

Retirement plan administrators have an ERISA fiduciary obligation to implement a diligent and prudent process to find missing plan participants and to take additional steps to make sure participants actually receive plan distributions. Uncashed 401(k) plan distribution checks are still retirement plan assets which means the 401(k) plan administrator is still subject to ERISA fiduciary standards of care, prudence and diligence related to those amounts. As a result, the IRS and DOL have increased their focus on uncashed checks and missing participants in retirement plan audits.

Plan administrators would be well-served by establishing and implementing a consistent process to stay on top of any missing plan participants or uncashed checks and taking steps to locate those participants and properly address uncashed checks. Plan administrators should also carefully document the steps that they take in this regard. The IRS and DOL have currently provided limited guidance on the steps a 401(k) plan administrator can take to locate missing participants, but more guidance is needed — let’s hope revenue ruling 2019-19 is just the beginning.

This article originally appeared on the Foley & Lardner website. The information in this legal alert is for educational purposes only and should not be taken as specific legal advice.

SOURCE: Dreyfus Bardunias, K. (6 September 2019) "A 401(k) plan administrators’ guide to the recent IRS revenue ruling" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/401k-administrators-guide-to-the-irs-revenue-ruling-2019-19


PCORI Fee Is Due by July 31 for Self-Insured Health Plans

Patient-Centered Outcomes Research Institute (PCORI) annual fees are due by July 31, 2019. Plans with terms ending after September 30, 2012, and before October 1, 2019, are required to pay an annual PCORI fee. Read this article from SHRM to learn more.


An earlier version of this article was posted on November 6, 2018

The next annual fee that sponsors of self-insured health plans must pay to fund the federal Patient-Centered Outcomes Research Institute (PCORI) is due July 31, 2019.

The Affordable Care Act mandated payment of an annual PCORI fee by plans with terms ending after Sept. 30, 2012, and before Oct. 1, 2019, to provide initial funding for the Washington, D.C.-based institute, which funds research on the comparative effectiveness of medical treatments. Self-insured plans pay the fee themselves, while insurance companies pay the fee for fully insured plans but may pass the cost along to employers through higher premiums.

The IRS treats the fee like an excise tax.

The PCORI fee is due by the July 31 following the last day of the plan year. The final PCORI payment for sponsors of 2018 calendar-year plans is due by July 31, 2019. The final PCORI fee for plan years ending from Jan. 1, 2019 to Sept. 30, 2019, will be due by July 31, 2020.

In Notice 2018-85, the IRS set the amount used to calculate the PCORI fee at $2.45 per person covered by plan years ending Oct. 1, 2018, through Sept. 30, 2019.

The chart below shows the fees to be paid in 2019, which are slightly higher than the fees owed in 2018. The per-enrollee amount depends on when the plan year ended, as in previous years.

Fee per Plan Enrollee for Payment Due
July 31, 2019
Plan years ending from Oct. 1, 2018, through Sept. 30, 2019. $2.45
Fee per Plan Enrollee for Payment Due
July 31, 2018
Plan years ending from Oct. 1, 2017, through Dec. 31, 2017, including calendar-year plans. $2.39
Plan years ending from Jan. 1, 2017, through Sept. 30, 2017 $2.26
Source: IRS.

Nearing the End

The PCORI fee will not be assessed for plan years ending after Sept. 30, 2019, "which means that for a calendar-year plan, the last year for assessment is the 2018 calendar year," wrote Richard Stover, a New York City-based principal at HR consultancy Buck Global, and Amy Dunn, a principal in Buck's Knowledge Resource Center.

For noncalendar-year plans that end between Jan. 1, 2019 and Sept. 30, 3019, however, there will be one last PCORI payment due by July 31, 2020.

"There will not be any PCORI fee for plan years that end on October 1, 2019 or later," according to 360 Corporate Benefit Advisors.

The PCORI fee was first assessed for plan years ending after Sept. 30, 2012. The fee for the first plan year was $1 per plan enrollee, which increased to $2 per enrollee in the second year and was then indexed in subsequent years based on the increase in national health expenditures.

FSAs and HRAs

In addition to self-insured medical plans, health flexible spending accounts (health FSAs) and health reimbursement arrangements (HRAs) that fail to qualify as “excepted benefits” would be required to pay the per-enrollee fee, wrote Gary Kushner, president and CEO of Kushner & Co., a benefits advisory firm based in Portage, Mich.

As set forth in the Department of Labor's Technical Release 2013-03:

  • health FSA is an excepted benefit if the employer does not contribute more than $500 a year to any employee accounts and also offers a group health plan with nonexcepted benefits.
  • An HRA is an excepted benefit if it only reimburses for limited-scope dental and vision expenses or long-term care coverage and is not integrated with a group health plan.

Kushner explained that:

  • If the employer sponsors a fully insured group health plan for which the insurance carrier is filing and paying the PCORI fee and the same employer sponsors an employer-funded health care FSA or an HRA not exempted from the fee, employers should only count the employees participating in the FSA or HRA, and not spouses or dependents, when paying the fee.
  • If the employer sponsors a self-funded group health plan, then the employer needs to file the form and pay the PCORI fee only on the number of individuals enrolled in the group health plan, and not in the employer-funded health care FSA or HRA.

An employer that sponsors a self-insured HRA along with a fully insured medical plan "must pay PCORI fees based on the number of employees (dependents are not included in this count) participating in the HRA, while the insurer pays the PCORI fee on the individuals (including dependents) covered under the insured plan," wrote Mark Holloway, senior vice president and director of compliance services at Lockton Companies, a benefits broker and services firm based in Kansas City, Mo. Where an employer maintains an HRA along with a self-funded medical plan and both have the same plan year, "the employer pays a single PCORI fee based on the number of covered lives in the self-funded medical plan (the HRA is disregarded)."

Paying PCORI Fees

Self-insured employers are responsible for submitting the fee and accompanying paperwork to the IRS, as "third-party reporting and payment of the fee is not permitted for self-funded plans," Holloway noted.

For the coming year, self-insured health plan sponsors should use Form 720 for the second calendar quarter to report and pay the PCORI fee by July 31, 2019.

"On p. 2 of Form 720, under Part II, the employer needs to designate the average number of covered lives under its applicable self-insured plan," Holloway explained. The number of covered lives will be multiplied by $2.45 for plan years ending on or after Oct. 1, 2018, to determine the total fee owed to the IRS next July.

To calculate "the average number of lives covered" or plan enrollees, employers should use one of three methods listed on pages 8 and 9 of the Instructions for Form 720. A white paper by Keller Benefit Services describes these methods in greater detail.

Although the fee is paid annually, employers should indicate on the Payment Voucher (720-V), located at the end of Form 720, that the tax period for the fee is the second quarter of the year. "Failure to properly designate 'second quarter' on the voucher will result in the IRS's software generating a tardy filing notice, with all the incumbent aggravation on the employer to correct the matter with the IRS," Holloway warned.

A few other points to keep in mind: "The U.S. Department of Labor believes the fee cannot be paid from plan assets," he said. In other words, for self-insured health plans, "the PCORI fee must be paid by the plan sponsor. It is not a permissible expense of a self-funded plan and cannot be paid in whole or part by participant contributions."

In addition, PCORI fees "should not be included in the plan's cost when computing the plan's COBRA premium," Holloway noted. But "the IRS has indicated the fee is, however, a tax-deductible business expense for employers with self-funded plans," he added, citing a May 2013 IRS memorandum.

SOURCE: Miller, S. (2 July 2019) "PCORI Fee Is Due by July 31 for Self-Insured Health Plans" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2019-pcori-fees.aspx


Compliance Recap - June 2019

June was a relatively busy month in the employee benefits world. The Department of Labor (DOL), the Department of Health and Human Services (HHS), and the Department of Treasury published final rules that removed the prohibition against integrating a health reimbursement arrangement (HRA) with individual health insurance coverage and recognized certain HRAs as limited excepted benefits.

A U.S. District Court issued a permanent injunction against the Patient Protection and Affordable Care Act contraception mandate. The President signed an executive order directing federal agencies to issue guidance and regulations regarding high deductible health plans with health savings accounts, Section 213 medical care expenses, flexible spending arrangements, health plan communication of out-of-pocket costs, and surprise billing.

The Department of Health and Human Services’ Office for Civil Rights (OCR) issued frequently asked questions (FAQs) regarding HIPAA compliance for health plans during care coordination and continuity.

UBA Updates

UBA released a new Advisor: Tri-Agency Final Rules on Health Reimbursement Arrangements

UBA updated or revised existing guidance: Contraception Mandate Rolled Back for Employers

DOL, HHS, and Treasury Publish Final Rules on Health Reimbursement Arrangements

On June 20, 2019, the Department of Labor (DOL), Department of Health and Human Services (HHS), and the Department of Treasury (Treasury) (collectively, the Departments) published their final rules regarding health reimbursement arrangements (HRAs) and other account-based group health plans. The DOL also issued a news release, frequently asked questions, model notice, and model attestations.

The final rules’ goal is to expand the flexibility and use of HRAs to provide individuals with additional options to obtain quality, affordable healthcare. According to the Departments, these changes will facilitate a more efficient healthcare system by increasing employees’ consumer choice and promoting healthcare market competition by adding employer options.

To do so, the final rules expand the use of HRAs by:

  • Removing the prohibition against integrating an HRA with individual health insurance coverage (individual coverage HRA)
  • Expanding the definition of limited excepted benefits to recognize certain HRAs as limited excepted benefits if certain conditions are met (excepted benefit HRA)
  • Providing premium tax credit (PTC) eligibility rules for people who are offered an HRA integrated with individual coverage
  • Assuring HRA and Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) plan sponsors that reimbursement of individual coverage by the HRA or QSEHRA does not become part of an ERISA plan when certain conditions are met
  • Changing individual market special enrollment periods for individuals who gain access to HRAs integrated with individual coverage or who are provided QSEHRAs

The final rules will be effective on August 19, 2019, and generally apply for plan years beginning on or after January 1, 2020.

However, the final rules under Section 36B (regarding PTCs) apply for taxable years beginning on or after January 1, 2020, and the final rules providing a new special enrollment period in the individual market apply January 1, 2020.

Read more about the final rules.

District Court Issues Permanent Injunction against ACA’s Contraception Mandate

On June 5, 2019, the U.S. District Court for the Northern District of Texas issued a permanent injunction against the Patient Protection and Affordable Care Act (ACA) contraception mandate. The injunction prohibits the federal government from enforcing the contraception mandate against an employer, group health plan, or health insurer that objects, based on sincerely held religious beliefs, to establishing, maintaining, providing, offering, or arranging for coverage or payment for some or all contraceptive services. The injunction also exempts objecting entities from the accommodations process.

The permanent injunction also prohibits enforcement of the contraception mandate for individuals who object to coverage or payments for some or all contraceptive services based on sincerely held religious beliefs and who are willing to obtain health insurance that excludes coverage for payments for some or all contraceptive services.

Employers who object to contraceptive coverage based on sincerely held religious beliefs are no longer required to comply with the ACA’s contraception mandate for those contraceptives to which they object.

Read more about the contraception mandate and court case.

Executive Order on Improving Healthcare Price and Quality Transparency

On June 24, 2019 President Trump signed an executive order directing federal agencies to increase healthcare quality and price transparency. The executive order does not create any new laws or regulations.

The executive order directs the Department of Treasury to:

  • Issue guidance that would expand individuals’ ability to enroll in high deductible health plans that can be used with a health savings account to cover low-cost preventive care before the deductible is met
  • Propose regulations that would treat certain expenses associated with direct primary care arrangements and healthcare sharing ministries as Section 213 medical care expenses
  • Issue guidance that would increase the amount of flexible spending arrangement funds that can be carried over to the next plan year without penalty

The executive order directs the Department of Health and Human Services to:

  • Seek comments on a proposal to require health insurance issuers and self-insured group health plans to provide or give patients access to expected health care out-of-pocket costs before receiving care
  • Report steps that can be taken to implement principles announced in a fact sheet on protecting patients from surprise billing

HHS Issues HIPAA FAQs

The Department of Health and Human Services’ Office for Civil Rights (OCR) issued two frequently asked questions (FAQs) clarifying how the Health Insurance Portability and Accountability Act (HIPAA) privacy rules permit health plans to share protected health information (PHI) for care coordination and continuity.

If certain conditions apply, a health plan may disclose PHI, without an individual’s written authorization and subject to the minimum necessary standard, to another health plan for its own health care operations purposes, or for the other health plan’s health care operations. OCR provides two examples:

  • If Covered Entity A provides health insurance to a person who receives access to the provider network of another plan provided by Covered Entity B, Covered Entity A is permitted to disclose the person’s PHI to Covered Entity B for care coordination.
  • If a person was enrolled in a health plan of Covered Entity A and switches to a health plan of Covered Entity B, Covered Entity A can disclose PHI to Covered Entity B to coordinate the person’s care.

If certain conditions are met, HIPAA permits a covered entity to use PHI in its possession about individuals to inform them about the availability of other health plans it offers, without the person’s authorization. For example, when Plan A discloses a person’s PHI to Plan B, Plan B is permitted to send communications to the person about Plan B’s health plan options that may replace the person’s current plan, if Plan B receives no remuneration for sending the communication and complies with applicable business associate agreements. 

Question of the Month

  1. Which group health plans must file a Form 5500 and when is it due?
  2. Currently, group welfare plans generally must file Form 5500 if:
  • The plan is fully insured and had 100 or more participants on the first day of the plan year (dependents are not considered “participants” for this purpose unless they are covered because of a qualified medical child support order).
  • The plan is self-funded and it uses a trust, no matter how many participants it has.
  • The plan is self-funded and it relies on the Section 125 plan exemption, if it had 100 or more participants on the first day of the plan year.

There are several exemptions to Form 5500 filing. The most notable are:

  • Church plans defined under ERISA 3(33)
  • Governmental plans, including tribal governmental plans
  • Top hat plans which are unfunded or insured and benefit only a select group of management or highly compensated employees
  • Small insured or unfunded welfare plans. A welfare plan with fewer than 100 participants at the beginning of the plan year is not required to file an annual report if the plan is fully insured, entirely unfunded, or a combination of both.

A plan is considered unfunded if the employer pays the entire cost of the plan from its general accounts. A plan with a trust is considered funded.

A plan’s Form 5500 must be filed electronically by the last day of the seventh month after the close of the plan year. The filing date is based on the “plan year,” which is designated in the Summary Plan Description (SPD) or other governing document. If a plan does not have an SPD, the plan year defaults to the policy year.

For calendar year plans, the due date for Form 5500 is July 31. Employers may obtain an automatic  2-1/2 month extension by filing Form 5558 by the due date of the Form 5500.

7/3/2019