The Internal Revenue Service (IRS) recently updated its longstanding Questions and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C that provides information on:

Generally, the Q&A describes when and how an employer reports its offers of coverage and describes the codes that employers should use when completing Form 1094-C and Form 1095-C for calendar year 2016 that are to be filed in 2017. The Q&A should be used in conjunction with the Instructions for Forms 1094-C and 1095-C which provide detailed information about completing the forms.

The updated Q&A provides information on COBRA reporting that had been left pending in earlier versions of the Q&A for the past year. UBA’s ACA Advisor “IRS Q&A About Employer Information Reporting on Form 1094-C and Form 1095-C” reviews the new information and explains other reporting obligations covered under the Q&A.

Reporting Offers of COBRA Continuation Coverage

An offer of COBRA continuation coverage that is made to a former employee due to termination of employment is not reported as an offer of coverage in Part II of Form 1095-C.

If the applicable large employer is required to complete a Form 1095-C for the former employee (because, for example, the individual was a full-time employee for one or more months of the year before terminating employment), the employer should use code 1H, No offer of coverage, on line 14 for any month that the former employee was offered COBRA continuation coverage. For those same months, the employer should use code 2A, Employee not employed during the month, on line 16 for each month in which the individual is not an employee (regardless of whether the former employee enrolled in the COBRA continuation coverage).

An employer that provides COBRA continuation coverage through a self-insured health plan generally must report that coverage for any former employee or family member who enrolls in that COBRA continuation coverage in Part III of the Form 1095-C. Also, the employer may report the coverage on Form 1095-B for any individual who was not an employee during the year and who separately elected the COBRA continuation coverage.

For more information on reporting offers of COBRA continuation coverage due to a reduction in hours (including examples), and self-insured health plan reporting of coverage of spouses and dependents who separately elect to receive COBRA continuation coverage—as well as a complete review of codes that employers should use when completing Forms 1094-C and 1095-C—view UBA’s ACA Advisor, “IRS Q&A About Employer Information Reporting on Form 1094-C and Form 1095-C”.

By Danielle Capilla
Originally published by www.ubabenefits.com

Cafeteria plans, or plans governed by IRS Code Section 125, allow employers to help employees pay for expenses such as health insurance with pre-tax dollars. Employees are given a choice between a taxable benefit (cash) and two or more specified pre-tax qualified benefits, for example, health insurance. Employees are given the opportunity to select the benefits they want, just like an individual standing in the cafeteria line at lunch.

Only certain benefits can be offered through a cafeteria plan:

  • Coverage under an accident or health plan (which can include traditional health insurance, health maintenance organizations (HMOs), self-insured medical reimbursement plans, dental, vision, and more);
  • Dependent care assistance benefits or DCAPs
  • Group term life insurance
  • Paid time off, which allows employees the opportunity to buy or sell paid time off days
  • 401(k) contributions
  • Adoption assistance benefits
  • Health savings accounts or HSAs under IRS Code Section 223

Some employers want to offer other benefits through a cafeteria plan, but this is prohibited. Benefits that you cannot offer through a cafeteria plan include scholarships, group term life insurance for non-employees, transportation and other fringe benefits, long-term care, and health reimbursement arrangements (unless very specific rules are met by providing one in conjunction with a high deductible health plan). Benefits that defer compensation are also prohibited under cafeteria plan rules.

Cafeteria plans as a whole are not subject to ERISA, but all or some of the underlying benefits or components under the plan can be. The Patient Protection and Affordable Care Act (ACA) has also affected aspects of cafeteria plan administration.

Employees are allowed to choose the benefits they want by making elections. Only the employee can make elections, but they can make choices that cover other individuals such as spouses or dependents. Employees must be considered eligible by the plan to make elections. Elections, with an exception for new hires, must be prospective. Cafeteria plan selections are considered irrevocable and cannot be changed during the plan year, unless a permitted change in status occurs. There is an exception for mandatory two-year elections relating to dental or vision plans that meet certain requirements.

Plans may allow participants to change elections based on the following changes in status:

  • Change in marital status
  • Change in the number of dependents
  • Change in employment status
  • A dependent satisfying or ceasing to satisfy dependent eligibility requirements
  • Change in residence
  • Commencement or termination of adoption proceedings

Plans may also allow participants to change elections based on the following changes that are not a change in status but nonetheless can trigger an election change:

  • Significant cost changes
  • Significant curtailment (or reduction) of coverage
  • Addition or improvement of benefit package option
  • Change in coverage of spouse or dependent under another employer plan
  • Loss of certain other health coverage (such as government provided coverage, such as Medicaid)
  • Changes in 401(k) contributions (employees are free to change their 401(k) contributions whenever they wish, in accordance with the administrator’s change process)
  • HIPAA special enrollment rights (contains requirements for HIPAA subject plans)
  • COBRA qualifying event
  • Judgment, decrees, or orders
  • Entitlement to Medicare or Medicaid
  • Family Medical Leave Act (FMLA) leave
  • Pre-tax health savings account (HSA) contributions (employees are free to change their HSA contributions whenever they wish, in accordance with the their payroll/accounting department process)
  • Reduction of hours (new under the ACA)
  • Exchange/Marketplace enrollment (new under the ACA)

Together, the change in status events and other recognized changes are considered “permitted election change events.”

Common changes that do not constitute a permitted election change event are: a provider leaving a network (unless, based on very narrow circumstances, it resulted in a significant reduction of coverage), a legal separation (unless the separation leads to a loss of eligibility under the plan), commencement of a domestic partner relationship, or a change in financial condition.

There are some events not in the regulations that could allow an individual to make a mid-year election change, such as a mistake by the employer or employee, or needing to change elections in order to pass nondiscrimination tests. To make a change due to a mistake, there must be clear and convincing evidence that the mistake has been made. For instance, an individual might accidentally sign up for family coverage when they are single with no children, or an employer might withhold $100 dollars per pay period for a flexible spending arrangement (FSA) when the individual elected to withhold $50.

Plans are permitted to make automatic payroll election increases or decreases for insignificant amounts in the middle of the plan year, so long as automatic election language is in the plan documents. An “insignificant” amount is considered one percent or less.

Plans should consider which change in status events to allow, how to track change in status requests, and the time limit to impose on employees who wish to make an election.

Cafeteria plans are not required to allow employees to change their elections, but plans that do allow changes must follow IRS requirements. These requirements include consistency, plan document allowance, documentation, and timing of the election change. For complete details on each of these requirements—as well as numerous examples of change in status events, including scenarios involving employees or their spouses or dependents entering into domestic partnerships, ending periods of incarceration, losing or gaining TRICARE coverage, and cost changes to an employer health plan—request UBA’s ACA Advisor, “Cafeteria Plans: Qualifying Events and Changing Employee Elections”.

By Danielle Capilla
Originally published by www.ubabenefits.com

On December 13, 2016, former President Obama signed the 21st Century Cures Act into law. The Cures Act has numerous components, but employers should be aware of the impact the Act will have on the Mental Health Parity and Addiction Equity Act, as well as provisions that will impact how small employers can use health reimbursement arrangements (HRAs). There will also be new guidance for permitted uses and disclosures of protected health information (PHI) under the Health Insurance Portability and Accountability Act (HIPAA). We review the implications with HRAs below; for a discussion of all the implications, view UBA’s Compliance Advisor, “21st Century Cares Act”.

The Cures Act provides a method for certain small employers to reimburse individual health coverage premiums up to a dollar limit through HRAs called “Qualified Small Employer Health Reimbursement Arrangements” (QSE HRAs). This provision will go into effect on January 1, 2017.

Previously, the Internal Revenue Service (IRS) issued Notice 2015-17 addressing employer payment or reimbursement of individual premiums in light of the requirements of the Patient Protection and Affordable Care Act (ACA). For many years, employers had been permitted to reimburse premiums paid for individual coverage on a tax-favored basis, and many smaller employers adopted this type of an arrangement instead of sponsoring a group health plan. However, these “employer payment plans” are often unable to meet all of the ACA requirements that took effect in 2014, and in a series of Notices and frequently asked questions (FAQs) the IRS made it clear that an employer may not either directly pay premiums for individual policies or reimburse employees for individual premiums on either an after-tax or pre-tax basis. This was the case whether payment or reimbursement is done through an HRA, a Section 125 plan, a Section 105 plan, or another mechanism.

The Cures Act now allows employers with less than 50 full-time employees (under ACA counting methods) who do not offer group health plans to use QSE HRAs that are fully employer funded to reimburse employees for the purchase of individual health care, so long as the reimbursement does not exceed $4,950 annually for single coverage, and $10,000 annually for family coverage. The amount is prorated by month for individuals who are not covered by the arrangement for the entire year. Practically speaking, the monthly limit for single coverage reimbursement is $412, and the monthly limit for family coverage reimbursement is $833. The limits will be updated annually.

Impact on Subsidy Eligibility. For any month an individual is covered by a QSE HRA/individual policy arrangement, their subsidy eligibility would be reduced by the dollar amount provided for the month through the QSE HRA if the QSE HRA provides “unaffordable” coverage under ACA standards. If the QSE HRA provides affordable coverage, individuals would lose subsidy eligibility entirely. Caution should be taken to fully education employees on this impact.

COBRA and ERISA Implications. QSE HRAs are not subject to COBRA or ERISA.

Annual Notice Requirement. The new QSE HRA benefit has an annual notice requirement for employers who wish to implement it. Written notice must be provided to eligible employees no later than 90 days prior to the beginning of the benefit year that contains the following:

  • The dollar figure the individual is eligible to receive through the QSE HRA
  • A statement that the eligible employee should provide information about the QSE HRA to the Marketplace or Exchange if they have applied for an advance premium tax credit
  • A statement that employees who are not covered by minimum essential coverage (MEC) for any month may be subject to penalty

Recordkeeping, IRS Reporting. Because QSE HRAs can only provide reimbursement for documented healthcare expense, employers with QSE HRAs should have a method in place to obtain and retain receipts or confirmation for the premiums that are paid with the account. Employers sponsoring QSE HRAs would be subject to ACA related reporting with Form 1095-B as the sponsor of MEC. Money provided through a QSE HRA must be reported on an employee’s W-2 under the aggregate cost of employer-sponsored coverage. It is unclear if the existing safe harbor on reporting the aggregate cost of employer-sponsored coverage for employers with fewer than 250 W-2s would apply, as arguably many of the small employers eligible to offer QSE HRAs would have fewer than 250 W-2s.

Individual Premium Reimbursement, Generally. Outside of the exception for small employers using QSE HRAs for reimbursement of individual premiums, all of the prior prohibitions from IRS Notice 2015-17 remain. There is no method for an employer with 50 or more full time employees to reimburse individual premiums, or for small employers with a group health plan to reimburse individual premiums. There is no mechanism for employers of any size to allow employees to use pre-tax dollars to purchase individual premiums. Reimbursing individual premiums in a non-compliant manner will subject an employer to a penalty of $100 a day per individual they provide reimbursement to, with the potential for other penalties based on the mechanism of the non-compliant reimbursement.

By Danielle Capilla
Originally published by www.ubabenefits.com

Employer-sponsored health insurance is greatly affected by geographic region, industry, and employer size. While some cost trends have been fairly consistent since the Patient Protection and Affordable Care Act (ACA) was put in place, United Benefit Advisors (UBA) finds several surprises in their 2016 Health Plan Survey.

Based on responses from more than 11,000 employers, UBA announces the top five best and worst states for group health care costs.

Watch this short video and contact us for more information about the Survey!

Many employee benefit limits are automatically adjusted each year for inflation (this is often referred to as an “indexed” limit). UBA offers a quick reference chart showing the 2017 cost of living adjustments for health and Section 125 plans, qualified plans, Social Security/Medicare withholding, compensation amounts and more. This at-a-glance resource is a valuable desk tool for employers and HR practitioners.

Here’s a snapshot of a section of the 2017 health plan limits; be sure to request the complete chart from a UBA Partner.

2017 health plan limits

Originally published by www.ubabenefits.com

 

Proposed regulations for revising and greatly expanding the Department of Labor (DOL) Form 5500 reporting are set to take effect in 2019. Currently, the non-retirement plan reporting is limited to those employers that have more than 100 employees enrolled on their benefit plans, or those in a self-funded trust. The filings must be completed on the DOL EFAST2 system within 210 days following the end of the plan year.

What does this expanded number of businesses required to report look like? According to the 2016 United Benefit Advisors (UBA) Health Plan Survey, less than 18 percent of employers offering medical plans are required to report right now. With the expanded requirements of 5500 reporting, this would require the just over 82 percent of employers not reporting now to comply with the new mandate.

While the information reported is not typically difficult to gather, it is a time-intensive task. In addition to the usual information about the carrier’s name, address, total premium, and payments to an agent or broker, employers will now be required to provide detailed benefit plan information such as deductibles, out-of-pocket maximums, coinsurance and copay amounts, among other items. Currently, insurance carriers and third party administrators must produce information needed on scheduled forms. However, an employer’s plan year as filed in their ERISA Summary Plan Description, might not match up to the renewal year with the insurance carrier. There are times when these schedule forms must be requested repeatedly in order to receive the correct dates of the plan year for filing.

In the early 1990s small employers offering a Section 125 plan were required to fill out a 5500 form with a very simple 5500 schedule form. Most small employers did not know about the filing, so noncompliance ran very high. The small employer filings were stopped mainly because the DOL did not have adequate resources to review or tabulate the information.

While electronic filing makes the process easier to tabulate the information received from companies, is it really needed? Likely not, given the expense it will require in additional compliance costs for small employers. With the current information gathered on the forms, the least expensive service is typically $500 annually for one filing. Employers without an ERISA required summary plan description (SPD) in a wrap-style document, would be required to do a separate filing based on each line of coverage. If an employer offers medical, dental, vision and life insurance, it would need to complete four separate filings. Of course, with the expanded information required if the proposed regulations hold, it is anticipated that those offering Form 5500 filing services would need to increase with the additional amount of information to be entered. In order to compensate for the additional information, those fees could more than double. Of course, that also doesn’t account for the time required to gather all the data and make sure it is correct. It is at the very least, an expensive endeavor for a small business to undertake.

Even though small employers will likely have fewer items required for their filings, it is an especially undue hardship on many already struggling small businesses that have been hit with rising health insurance premiums and other increasing costs. For those employers in the 50-99 category, they have likely paid out high fees to complete the ACA required 1094 and 1095 forms and now will be saddled with yet another reporting cost and time intensive gathering of data.

Given the noncompliance of the 1990s in the small group arena, this is just one area that a new administration could very simply and easily remove this unwelcome burden from small employers.

Originally published by www.ubabenefits.com

 

Employer-paid life insurance can be an important part of protecting your family in the event that you die prematurely. Companies offer the program on top of other benefits, such as health insurance. The coverage is generally term insurance, meaning there is no investment or cash-value component. If you pass on unexpectedly, depriving your family not only of your presence but also your income, your dependents will be glad you signed up for your workplace’s life insurance benefit.

Basics

Employer-paid term life insurance comes as an option through some employee benefits packages. It works, in a sense, like group health insurance: Rather than buying a separate policy for each employee, the employer buys a single policy that covers all workers who participate, according to Insurance.com. Thus, the employer pays one premium, not a separate premium for each employee. You may be responsible for a part of the premium, too. Typically, the death benefit is one or two times your yearly salary, according to the American Institute of Certified Public Accountants.

Advantages

Life insurance acquired through your employer is likely to be cheaper than what you can buy on the open market, since your employer is likely to cover at least part of the premiums, according to Insurance.com. Additionally, you do not have to undergo individual underwriting, which means you can get coverage even if you have a serious health condition, like heart disease, that would, according to Insure.com, get you denied or make you have to pay high premiums if you were buying on the open market.

Warning

Depending exclusively on employer-paid life insurance to protect your family has some disadvantages, according to Insurance.com. The main one is that if you leave your job, you stand a high chance of losing your insurance. Depending on your age and health status at that time, according to Insurance.com, you may or may not be able to get new insurance at a reasonable rate. For that reason, it is best to carry employer group insurance only as a supplement to other coverage. Another drawback to such coverage is that the amount of insurance available to you is likely to be limited, though some plans allow you to get more coverage for an additional fee.

Considerations

Some employer-paid life insurance plans, according to the American Institute of Certified Public Accountants’ 360 Degrees of Financial Literacy website, can follow you even when you leave your job. But most employees decide against doing this for the reason that the “conversion premiums” tend to be higher than prices for comparable individual policies. Typically, according to the site, “only those who are otherwise uninsurable take advantage of this conversion option.”

Taxes

The Internal Revenue Service taxes life insurance that has a value above $50,000. It uses a formula that takes into account your age and the amount of your death benefit to determine the taxable value per month.

Originally published by www.livestrong.com

Question: Are we required to allow employees (either exempt or nonexempt) to work from home if we must close the office due to bad weather?

Answer: No, employers are not required to allow employees to telework (work from home or another location; virtual work) under any specific weather conditions regardless of Fair Labor Standards Act (FLSA) exemption status. However, employers may allow employees to telework. Company policy should delineate procedures for both teleworking and notice requirements when inclement weather affects the workplace; for instance, notice from the employer that the workplace is closed and notice from the employee that they cannot travel to the workplace due to weather-related or other emergency conditions. These policies should be in the employee handbook, and should also detail whether the employer will allow nonexempt employees to make up missed time.

Note that if the employer closes the workplace for weather-related reasons, nonexempt employees are not entitled to pay because such employees are only entitled to compensation for hours actually worked. However, an employer may allow nonexempt employees to use accrued paid time off so as to receive compensation during such an absence. If paid time off is not available, then the time off remains unpaid.

Alternatively, exempt employees who are able and available to work but do not work because the employer closed the workplace due to inclement weather are still entitled to their full week of pay. This is because the exempt employee is available to work but rather the employer made the work unavailable. As a general rule, if an exempt employee performs any work during the workweek, they must be paid their full salary amount. An employer may not make deductions from an exempt employee’s pay for absences caused by the employer or by the operating requirements of the business. If the exempt employee is ready, willing and able to work, an employer cannot make deductions from the exempt employee’s pay when no work is available. Additionally, the U.S. Department of Labor specifically states that an example of an improper deduction from an exempt employee’s pay includes deduction of a days’ pay because the employer was closed due to inclement weather.

Originally published by www.thinkhr.com

Question: If an employee has a small health flexible spending account (FSA) balance with a carryover to the next year, and the employee chooses not to participate in the new FSA year, can the employer force the employee to use those funds so as not to incur additional administrative fees in the next plan year?

Answer: An employer can prevent “perpetual carryovers” by carefully drafting the cafeteria plan document with respect to carryover amounts. IRS guidance allows carryovers to be limited to individuals who have elected to participate in the health FSA in the next plan year. Health FSAs may also require that carryover amounts be forfeited if not used within a specified period of time, such as one year. Note that this plan design requires additional administration (to track the time limit for each carryover dollar, for instance) as well as ordering rules (e.g., will carryovers be used first?), so you will need to carefully review the cafeteria plan document. Under no circumstances are amounts returned to participants.

According to IRS guidance, a health FSA may limit the availability of the carryover of unused amounts (subject to the $500 limit) to individuals who have elected to participate in the health FSA in the next year, even if the ability to participate in that next year requires a minimum salary reduction election to the health FSA for that next year. For example, an employer sponsors a cafeteria plan offering a health FSA that permits up to $500 of unused health FSA amounts to be carried over to the next year in compliance with Notice 2013-71, but only if the employee participates in the health FSA during that next year. To participate in the health FSA, an employee must contribute a minimum of $60 ($5 per calendar month). As of December 31, 2016, Employee A and Employee B each have $25 remaining in their health FSA. Employee A elects to participate in the health FSA for 2017, making a $600 salary reduction election. Employee B elects not to participate in the health FSA for 2017. Employee A has $25 carried over to the health FSA for 2017, resulting in $625 available in the health FSA. Employee B forfeits the $25 as of December 31, 2016 and has no funds available in the health FSA thereafter. This arrangement is a permissible health FSA carryover feature under Notice 2013171. The IRS also clarifies that a health FSA may limit the ability to carry over unused amounts to a maximum period (subject to the $500 limit). For example, a health FSA can limit the ability to carry over unused amounts to one year. Thus, if an individual carried over $30 and did not elect any additional amounts for the next year, the health FSA may require forfeiture of any amount remaining at the end of that next year.

Originally published by www.thinkhr.com

Under the Patient Protection and Affordable Care Act (ACA), all public Exchanges are required to notify employers when an employee is receiving a subsidy (tax credits and cost-sharing reductions) for individual health insurance purchased through an Exchange. According to the final rules published in August 2013, employers have the right, but are not required, to engage in an appeal process through the IRS if they feel an employee should not be receiving a subsidy because the employer offers minimum value, affordable coverage.

Some states began sending notices from public Exchanges indicating that one or more employees are currently receiving a subsidy in 2015, but the U.S. Department of Health and Human Services (HHS) announced that all federally-facilitated Exchanges will begin sending notices in 2016. Just because the employer receives a notice, it does not mean the employer will actually owe a penalty payment under Section 4980H.

Dan Bond, Principal, Compliancedashboard, offers this important commentary: “I think it’s important for employers to remember that just because they may receive one of these notices from the IRS telling them that one of their employees is receiving a subsidy on the exchange, it does not necessarily mean the employer has exposure to a penalty. There are various reasons that someone might have received a subsidy so the employer can use this notice to determine exactly why and whether or not they have any exposure. In fact, small employers will also receive these notices and they are not even subject to the employer shared responsibility mandate so they will not be subject to penalties, regardless.”

subsidy appeal chart

Appeal Form and Process
So long as the requirements in the final rules are met, each state Exchange is allowed to set up its own process and procedures. Information about how to file an appeal is usually included in the notice, but it may be necessary to check with the applicable Exchange to find out exactly how to handle the appeals process, the particulars of which are managed by each Exchange separately.

The form currently used by federally-facilitated Exchanges, as well as by eight states, may be found on Healthcare.gov (approximately half of the states are currently using this form and process). The forms and processes for all other states may be found by visiting a state’s Exchange site. The process generally involves filing a paper appeal, providing documentation, and in some cases participating in a hearing.

Conclusion
The employer does not have to appeal to avoid a penalty under Section 4980H, and penalties will not apply until after the employer reporting (via Forms 1094-C and 1095-C) is reconciled. There is some speculation that it may be more beneficial to appeal with the Exchange rather than waiting to appeal later with the IRS. This is a fairly new process, so the best approach for employers may remain somewhat unclear until the first year of employer reporting is completed.

Filing an appeal as soon as possible may help avoid hassles with the IRS and prevent the individual from receiving a subsidy for which they are ineligible. At the same time, although the appeals process does not appear to be a difficult one, it is possible that everything could be cleared up more quickly by simply communicating directly with the employee that they may be receiving the subsidy in error.

Originally published by www.ubabenefits.com

 

Thank you for putting the Plan Document together for us!  It is a big accomplishment knowing that we are in compliance!   Once again we are grateful and thankful for your continuing support and enjoy the relationship that we share.

- Office Manager, Food Distribution Company

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