euclid managers legislative review

VOL. XXIII, ISSUE 5 – MAY 2018

Compliance Compendium

A “compendium” is “a list of a number of items” according to the Merriam-Webster dictionary. This issue of Legislative Review offers a compendium of compliance items that are worth noting.

“Grandmothered” Plans

“Grandmothered” plans were set to expire at the end of 2018. CMS announced on April 9, 2018 transition relief that allows “grandmothered” plans to continue until December 31, 2019. The transition relief applies to both the individual and small group markets. States can determine whether and to what extent they wish to allow their markets to follow suit.

A model notice was included with the April 9 announcement for use if a cancellation notice has already been sent to a policyholder.

Individual Mandate

The individual mandate has not been repealed. The action taken by Congress zeroed out the penalty for not having coverage as of 2019.

The impact the absence of a penalty will have on enrollment in health plans is unknown. Some studies indicate that coverage will remain steady. Other studies have found that many people will abandon coverage.

A linchpin in the decision to maintain coverage will likely depend on the plans offered by the carriers and the premiums for them.

Employer Reporting

Employer reporting is still required. So, any employers that are “applicable large employers” (ALEs) or that have a self-funded plan that missed the recent deadlines to report should make haste coming into compliance.

Now is the time for employers to prepare for next year’s filing. Employers have found that using the W-2 affordability safe harbor makes timely filing difficult. Forms W-2 must be filed with the Social Security Administration by January 31. As such, meeting a January 31 date for employer reporting using the W-2 safe harbor is challenging. To avoid this time crunch, employers using a payroll vendor may wish to establish an earlier date to receive next year’s form W-2 data.

Another option would be for employers to identify during the year employees where they believe affordability may be in question. These select employees could then be reported earlier allowing the employer the time to complete the form 1095-C.

Two other options to ease the time crunch:

  • Utilize the rate of pay safe harbor or the Federal Poverty Line safe harbor
  • Request an extension of the filing date from the

Employers who realize that they should have filed, but haven’t, should take immediate steps to come into compliance. Willful noncompliance fines can be as much as $540 perform. Late filing penalties start at $50 perform within 30 days of the due date, increasing to $100 per form if filed before August 1.

The affordability threshold for 2017 was 9.69%. It was revised downward to 9.56% for 2018.

IRS guidance is that records should be maintained for at least three (3) years from the due date of filings. If filing late the records should be maintained for at least three (3) years from the date that the records were filed. When possible records should be maintained for as long as possible.

Murphy’s Law is that the day after the records are destroyed, they’ll be needed!

IRS Penalty Letters

The 226J penalty letters appear to be mailed in waves. Acting IRS commissioner David Kautter testified before Congress in April that 10,000 penalty letters have gone out. He stated that 80% of the letters have been resolved without any amounts due.

Common errors reported so far largely represent errors on the Form 1094-C regarding eligibility for transition relief or whether an employer indicated that “minimum essential coverage” was offered to employees.

Employers have 30 days to respond to the 226J letter as stated on the letter. Employers – especially those with multiple locations or where the person identified as the contact on the Form 1094-C is no longer with the firm – should alert personnel regarding the proper handling of these letters.

Cadillac Tax

The excise tax commonly called “the Cadillac tax” has once again been delayed. It was to go into effect as of January 1, 2020. It is now slated to go into effect January 1, 2022.

Employers with renewal dates that are non-calendar year may want to address the Cadillac tax as of their 2021 renewals to avoid the tax or having to make mid-year adjustments to avoid it. As a reminder, the tax is a 40% excise tax for amounts in excess of the tax threshold. The threshold for the tax will be approximately $10,800 for self- only coverage and $29,100 for other than self-only coverage.

Also, employers should consider whether they wish to take interim steps to come into compliance or face potentially drastic reductions or benefit changes to avoid the tax.

Complicating decisions on the Cadillac tax is that guidance on how the tax will be implemented has been sparse.

Notices published in 2015 – Notice 2015-16 and Notice 2015-52 – asked more questions than providing specifics. Based on the notices, however, it is likely that flexible spending account (FSA), health reimbursement arrangement (HRA) and health savings account (HSA) contributions will count toward the threshold for the tax.

HSA Family Contribution Limit — Restored!

Tax reform changed the HSA family contribution limit for tax year 2018. As a result of the new “chained CPI” calculation, the IRS lowered the HSA contribution limit for family coverage to $6,850. It had previously been announced as $6,900.

Citing administrative and other difficulties, the IRS reversed course in late April, restoring the family limit to $6,900.

Health Care Sharing Ministries

Enrollment in health care sharing ministries has grown significantly since enactment of the ACA. The Alliance of Health Care Sharing Ministries claims there are more than one (1) million participants in these plans. The ACA allowed an exemption from the individual mandate penalty for individuals participating in a health care sharing ministry.

It’s important to note that a health care sharing ministry is not insurance. As such, the plans are not regulated by a state’s insurance commissioner. As such, the states are generally unable to require the ministries to meet solvency requirements or establish required reserves for claims.  Nor is the plan covered by a state’s guarantee fund or subject to rules regarding appeals for claims decisions.

Some employers have considered offering health care sharing ministry coverage to employees. The IRS has stated that a health care sharing ministry is “not employer-provided coverage under an accident or health plan.” Therefore, the cost of employee participation is not excluded from the employee’s gross income.

Employers who are ALEs cannot count coverage by a health care sharing ministry toward the required 95% offer of coverage requirement to avoid the “no offer” penalty (Part A). This is because the coverage is not considered to be “minimum essential coverage” (MEC).

HSA Conundrums

HSAs were created in 2003. The premise of an HSA has always been that an individual could qualify for an HSA if they were covered by a qualified high-deductible health plan that does not have first-dollar coverage. Since 2003, changes in plan offerings have caused questions to surface about compatibility with HSA requirements.

Three (3) common questions that are confounding are:

  1. Do telemedicine plans preclude HSA eligibility?
  2. Do EAPs preclude HSA eligibility?
  3. Do payments for access to concierge medicine preclude HSA reimbursement?

The answer to all three (3) questions is “it depends.” Using a strict interpretation of IRS guidance, if the plan pays for services before the person has met their deductible, then the person loses eligibility for the HSA.

The IRS has provided guidance on EAPs. An EAP is not a health plan if it does not provide “significant benefits in the nature of medical care or treatment.” Careful structure of an EAP plan can allow for continued eligibility for HSAs.

Telemedicine plans pose concerns similar to an EAP. If the plan provides first-dollar benefits or benefits that are below “market-rate,” then they may make a person ineligible for an HSA. Unless the IRS provides guidance specific to telemedicine plans, employers should consider how they structure the plans to avoid HSA compliance issues.

Fees for concierge medicine would not appear to be eligible for reimbursement. These “access fees” do not meet the requirements of being a medical expense under IRS code section 213(d).

Letter from Karen Knippen

Spring was a bit late this year. How’s that for an understatement?

Compliance issues are often vexing. Another understatement! This issue of Legislative Review provides a noteworthy assortment of compliance concerns and tips.

Euclid Managers is pleased that we have an assortment of health plans and other desirable benefits for your clients and their employees. Contact your marketing representative to explore what we have to offer.

You’ll be glad you did! (Another understatement!)

Sincerely yours,
Karen Knippen Signature
Karen Knippen, RHU, REBC Senior Vice President

EUCLID MANAGERS has been serving the independent agent since 1976 with a portfolio of group health, life, disability, dental and individual health. We proudly represent UnitedHealthcare of Illinois, Delta Dental of Illinois, MetLife and UnitedHealthOne Individual. We encourage your feedback and suggestions. Please call your EUCLID MANAGERS Marketing Representative or Marcy Graefen at (630) 238-2915 for more information.

The information contained in this publication is intended for the general information of our clients. It should not be construed as legal advice or legal opinion regarding any specific or factual situation.