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IRS Releases Information on Small Business Health Care Tax Credit
Apr 14, 2010
Certain small businesses and tax-exempt organizations that provide health insurance coverage to their employees may qualify for a special tax credit, according to the Internal Revenue Service. Included in the recently enacted health care reform legislation, the Patient Protection and Affordable Care Act, is a tax credit designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. The following are eligibility rules and the amount of credit as explained by the IRS.
Eligibility Rules
• Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
• Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
• Average annual wage. A qualifying employer must pay average annual wages below $50,000.
• Both taxable (for profit) and tax-exempt firms qualify.
Amount of Credit
• Maximum Amount. The credit is worth up to 35 percent of a small business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
• Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
Three Simple Steps for Employers to Qualify
If you are a small employer (business or tax-exempt) that provides health insurance coverage to your employees, determine if you may qualify for the Small Business Health Care Tax Credit by following the three simple steps featured here.
For more information about the credit, please see different tax credit scenarios and answers to frequently asked questions. Or, please visit the IRS site here.
Health Reform: List of Preventive Services without Cost-Sharing Released
Aug 03, 2010
The Departments of Health and Human Services (HHS), Labor, and Treasury issued interim final regulations requiring new plans and issuers to cover certain preventive services without any cost-sharing requirements when delivered by network providers. Cost-sharing includes out-of-pocket costs like deductibles, co-payments and co-insurance. Employers should note that these required preventive services do not apply to grandfathered plans.
Under the new rules, services recommended by the U.S. Preventive Services Task Force (USPSTF) will generally be required to be provided without cost-sharing when delivered by an in-network provider in the plan years that begin on or after September 23, 2010 (except grandfathered plans). For recommendations that have been in effect for less than one year, plans and issuers will have one year from the effective date to comply. Thus, recommendations and guidelines issued prior to September 23, 2009 must be provided for plan years beginning on or after September 23, 2010.
Recommendations of the USPSTF appear in a released chart, which can be accessed by clicking here.
Preventive Services to Be Covered without Cost-Sharing
HHS reports that under the new rules, depending on age and plan type, individuals may have easier access to the following preventive services:
• Blood pressure, diabetes, and cholesterol tests
• Cancer screenings, including mammograms and colonoscopies
• Flu and pneumonia shots
• Routine vaccines ranging from routine childhood immunizations to periodic tetanus shots for adults, including diseases such as measles, polio, or meningitis
• Counseling from health care providers on such topics as quitting smoking, losing weight, eating better, treating depression, and reducing alcohol use
• Counseling, screening and vaccines for healthy pregnancies
• Regular well-baby and well-child visits, from birth to age 21
The interim final regulations also make clear that a plan or issuer is not required to provide coverage or waive cost-sharing requirements for any item or service that has ceased to be a recommended preventive service. For example, if a recommendation of the USPSTF is downgraded from a rating of A or B to a rating of C or D, or if a recommendation or guideline no longer includes a particular item or service, the service is not required to be provided without cost-sharing.
For more on preventive services under the Affordable Care Act, please click here, or view the chart of covered services by clicking here. You can also view a list of covered services for adults, women (including pregnancy) and children by clicking here. To view the interim final regulations, please click here. To learn more about changes to group health plans under the Affordable Care Act, including grandfathered plans, please visit the HR & Benefits Essentials Health Care Reform Section by clicking here.
Mental Health Parity Act & Group Health Plans
Aug 13, 2009
On October 3, 2008, the President signed the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). Key changes made by MHPAEA, which is generally effective for plan years beginning after October 3, 2009, include the following:
• If a group health plan includes medical/surgical benefits and mental health benefits, the financial requirements (e.g., deductibles and co-payments) and treatment limitations (e.g., number of visits or days of coverage) that apply to mental health benefits must be no more restrictive than the predominant financial requirements or treatment limitations that apply to substantially all medical/surgical benefits;
• If a group health plan includes medical/surgical benefits and substance use disorder benefits, the financial requirements and treatment limitations that apply to substance use disorder benefits must be no more restrictive than the predominant financial requirements or treatment limitations that apply to substantially all medical/surgical benefits;
• Mental health benefits and substance use disorder benefits may not be subject to any separate cost sharing requirements or treatment limitations that only apply to such benefits;
• If a group health plan includes medical/surgical benefits and mental health benefits, and the plan provides for out of network medical/surgical benefits, it must provide for out of network mental health benefits;
• If a group health plan includes medical/surgical benefits and substance use disorder benefits, and the plan provides for out of network medical/surgical benefits, it must provide for out of network substance use disorder benefits;
• Standards for medical necessity determinations and reasons for any denial of benefits relating to mental health benefits and substance use disorder benefits must be made available upon request to plan participants;
• The parity requirements for the existing law (regarding annual and lifetime dollar limits) will continue and will be extended to substance use disorder benefits.
Federal and State law – Generally, large employers with a group health plan must comply with the Federal parity requirements as well as state laws, whereas small employers (2-50 employees) with a group health plan will only be potentially subject to state laws. A state law that requires more favorable treatment of mental health benefits under health insurance coverage offered by issuers (generally, health insurance companies) would not be preempted by the provisions of MHPA and the interim rules. The combined effect of Federal and State rules will vary from state to state.
Please note the following can opt out of the Mental Health Parity Act.
A nonfederal government employer that provides self-funded group health plan coverage to its employees (coverage that is not provided through an insurer) may elect to exempt its plan (opt-out) from the requirements of MHPA and MHPAEA by issuing a notice of opt-out to enrollees at the time of enrollment and on an annual basis thereafter. The employer must also file the opt-out notification with CMS.
For more information on your state, contact the Department of Insurance (DOI) for the state in which you reside. Ask DOI about mental health parity and state laws mandating that mental health benefits be included in the plan. You may also go to www.ncsl.org/programs/health/Mentalben.htm for additional State specific information.
For more information on the MHPA go to the following Websites:
• CMS - links to the MHPA statute. Click on “The Mental Health Parity Act” in the left column and scroll down to the statute.
• For more information on the MHPA statute, regulation, fact sheet and other publications, please click here and scroll down to the MHPA.
IRS Announces 2010 Retirement and Inflation-Adjusted Benefit Numbers
Dec 10, 2009
The IRS has announced the 2010 cost-of-living adjustments applicable to dollar limitation for retirement plans and inflation adjusted limits for other benefits.
Read more (pdf)...
COBRA Subsidy Update
Dec 29, 2009
As we previously announced, Congress enacted new legislation related to the COBRA continuation coverage subsidy. We thought it would be helpful to summarize the key changes for your review.
The new provisions do the following:
• Change the end date of eligibility for the COBRA ARRA subsidy from December 31, 2009 to February 28, 2010 (a two-month extension);
• Expand the ARRA premium subsidy to 15 months (an increase from the nine-month period under the original provisions);
• Allow for a 60-day period for the retroactive payment of premiums for assistance eligible individuals ("AEIs") (i.e., individuals who were entitled to the subsidy) whose subsidy period expired on November 30th and who failed to pay their premium for December coverage. The period will commence the day the provision is signed into law by the president, or, if later, 30 days after provision of the special notice (described below). The same refund/credit rules under the original bill will apply to any assistance eligible individual ("AEI") whose subsidy expired in November and who has since paid the full COBRA premium;
• Require a special notice describing the new subsidy provisions to all AEIs who are on COBRA on or after November 1, 2009 or whose qualifying event is an "involuntary termination" of employment occurring on or after November 1, 2009;
• Conditions eligibility for the COBRA subsidy on only one factor: a qualifying event that is an "involuntary termination" of employment occurring on or before the new February 28, 2010 sunset date. The previous version of the subsidy also took into account when the COBRA coverage period actually began. This means that employees who are involuntarily terminated before February 28, 2010 but still receive coverage subsidized by employers that defers the COBRA start date to a date later than February 28, 2010 will still be able to receive the subsidy.
We hope you find this information useful. As always, we will keep you posted with future developments.
Model Employer Children's Health Insurance Program Notice
Feb 15, 2010
On February 4, 2009, President Obama signed the Children's Health Insurance Program Reauthorization Act (CHIPRA) of 2009. CHIPRA includes a requirement that the Departments of Labor and Health and Human Services develop a model notice for employers to use to inform employees of potential opportunities currently available in the State in which the employee resides for group health plan premium assistance under Medicaid and the Children's Health Insurance Program (CHIP). The Department of Labor was required to provide the model notice to employers within one year of CHIPRA's enactment.
Through a notice in the February 4, 2010 FEDERAL REGISTER, the Department's Employee Benefits Security Administration (EBSA) announces the availability of the Model Employer CHIP Notice. The notice provides the "form and content of notice" as well as the "timing and delivery of the notice" while outlining the requirements for addition of state-specific information.
The model Employer CHIP Notice is now available in this electronic format.
ARRA Bill Changes COBRA Regulations
Feb 17, 2009
As you are aware, the American Recovery and Reinvestment Act of 2009 (ARRA) was signed into law by President Obama on February 17th, 2009, and provides a 65-percent subsidy on federal COBRA and COBRA-comparable state continuation premiums for certain assistance eligible individuals (AEIs) for up to nine months.
The Department of Labor has set a deadline of April 18th, 2009 for all ARRA COBRA notices to be mailed out to any employee terminated involuntarily after September 1st, 2008.
Any small group employer that currently offers Cal-COBRA (20 or less employees) should be aware that it is the carrier's responsibility to administer Cal-COBRA, but should also be advised that there is a penalty on the employer if a notice is not sent out to all involuntarily terminated employees after September 1st, 2008.
Please click on the link below to review the model notices made available by the Department of Labor:
http://www.dol.gov/ebsa/cobramodelnotice.html
We have two suggestions for all small group employers that offer Cal-COBRA:
1) Contact your current medical carrier to find out how the ARRA subsidy is being handled.
2) As a precaution, mail out a COBRA ARRA notice to all employees involuntarily terminated after 9/1/08 before the deadline of 4/18/09.
ARRA COBRA Subsidy Extension Action Items for January 2010
Jan 08, 2010
Universal Health Care Legislation Advanced by Committee
Jul 16, 2009
The Senate committee on health care has advanced a milestone measure for Obama’s plan.
President Barack Obama’s key priority of providing universal healthcare to the public was voted on by the Senate health committee Wednesday. As reported by the Associated Press (AP), the vote by the committee advanced a $600 billion measure that would require Americans to obtain health insurance, and employers to help supply the rate. The bill also calls for government financial help with premiums for those who will have trouble with the costs. However, the complete plan is still under development.
Senator Chris Dodd of Connecticut is quoted in the report as stating of the bill, “This time we’ve produced legislation that by and large I think the American people want.”
As noted by the AP, House Democratic leaders pledged to meet President Obama’s health care legislation goal by August earlier this week. Leaders are reportedly offering a $1.5 trillion plan, which would make healthcare both a first time right and responsibility for citizens of the United States.
WiredPRNews.com - The latest in U.S. Presidential News
IRS Releases Revised Form 941 for HIRE Act
Jun 01, 2010
The IRS has issued the newly revised payroll tax Form 941 which most eligible employers can use to claim the special payroll tax exemption that applies to many new workers hired during 2010.
Designed to encourage employers to hire and retain new workers, the payroll tax exemption and the related new hire retention credit were created by the Hiring Incentives to Restore Employment (HIRE) Act signed by President Obama on March 18, 2010.
The payroll tax exemption is an exemption from the employer's 6.2 percent share of social security tax on all wages paid to qualified employees from March 19, 2010 (the day after the date of enactment of the HIRE Act) through December 31, 2010. The employee's 6.2 percent share of social security tax and the employer and employee’s shares of Medicare tax still apply to all wages.
In addition, for each qualified employee retained for at least a year whose wages did not significantly decrease in the second half of the year, businesses may claim a new hire retention credit of up to $1,000 per worker on their income tax return. Further details on both the tax credit and the payroll tax exemption can be found in a recently-expanded list of answers to frequently-asked questions about the new law now.
How to Claim the Payroll Tax Exemption
Form 941, Employer's QUARTERLY Federal Tax Return, revised for use beginning with the second calendar quarter of 2010, can be filed by most employers claiming the payroll tax exemption for wages paid to qualified employees. The HIRE Act does not allow employers to claim the exemption for wages paid in the first quarter but provides for a credit in the second quarter. The instructions for the new Form 941 explain how this credit for wages paid from March 19 through March 31 can be claimed on the second quarter return.
HSA Contribution Limits and Minimum Deductibles Remain Same as 2010
Jun 17, 2010
The IRS has released the 2011 contribution limits and minimum deductible amounts for Health Savings Accounts (HSAs), based on the Internal Revenue Code's cost-of-living adjustment rules. For calendar year 2011, the annual limit on HSA deductions for an individual with self-only coverage under a high deductible health plan remains $3,050. For calendar year 2011, the annual limit on deductions for an individual with family coverage under a high deductible health plan remains $6,150.
For calendar year 2011, a “high deductible health plan” remains defined as a health plan with an annual deductible that is not less than $1,200 for self-only coverage or $2,400 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $5,950 for self-only coverage or $11,900 for family coverage.
The amounts for 2011 are unchanged from 2010. To view Revenue Procedure 2010-22, please click here.
Agencies Clarify "Grandfathering" Under Health Care Reform
Jun 18, 2010
The Affordable Care Act imposed a number of benefit mandates on employer health plans, most of which will take effect with the first plan year beginning after September 23, 2010. However, certain plans that were in existence on March 23, 2010 (the Act's enactment date) enjoy limited "grandfather" protection. Some of the benefit mandates do not apply at all to these grandfathered plans, while others apply only at a later date. Unfortunately, the Act did little to define the scope of this grandfather protection. The three agencies charged with administering the Act have now issued interim final regulations providing useful guidance on this topic.
Advantages of Grandfathered Status
Even grandfathered plans must comply with many of the Act's benefit mandates. Such plans are exempt, however, from the following mandates:
- Required coverage for emergency services at in-network levels;
- Required first-dollar coverage for certain preventive services (immunizations and screenings), subject to no deductible;
- A prohibition on restricting the designation of primary care providers or requiring referrals for OB/GYN services;
- Required coverage of routine expenses for participation in clinical trials;
- Enhanced claim appeal procedures, including implementation of an external appeals process; and
- A prohibition on discriminating in favor of highly compensated individuals (i.e., applying the same nondiscrimination rules to both insured and self-funded plans).
General Requirements for Grandfathered Status
In addition to being in effect on May 23, 2010, a grandfathered plan must avoid taking any action that would undermine its grandfathered status. The types of actions that would cause a plan to lose its grandfathered status are described in the next section of this Alert. However, the regulations also condition grandfathered status on the sponsor taking the following affirmative steps:
- Including "in any plan materials provided to a participant or beneficiary that describes the benefits provided under the plan" (such as a summary plan description) a statement that the plan believes it is a grandfathered health plan within the meaning of Section 1251 of the Act. This statement must also provide contact information for questions and complaints. The regulations include model language that may be used to satisfy this disclosure requirement.
- Maintaining records that document the terms of the plan as in effect on March 23, 2010, along with any other documents necessary to verify, explain, or clarify the plan's status as a grandfathered health plan. Those records must then be made available for examination upon request by a participant, beneficiary, or government agency.
The regulations are particularly helpful in listing the steps a plan may -- or may not -- take without losing its grandfathered status. For instance, grandfathered plans have substantial flexibility to add or remove covered individuals. Employees may be allowed to add their dependents, the plan may enroll new hires, and (clarifying a question left unanswered by the statutory language) the plan may enroll existing employees who had simply declined to enroll in the past. Moreover, subject to certain "anti-abuse rules," employees may be transferred between plans (or plans may be merged) without thereby undermining the plans' grandfathered status.
A self-funded plan may also substitute a new third-party administrator for the TPA that was in place on March 23, 2010. By contrast, an insured plan will generally lose its grandfathered status if it enters into a new policy, certificate, or contract of insurance. Presumably, simply renewing a policy with an existing carrier will not cause a loss of grandfathered status.
The regulations also allow for changes in a plan's benefit structure, so long as none of those changes is described in the following list:
- Eliminating all or substantially all benefits to diagnose or treat a particular condition;
- Increasing a coinsurance or other percentage-based cost-sharing requirement above the level in effect on March 23, 2010;
- Increasing a fixed-dollar cost-sharing requirement (other than a copayment), such as an annual deductible or out-of-pocket limit, by a total percentage - measured from March 23, 2010 -- that exceeds the sum of the medical inflation rate plus 15 percentage points;
- Increasing a copayment by an amount that exceeds the greater of (1) the amount just described for other fixed-amount cost-sharing requirements, or (2) $5 increased by the medical inflation rate since March 23, 2010;
- Decreasing the rate of employer contributions to the plan (for any tier of coverage, such as employee-only or family) by more than five percentage points below the rate that was in effect on March 23, 2010; or
- Adopting or decreasing an annual benefit limit, with the specific rules depending on whether the plan had already imposed an annual or lifetime limit as of March 23, 2010.
The regulations provide that the grandfathering rules apply separately to each "benefit package" made available under a health plan. Thus, a plan offering both an HMO and a PPO option might choose to modify the PPO's deductible or copayment in a way that would cause the PPO to lose its grandfathered status, without thereby forfeiting the HMO's grandfathered status.
Collectively Bargained Plans
The Act contains special grandfathering provisions for plans maintained pursuant to a collective bargaining agreement. Because these statutory provisions concerning collectively bargained plans were inartfully drafted, they are subject to differing interpretations. The regulations provide needed clarification in this area - though sometimes in rather surprising ways.
For example, the drafters of the regulations take literally the Act's reference to "health insurance coverage" maintained pursuant to a collective bargaining agreement. The regulations therefore limit the special grandfathering rules for collectively bargained plans to those that are fully insured. Although self-funded collectively bargained plans may be grandfathered under the rules described above, they do not enjoy any additional protection under these collectively bargained rules.
Accordingly, if a self-funded collectively bargained plan is modified in any way that would cause a non-bargained plan to lose its grandfathered status, the collectively bargained plan will do so as well. Even granting that this approach tracks the statutory language, one has to question the policy basis for favoring insured over self-funded plans in this fashion.
Moreover, some practitioners had read the Act's provisions concerning collectively bargained plans as providing a type of "super-grandfathering." That is, the language could be read to provide that none of the benefit mandates would apply to a collectively bargained plan -- even those that would otherwise apply to a grandfathered plan -- until the expiration of the last of the relevant collective bargaining agreements (i.e., those in effect on March 23, 2010). The regulations clearly reject this interpretation. A collectively bargained grandfathered plan (even an insured one) will be subject to the Act's benefit mandates at the same time as other grandfathered plans. Thus, for example, as of the first plan year beginning after September 23, 2010, even a collectively bargained plan must eliminate all pre-existing condition limitations for dependents under age 19, remove any lifetime limits on "essential benefits," and make coverage available until a child's 26th birthday (unless the child has access to other employer coverage).
On the other hand, a fully insured plan that enjoys this special grandfather protection for collectively bargained plans may be amended in ways that would otherwise violate the restrictions summarized above without immediately losing its grandfathered status. Instead, it would remain grandfathered until the expiration of the last of the relevant bargaining agreements.
The regulations clarify one other point concerning collectively bargained plans. Some had read the statute to say that such a plan would automatically lose its grandfathered status upon the expiration of the last bargaining agreement that was in effect on March 23, 2010. Again, the regulations reject this approach. Instead, such a plan's status will be determined by comparing the terms of the plan in effect at that point to the terms in effect on March 23, 2010 -- and then applying the analysis set forth above. That is, did any benefit changes exceed the levels described above? If so, the plan will no longer be grandfathered. Otherwise, the grandfather protection will remain in place until such a change is adopted.
Oddly, the regulations also note that a collectively bargained plan may change insurance carriers prior to the expiration of the last of the relevant bargaining agreements without causing a loss of its grandfathered status once that bargaining agreement expires. No policy basis is provided for this exception to the general rule noted above.
Limited Transition Relief
Recognizing that plan sponsors may have been attempting to stay within the Act's grandfather provision even in the absence of regulatory guidance, these regulations provide limited transition relief. In particular:
- Plan changes adopted after March 23, 2010, will be treated as in effect on that date if they were made pursuant to either a legally binding contract or state insurance department filing that was made prior to that date.
- Plans that adopted changes after March 23, 2010, will now have a "grace period" during which they may revoke those changes and thereby retain their grandfathered status. This grace period will end on the first day of the first plan year beginning after September 23, 2010.
- For the period before these regulations were released, the agencies "will take into account good-faith efforts to comply with a reasonable interpretation of the statutory requirements and may disregard changes ... that only modestly exceed" the types of changes allowed by grandfathered plans.
Armed with this regulatory guidance, sponsors of health plans that wish to retain their grandfathered status should immediately review any changes adopted since March 23, 2010. Some of those changes may need to be revoked during the grace period described above.
Sponsors should also take this guidance into account when determining whether to make further changes to the plan. In doing so, they should consider whether the cost savings associated with plan modifications might more than offset the costs of complying with the benefit mandates associated with the loss of grandfathered status.
Given some of the surprises contained in these regulations, collectively bargained plans may need to entirely rethink their proposed approach to the Act. Those that are self-funded should understand that they enjoy no special protection as a result of their collectively bargained status. And even insured plans that are collectively bargained should be prepared to comply with all of the benefit mandates to which other grandfathered plans are subject -- generally, by the first day of the plan year beginning after September 23, 2010.
Finally, sponsors who want to retain their plan's grandfathered status should not overlook the notification and document retention requirements. For instance, before the first plan year beginning after September 23, 2010, they will want to supplement the plan's summary plan description to include either the IRS model language or similar language tailored to the plan's particular situation.
Spencer Fane Britt & Browne LLP
COBRA Subsidy Extended
Mar 05, 2010
President Obama has signed legislation that extends the deadline for terminated employees to qualify for the COBRA premium subsidy. Under the law, as amended, workers now terminated between September 1, 2008, and March 31, 2010 may be eligible for a 65% subsidy of their COBRA premiums for up to 15 months.
The legislation also redefines a qualifying event to include the involuntary termination of employment on or after March 2, 2010, of any qualified beneficiary who did not make (or who made and discontinued) an election of coverage on the basis of a reduction of hours of employment.
For more information on this temporary extension, individuals are encouraged to call the Employee Benefits Security Administration toll-free at 1-866-444-3272. To view the legislation, H.R. 4691, please click here.
Dust Off Your HIPAA Hats: Major Changes to HIPAA Privacy and Security Rules Are On The Way
Mar 11, 2009
Significant changes are coming up for HIPAA! Read more (pdf)...
New HSA Limits Announced
Mar 15, 2009
The IRS recently released the new HSA Limits for 2010.
Health Care Reform Passes!
Mar 22, 2010
As you may already know, the U.S. House of Representatives passed new health care legislation last night. As such, Congress is preparing to send the package to President Obama for signature.
The bill touches upon nearly every component of Health Care financing and delivery in the United States. The major components of the bill will be phased in over time (2010, 2011, 2013 and 2014), subject to the writing of regulations. Over the next several weeks, we will send you additional reporting that will outline the impact, timelines and key elements of the new legislation.
Some of the brief highlights are:
- Market Reforms: The plan introduces a number of market reforms, some of which will take place within 6 months of the enactment of the bill. Some of these reforms include the removal of Pre-Existing conditions, allowing dependent children to stay on the plan until age 26, disbanding “rescission” practices, and the introduction of guarantee issue coverage.
- Exchange Portals: Creation of State-based insurance exchanges for small employers and individuals by 2014. These exchanges would consist of multiple insurance companies offering a wide range of plans. A small employer is defined as 100 or fewer employees, but states may reduce that number down to 50 employees.
- Employer Mandate: Employers do not have to offer coverage, but employers of 50 or more must provide a baseline of “essential” coverage, or pay a fine of $2,000 per uncovered employee (first 30 uncovered employees are exempt).
- Individual Mandate: Beginning 2014, all American citizens and legal residents must purchase qualified health insurance. The bill exempts those below Federal tax thresholds, and applies a penalty to those who do not purchase the coverage.
- Automatic Enrollment: Employers of 200 or more are required to automatically enroll all new employees into employer-sponsored plans. Employees are able to waive if they have another source of coverage.
- FSA limitations: FSA contributions to be limited to $2,500, starting in 2013, and over-the-counter drugs would be considered ineligible expenses at that time.
- MultiState Plans: Allows for creation of interstate and national plans. Creates multistate plans to be offered via state exchanges, provided by private insurers and administered by the Federal Office of Personnel Management.
- Financing: The financing of the increased benefits will come from several sources. Increased Medicare taxes, Employer fines for not covering employees, and new Insurance and Pharmaceutical industry taxes are among the primary funding vehicles.
- Medicare: The bill closes the “donut hole” in Medicare Part D (prescription drugs), by providing a $250 rebate to those who hit the Rx deductible. It reduces payments to Medicare Advantage by freezing the benchmark payment in 2011, and reducing those payments going forward. Proposed “savings” is $200 billion.
- Medicaid: The bill expands coverage under Medicaid for people up to 144% of the Federal Poverty level in 2014.
Please look for additional information from e3 Financial, as we will have specific Compliance Alerts and Webinars on this topic in the near future. In the meantime, if you have any questions, do not hesitate to call.
New Dependent Coverage Law - DOL Releases Fact Sheet and FAQs
May 12, 2010
The U.S. Department of Labor has released a Fact Sheet and set of Frequently Asked Questions regarding dependent coverage under the Affordable Care Act. Under the Act, for plan years starting on or after September 23, 2010, group and individual health plans that cover dependents must continue to make dependent coverage available until age 26. The Fact Sheet and FAQs cover topics that include enrollment, new tax benefits, grandfathered plans, and a list of companies that have agreed to implement the program before the September 23, 2010 deadline.
The Young Adults and the Affordable Care Act Fact Sheet and FAQs were released around the same time as regulations from the U.S. Treasury, Labor, and Health and Human Services Departments implementing the dependent care requirements under the Affordable Care Act.
To view the Fact Sheet, please click here. To see the FAQs, click here. To visit the e3 Compliance Navigator “Dependent Coverage to Age 26” Section, please click here to login. More information can be found under the Employee Benefits section, within the Health Insurance Sub-folder entitled “2010 Health Care Reform”.
November 30th Deadline for Determining How to Handle 2009 Required Minimum Distributions
Nov 19, 2009
Under recent IRS guidance, sponsors of 401(k) and other defined contribution plans must decide, by November 30, 2009, how to handle required minimum distributions (RMDs) for the 2009 calendar year. Moreover, participants who have already received 2009 distributions that consisted of (or included) a 2009 RMD have until this same date to decide whether to roll that RMD into an IRA or eligible retirement plan in a tax-free rollover.
Late last year, Congress passed the Worker, Retiree and Employer Recovery Act of 2008 (WRERA), which waived the 2009 RMD that must otherwise be paid to participants who have both retired and attained age 70. The expressed goal was to allow participants to avoid having to liquidate a portion of their account balance while the bottom had fallen out of the market. This one-year waiver of the RMD applies only to 401(k) and other qualified defined contribution plans, Section 403(b) plans, and governmental Section 457(b) plans.
On September 24, 2009, the IRS released Notice 2009-82, which provides transition relief for both plan sponsors and plan participants. This transition relief applies to RMDs made between January 1, 2009, and November 30, 2009. According to Notice 2009-82, the IRS will not consider a plan to be disqualified – even if it was not operated in accordance with its written terms during that period – because:
1. It did or did not distribute 2009 RMDs;
2. It did not give participants the option of receiving or not receiving 2009 RMDs; or
3. It did or did not offer direct rollovers of 2009 RMDs.
Under the transition relief, participants who have received a 2009 RMD have until the later of November 30, 2009, or 60 days after receipt of the distribution to roll the RMD into an IRA or eligible retirement plan. This extended deadline applies to both single-sum RMD payments (i.e., a distribution that is limited to the 2009 RMD) and distributions (such as installments or annuity payments) where only a portion of the distribution is the 2009 RMD.
This transition relief is a boon for plan sponsors because they (and their service providers) have taken a variety of approaches to this waiver – some of them inconsistent with each other. However, the transition relief ends on November 30, 2009. All distributions made after that date must be made in accordance with the terms of the plan. Even though WRERA gives plan sponsors until the end of the 2011 plan year to adopt any amendments needed to comply with the RMD waiver, those amendments must reflect the actual operation of the plan for periods after November 30, 2009.
Plan sponsors must therefore decide – between now and November 30, 2009 – how to handle distributions of 2009 RMDs (and distributions that may include 2009 RMDs) for the remainder of the 2009 plan year. The permissible options include:
1. Allowing participants to choose whether to receive any distribution that includes the 2009 RMD (with the default being no distribution if the participant fails to elect); or
2. Allowing participants to choose whether to receive any distribution that includes the 2009 RMD (with the default being to make the distribution); or
3. Automatically making all distributions required under the terms of the plan (i.e., as if there were no waiver of 2009 RMDs); or
4. Automatically stopping any distribution that consists solely of the 2009 RMD; or
5. Some combination of the above.
The IRS guidance anticipates that most plans will adopt one of the first two options (i.e., they will allow participants to choose whether to take, or not take, any distribution that includes the 2009 RMD). Notice 2009-82 even includes “model” amendments that plan sponsors may adopt for these two alternatives. Note that automatically “stopping” all distributions that include the 2009 RMD (without giving the participant any choice) may constitute an impermissible “cutback” of a protected distribution option, and is therefore not a recommended option.
Plan sponsors must also decide whether to give participants receiving 2009 RMDs the option of making a direct rollover of these amounts into an IRA or eligible retirement plan. WRERA does not require plan sponsors to offer a direct rollover option for 2009 RMDs (i.e., they can force participants to receive the distribution and then roll it over within 60 days). However, plan sponsors may allow participants to elect a direct rollover of either (i) any amount that is (or includes) a 2009 RMD, or (ii) only those amounts that would otherwise be “eligible rollover distributions” (such as lump sums or payments over a period of less than 10 years).
Plan sponsors should consult with their investment provider to make sure that the provider can operationally support the plan’s decision on how to administer RMDs after November 30, 2009. Sponsors should also consult with their plan document provider to make sure that the provider will be able provide a plan amendment that is consistent with the plan’s actual administration of RMDs after November 30, 2009.
Spencer Fane Britt & Browne LLP
Congress Expands Military Family Leave Coverage
Nov 20, 2009
In the 2010 National Defense Authorization Act (NDAA), which was signed by President Obama on October 28, 2009, Congress expanded the military-related family and medical leave that it created in the 2008 NDAA. The expansion became effective upon the President's signature. This new legislation means the Family Medical Leave Act regulations that became effective earlier this year are already outdated with respect to military-related FMLA leave.
Caregiver Leave Expansion
The FMLA permits up to 26 weeks of leave for an eligible employee who is the spouse, son or daughter, parent or next of kin of a service member in the Regular Armed Forces, National Guard or Reserves to care for such a service member who has incurred a serious injury or illness in the line of duty while on active duty. Prior to the most recent amendments, this generally meant that treatment for, recuperation from, or therapy for the serious injury or illness had to commence while the service member was still a member of the military (or on the temporary disability retired list) in order for the family member to take FMLA leave to care for the service member. In other words, if an injury or illness did not manifest itself until after the individual was discharged from the military (e.g., post-traumatic stress disorder), a family member would not have been able to take FMLA caregiver leave to care for the individual.
The above limitation has now been modified. Under the new rules, the serious injury or illness still needs to be incurred while the service member is in the military, but treatment, recuperation and/or therapy for it can now begin as late as five years after the service member's discharge from the military. For example, if a service member is discharged from the military on November 1, 2009 (after serving in Iraq), and begins treatment for service-related PTSD two years later, a covered family member will be able to take FMLA leave at that time to care for the service member. Moreover, the definition of "serious injury or illness" is also expanded to cover not only an injury or illness incurred by the service member in the line of duty on active duty, but also an injury or illness that existed before the beginning of the service member's active duty that was aggravated by service in the line of duty on active duty. The eligible employee is still limited to a total of 26 weeks of leave related to the service member within a single 12 month period beginning with the first use of the leave.
Qualifying Exigency Leave Expansion
Under the original version of the FMLA military leave provisions, as implemented through the FMLA regulations earlier this year, eligible employees may take leave for a "qualifying exigency" arising from a spouse's, child's or parent's active duty or call to active duty as a member of the Reserves or National Guard in support of a "contingency operation" declared by the Secretary of Defense, the President, or Congress. This leave entitlement is up to 12 work weeks of unpaid leave in the employer's normally designated 12 month period (when combined with all other FMLA leave except FMLA caregiver leave).
The original provisions did not provide "exigency" leave related to active duty members of the Armed Forces on a theory that such active duty members and their families are always to be prepared for an assignment overseas. The 2010 NDAA discards this theory and extends coverage to eligible family members of: (1) any member of the Regular Armed Forces who is deployed to a foreign country (regardless of the nature of the service performed in that foreign country and regardless of whether it is in support of a contingency operation); and (2) any member of the Reserves or National Guard who is on federal active duty in a foreign country or is called to federal active duty in a foreign country, provided that such active duty is in support of a contingency operation.
The "qualifying exigencies" have not changed and include: short notice deployment, military events, arranging for child care, arranging financial or legal matters, attending counseling, assisting with the military member's rest and recuperation, post-deployment activities, and similar activities as agreed upon by the employer and employee.
Practice Tips
The expansion of caregiver leave and exigency leave clearly will increase the potential number of employees who may be entitled to take such leave. Employers should consider several steps to comply with the recent changes in the law.
• Update FMLA policies with respect to military leave.
• Monitor the Department of Labor for the anticipated poster revisions, notice revisions, form revisions, and regulatory revisions. In the meantime, consider posting a notice next to the current DOL poster briefly explaining the changes.
• Train personnel responsible for leaves and attendance concerning the changes.
• Educate supervisors of the basics of the changes to enable them to identify situations that should be brought to the attention of personnel responsible for leave administration.
Spencer Fane Britt & Browne LLP
HHS Issues Interim Final Rule Issued on HIPAA Breach Notification
Oct 06, 2009
As reported in a March 2009 Alert, the Health Information Technology for Economic and Clinical Health (HITECH) Act created a new notification requirement in the event of a breach involving protected health information (PHI). The Department of Health and Human Services (HHS) recently published interim final regulations clarifying when and how such breach notices must be provided.
Perhaps the most interesting aspect of this new guidance is its clarification of the term “breach.” The regulations define a breach as the acquisition, use or disclosure of PHI that compromises the security or privacy of PHI. The security or privacy of PHI is compromised only if the breach “poses a significant risk of financial, reputational, or other harm to the individual.”
This standard will require a covered entity to conduct a risk assessment and document its analysis with respect to whether a breach has occurred. For example, the inadvertent disclosure of an individual’s admission to the hospital may not be considered a breach for purposes of requiring notification, but the inadvertent disclosure of an individual’s admission to the hospital for substance abuse treatment might be considered a breach.
According to the regulations, this notice requirement applies only to “unsecured” PHI. Unsecured PHI is defined as PHI that is “not rendered unusable, unreadable, or indecipherable to unauthorized individuals through the use of a technology or methodology specified by the Department of Health and Human Services in published guidance.” HHS issued such guidance in April of this year, indicating that the only two approved methods of securing PHI are encryption (for both electronic data “at rest” and data “in motion”) and destruction (by shredding or purging). From a practical perspective, this appears to mean that any PHI that is maintained in a paper format would be considered unsecured for purposes of the breach notification rule, since it cannot be rendered secured until it has been destroyed.
As noted in our earlier article, the HITECH Act also extended this breach notification requirement to business associates of covered entities. Once they become subject to this requirement (by no later than Feb. 17, 2010), business associates whose actions result in a breach of unsecured PHI will be required to notify the covered entity of that breach without unreasonable delay, but in any event within 60 days of the discovery of the breach. They will also have to provide the names of the individuals whose PHI was the subject of the breach.
The new breach notification rules became effective as to covered entities on Sept. 23, 2009, but HHS has stated that it will use its enforcement discretion not to impose sanctions for failure to provide the required notifications for breaches discovered before Feb. 22, 2010. Nonetheless, given the complexities inherent in this area, covered entities (and their business associates) should not rely on this non-enforcement policy as an excuse to delay implementing the breach notification rules.
Julia M. Vander Weele, Partner
Spencer Fane Britt & Browne LLP
New Genetic Information Nondiscrimination Act (GINA) Guidance: Health Risk Assessment
Oct 14, 2009
On Oct.1, three federal agencies issued a lengthy package of regulations under the Genetic Information Nondiscrimination Act of 2008 (GINA). Though it will take some time to digest this entire package, one point is abundantly clear: Health plan sponsors and their insurers should think twice - if not three or four times - before including questions concerning an individual's family medical history in any health risk assessment (HRA).
Among other things, GINA bars a group health plan or insurer from discriminating on the basis of genetic information. This prohibition extends to collecting genetic information if that information will be used for underwriting purposes. GINA's statutory language made clear that family medical history falls within the definition of genetic information. Accordingly, GINA makes it impermissible to ask for family medical history before enrolling an individual in a health plan.
What many found surprising in the recent regulations, however, is a flat-out prohibition on asking for family medical history in even post-enrollment HRAs if employees will be rewarded for completing the assessment (or penalized for not doing so). Here is the rationale put forth by the government agencies for adopting this more stringent approach:
Under GINA, the definition of underwriting is broader than merely activities relating to rating and pricing a group policy. These interim final regulations clarify that underwriting purposes includes changing deductibles or other cost-sharing mechanisms, or providing discounts, rebates, payments in kind, or other premium differential mechanisms in return for activities such as completing a health risk assessment (HRA) or participating in a wellness program.
So what does this all mean? At a minimum, it means that HRAs may not ask for family medical history in either of the following two circumstances:
1. Before an individual is enrolled in a plan (or even before reenrollment, if the information may affect that reenrollment), or
2. At any time, if a reward will be given for providing this information (including a penalty for not doing so).
These prohibitions apply to plan years beginning after Dec. 7, 2009 - or as of Jan. 1, 2010, for calendar-year plans.
Now that many employers are beginning their annual enrollment season, employers, insurers and wellness vendors may need to respond immediately in order to delete from their HRAs any questions concerning family medical history. It may also be necessary to add language to open-ended questions stating that, in answering those questions, individuals should not provide any genetic information (including family medical history). The regulations impose this requirement in order to take advantage of an "incidental collection exception."
Fortunately, the regulations contain a number of examples that help to illustrate what may or may not be done in this regard. Those examples make clear that the following practices will pass muster under GINA (though they may still run afoul of other laws - including more stringent state laws):
1. Offering a financial incentive to complete an HRA, but excluding from that HRA any questions concerning family medical history.
2. Including questions concerning family medical history, but offering no financial incentive to complete the HRA (and deferring the HRA until after enrollment).
3. Offering a financial incentive to complete an HRA that requests no family medical history, and then including an addendum that requests such history - clearly stating that employees who leave the addendum blank will still receive the financial incentive for completing the rest of the HRA.
Keep in mind, though, that to effectively omit questions concerning family medical history, an HRA must plainly state that such history should not be provided in response to open-ended questions.
Kenneth A. Mason, Partner
Spencer Fane Britt & Browne LLP
CMS/ Medicare Disclosure Deadline (Nov 15th)
Oct 29, 2009
You may recall that Medicare Part D includes requirements for employers offering group prescription drug coverage, as you do under your group medical plan(s). To assist you in complying with those requirements, we offer these friendly reminders:
You must send a Notice of Creditable (or Non-Creditable) Coverage to ALL Medicare Part D eligible individuals currently covered under your group medical plan by November 15th of each year.
• The Notice of Creditable Coverage is appropriate for anyone enrolled in an HMO, POS or traditional PPO plan. The Notice of Non-Creditable Coverage is appropriate for anyone enrolled in an HSA-compatible high deductible PPO plan.
• Because Part D eligible individuals may include dependents and COBRA participants, we advise you to send the Notice via regular mail to ALL participants covered under your group medical plan. If dependents reside at the same address as the employee, the envelope may be addressed to "(Employee Name) and All Covered Dependents".
• Please contact us for model notices provided by the Center of Medicare & Medicaid Services (CMS), which we have modified to make them more user-friendly. For example, we've replaced the term "Entity" with "Name of Employer's Group Health Plan". (If you wish to review the original model notices, please visit: https://www.cms.hhs.gov/CreditableCoverage/).
You also must provide a disclosure of creditable coverage status to CMS by completing the online Disclosure to CMS Form. This should be done within 60 days after the end of your group medical plan year. If that deadline has passed, complete the Disclosure as soon as possible.
• Completing the online Disclosure to CMS Form requires only three steps and should take no more than five minutes:
o Step 1 -Enter the Disclosure Information
o Step 2 -Verify and Submit Disclosure Information
o Step 3 -Receive Submission Confirmation
• Step 1 will ask you to provide an estimate - and only an estimate! - of the number of Part D eligible individuals covered under your group medical plan as of the beginning of your plan year. You must also state the latest date on which you sent the Notice of Creditable (or Non-Creditable) Coverage to Part D eligible individuals.
• Here is the link to the required Disclosure to CMS Form:
https://www.cms.hhs.gov/CreditableCoverage/45_CCDisclosureForm.asp
• Once you have answered all of the questions, print a copy of your group's disclosure information and submission confirmation for your records.
If you have not already done so, we encourage you to complete the above items as soon as possible. If you need any assistance, please contact your Experience Manager or Client Advocate at 949-724-1964.
COBRA Subsidy Recipients and Notifying Former Employers to Avoid Penalties
Sep 09, 2009
Individuals who have qualified and received the 65 percent subsidy for COBRA health insurance, due to involuntary termination from a prior job, should notify their former employer if they become eligible for other group health coverage.
The American Recovery and Reinvestment Act of 2009 provides a subsidy of 65 percent of the COBRA health insurance premium for employees who are involuntarily terminated from September 30, 2008, to December 31, 2009. The subsidy requires only 35 percent of the premium to be paid for COBRA coverage for individuals, and their families, who have involuntarily lost their job and do not have coverage available elsewhere. The IRS announced the subsidy in a February 26, 2009, information release, IR-2009-15.
If an individual becomes eligible for other group health coverage, they should notify their plan in writing that they are no longer eligible for the COBRA subsidy. The notice that the United States Department of Labor sent to the individual advising them of their right to subsidized COBRA continuation payments includes the form individuals should use to notify the plan that they are eligible for other group health plan coverage or Medicare.
If an individual continues to receive the subsidy after they are eligible for other group health coverage, such as coverage from a new job or Medicare eligibility, the individual may be subject to the new IRC § 6720C penalty of 110 percent of the subsidy provided after they became eligible for the new coverage.
Taxpayers who fail to notify their plan that they are no longer eligible for the COBRA subsidy may wish to self-report that they are subject to the penalty by calling the IRS toll-free at 800-829-1040. In addition, taxpayers will need to notify their plan that they are no longer eligible for the COBRA premium subsidy.
Anyone who suspects that someone may be receiving the subsidy after they become eligible for group coverage or Medicare may report this to the IRS by completing Form 3949-A, Information Referral (PDF).
References/Related Topics
COBRA Health Insurance Continuation Premium Subsidy
