HHS Announces HIPAA Compliance Review Program
On March 25, 2019, HHS announced the launch of the Compliance Review Program. In April 2019, HHS will randomly select nine covered entities (five health plans and four clearinghouses) for a review of their compliance with the HIPAA administrative simplification rules for electronic health care transactions. This is a follow-up to the 2018 pilot program, which included health plan and clearinghouse volunteers.
Specifically, the program will review compliance with the rules related to electronic transactions, code sets, unique identifiers, and operating rules. If the entity is not in compliance, HHS will work with the entity to resolve. If the noncompliance continues, HHS may increase enforcement action. If there is willful and egregious noncompliance, monetary penalties may be assessed.
The announcement shows the continued efforts of HHS to enforce the HIPAA privacy and security rules. Employers who sponsor a group health plan, whether fully insured or self-insured, have responsibilities under those rules including identifying a privacy official, conducting a risk analysis, training workforce members, maintaining written policies and procedures, and safeguarding protected health information.
CMS Announces 2020 Medicare Part D Parameters
On April 1, 2019, CMS released the 2020 parameters for the Medicare Part D prescription drug benefit. This information is used by employers to determine whether the prescription drug coverage offered by their group coverage is creditable or non-creditable. To be creditable, the actuarial value of the coverage must equal or exceed the value-defined standard Medicare part D coverage provides.
For 2020, the defined standard Medicare Part D prescription drug benefit is:
- Deductible: $435 (a $20 increase from 2019)
- Initial coverage limit: $4,020 (a $200 increase from 2019)
- Out of pocket threshold: $ 6,350 (a $1,250 increase from 2019)
- Total covered Part D spending at the out-of-pocket expense threshold for beneficiaries not eligible for the coverage gap discount program: $9,038.75 (a $1,385 increase from 2019)
- Estimated total covered Part D spending at the out-of-pocket expense threshold for those eligible for the coverage gap discount programs: $9,719.38 (a $1,579.84 increase from 2019)
- Minimum cost-sharing under catastrophic coverage benefit: $3.60 for generic/preferred multi-source drug (a $.20 increase from 2019) and $8.95 for all other drugs (a $.45 increase from 2019)
Employers should use these 2020 parameters for the actuarial determination of whether their plans’ prescription drug coverage continues to be creditable for 2020. For additional information, please consult with your adviser.
IRS Publishes Memo on Deductibility of S Corporation Shareholder Health Insurance Costs
The IRS recently published IRS Chief Counsel Memorandum 201912001, which is dated December 21, 2018, and relates to health insurance costs of employee family members of 2 percent S corporation shareholders. The memo addresses an individual who owns 100 percent of an S corporation, where the S corporation employs one of the individual’s family members. Under the IRC’s Sec. 318 family attribution rules, the family member is considered to be a 2 percent shareholder of the S corporation. The S corporation provides a group health plan for all employees, and the amounts paid by the S corporation under the plan are generally included in the family member’s gross income. The question presented in the memo is whether the family member is entitled to a deduction for the amounts paid by the S corporation under the group health plan.
According to the memo, an individual who is a 2 percent shareholder of an S corporation pursuant to the Sec. 318 ownership attribution rules is entitled to a deduction for amounts paid by the S corporation under a group health plan for all employees and included in the individual’s gross income. In order for an employee who is a 2 percent shareholder to deduct the amount of the premiums, the S corporation must report the group health plan insurance premiums paid or reimbursed on the 2 percent shareholder’s Form W-2 in that same year, and the shareholder must report the premium payments/reimbursements on their Form 1040 for that year.
For employers, the memo has limited application. IRS memos are informational only and generally cannot be relied upon as direct guidance. However, this memo does serve as some indicator on how the IRS may position themselves on a particular issue. Because the memo relates to federal income taxation and deductions, employers should seek outside counsel for any direct questions.
House Committee Unanimously Approves SECURE Act
On April, 2019, the US House of Representatives’ Ways and Means Committee unanimously approved the Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act”). While the Benefits Compliance team doesn’t normally report on bills that haven’t yet passed, we chose to provide this information as the SECURE Act, if passed, would result in major changes to retirement regulations. Additionally, the unanimous vote from the Ways and Means Committee reflects bipartisan support for the Act, which means that there are good chances that some version of it will be signed in to law.
As background, the SECURE Act comes after multiple bills attempted to include similar provisions. Specifically, the Retirement Enhancement and Savings Act (RESA) was approved by the Senate Finance Committee and the Family Savings Act was passed by the House in 2018, respectively. The SECURE Act includes provisions found in both of those bills and adds some new provisions.
The SECURE Act is broken up into four titles, and some of the major provisions are summarized as such:Title I: Expanding and Preserving Retirement Savings
- Increases auto enrollment safe harbor cap to 15 percent
- Simplifies 401(k) safe harbor, notably eliminating the notice requirement
- Increases tax credit for small employer plan start ups
- Provides credit for small employers that start plans that include automatic enrollment
- Prohibits plan loan distribution through credit cards
- Allows portability of lifetime income investments for defined contribution, 403(b), and governmental plans
- Requires employers to offer 401(k) plan participation to long-term part-time workers
- Provides penalty-free withdrawals for qualified births and adoptions
- Increases the age for required minimum distributions from age 70 1/2 to age 72
Title II: Administrative Improvements
- Permits plans adopted by the employer’s tax return due date to be treated as in effect as of the close of the plan year
- Requires annual benefit statements to include a lifetime income disclosure
- Provides safe harbor for fiduciaries that select lifetime income provider
Title III: Other Benefits
- Expands Section 529 plans to cover additional educational costs, notably include student loan repayment
Title IV: Revenue Provisions
- Modifies required minimum distribution rules relating to death of the account owner
- Increases penalties for failure to file a Form 5500
As noted, this legislation would result in an overhaul of many of the retirement regulations that have been in place for decades. If passed, it will likely require employers to amend their plans and adjust their plan operations. We will continue to monitor any developments.
Is an employer required to offer coverage to a temporary employee working full-time hours?
The answer depends on many factors. Specifically, the employer group’s size and the nature of the temporary employees’ work will determine if coverage must be offered.
A small employer (with fewer than 50 full-time employees, including equivalents) must carefully review its plan documents and insurance contract for the terms of eligibility. If they simply state that employees working a certain number of hours per week are eligible, a temporary employee satisfying the hour requirement would qualify and would need to be offered coverage. If the intention is to exclude temporary employees, the small employer should work with outside counsel to review its employment practices and draft appropriate plan language.
Under the ACA’s employer mandate, large employers with 50 or more full-time employees including equivalents must offer coverage to employees working 30 hours or more per week. The only exceptions are for variable hour employees whose hours fluctuate above and below 30 hours and seasonal employees. These two categories of employees may be measured in a look-back measurement period and offered coverage prospectively if they average full-time hours during the measurement period.
Part-time employees should also be measured and monitored. If any of the classified part-time employees are in fact averaging full-time hours, they should be offered minimum value, affordable medical coverage as are other full-time employees. If they are not offered such coverage, the employer is at risk for an employer mandate penalty if one of the employees goes to the exchange, purchases individual coverage, and receives a premium tax credit.
There is no exception under the employer mandate for non-seasonal temporary employees. If they are regularly working 30 hours or more per week for more than three months, they should be treated as any other full-time employee and offered minimum value, affordable coverage.
If the temporary employee is employed through a staffing agency, that adds another dimension. Temporary employees who work multiple assignments with varying lengths are generally the common law employee of the staffing agency. An employer would generally not need to offer such an employee coverage.
However, if the temporary employee is on a long-term assignment with the employer, the employee could still be considered the employer’s common law employee even if the employee receives a paycheck from the staffing agency. In this case, the employer would need to review its contract with the staffing agency to see if the staffing agency is going to offer coverage to the employee and include them in reporting on the employer’s behalf. If the staffing agency does not accept that responsibility, the employer will need to offer coverage if the employee is working full-time hours for the employer and include them in reporting.
This material was created by PPI Benefit Solutions to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The service of an appropriate professional should be sought regarding your individual situation. PPI does not offer tax or legal advice. "PPI®" is a service mark of Professional Pensions, Inc., a subsidiary of NFP Corp. (NFP). All rights reserved.
Industry news topics covered in the Compliance Corner are chosen based on general interest to most employers and may include articles about services not available through PPI.
Is an employer required to offer coverage to a temporary employee working full-time hours?