Healthcare Reform
IRS Extends Forms 1095-B/C Reporting Deadline and Good Faith Effort Relief
On Nov. 28, 2018, the IRS published Notice 2018-94, which delays the date by which informational statements must be provided to individuals. The notice also provides transitional good faith relief for reasonable mistakes made in reporting Sections 6055 and 6056 information about 2018.
Specifically, the due date for providing individuals with Form 1095-B (by a carrier or self-insured employer) and Form 1095-C (by an applicable large employer) has been extended from Jan. 31, 2019, to March 4, 2019. The deadline for filing these forms with the IRS hasn't changed. That date remains April 1, 2019, if filing electronically, or Feb. 28, 2019, if not filing electronically. If an employer doesn't comply with the deadlines, the employer could be subject to penalties. The notice also states that because the automatic extension of the due date to furnish is as generous as the permissive 30-day extension to provide notices to individuals/employees, the IRS will not formally respond to any request for such an extension.
Despite the extended due date, employers and other coverage providers are encouraged to furnish 2018 statements as soon as they're able. But if individuals haven't received these forms by the time they file their individual tax returns, they may rely upon other information received from employers or coverage providers to attest that they had minimum essential coverage as required by the individual mandate. Individuals need not amend their returns once they receive the forms, but they should keep them with their tax records.
In addition, Notice 2018-94 extends good faith effort relief to employers for incorrect or incomplete returns filed in 2019 (as to 2018 information). The IRS previously provided relief for penalties stemming from 2018 reporting failures (as to 2017 information). Accordingly, for 2018 and prior filings, relief is available to entities that could show that they made good faith efforts to comply with the information reporting requirements, even if they reported incorrect or incomplete information. In determining what constitutes a good faith effort, the IRS will take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting, such as gathering and transmitting the necessary data to a reporting service provider or testing its ability to use the Affordable Care Act Information Return Program (AIR) electronic submission process. This relief doesn't apply to a failure to timely furnish or file a statement or return, and it doesn't extend to employer mandate penalties (for large employers that didn't offer affordable, minimum value coverage to full-time employees pursuant to the ACA's employer mandate).
Lastly, the notice states that the IRS is reviewing whether the repeal of the individual mandate tax penalty (which takes effect in 2019) will change the reporting requirements under IRC Section 6055 for self-insured employers and other coverage providers (such as an insurer of a fully insured plan) to report on all covered individuals under the plan on either Form 1095-B or 1095-C. PPI's Benefits Compliance division will continue to monitor any developments that might impact employer reporting obligations in future years.
IRS Issues 2018 Form 8941, Credit for Small Employer Health Insurance Premiums
The IRS recently issued the 2018 version of the Form 8941, Credit for Small Employer Health Insurance Premiums, and the related instructions. Form 8941 is used by small employers to calculate and claim the small business health care tax credit. As background, this tax credit benefits employers that do all of the following:
- Offer coverage through the small business health options program, also known as the SHOP Marketplace
- Have fewer than 25 full-time equivalent employees
- Pay an average wage of less than $50,000 a year (indexed annually)
- Pay at least half of employee health insurance premiums
An employer may only claim the credit for a two-consecutive-year period.
The 2018 instructions include three important information items.
First, the average annual wage for 2018 is increased from $53,000 (in 2017) to $54,000.
Second, the IRS states that employers located in Hawaii cannot claim this credit for insurance premiums paid for health plans beginning after 2016. This is because Hawaii's Section 1332 Innovation Waiver related to the SHOP was approved by HHS. Thus, effective 2017, the state of Hawaii is no longer required to maintain a SHOP because of the state's Prepaid Health Care Act, which requires employers of all sizes to offer affordable coverage to employees. The state also provides premium assistance to small employers.
Lastly, for calendar year 2018, some SHOP Marketplaces in certain counties didn't have qualified health plans available for employers to offer to employees. However, relief is available which allows eligible small employers with a principal business address in those counties to claim the credit for 2018, including coverage through a SHOP or coverage that met the requirements for relief under IRS Notice 2016-75 (if applicable), for all or part of 2017.
If a small employer qualifies for the health care tax credit, they should work with their accountant to properly claim the credit with the IRS.
Federal Updates
DOL Issues 2018 Form M-1 and New Filing Tips
The DOL recently issued the 2018 version of Form M-1. As background, Form M-1 must be filed by multiple employer welfare arrangements (MEWAs) and certain entities claiming exception (ECEs). The Form M-1 allows those entities to report that they complied with ERISA's group health plan mandates.
While minimal changes to the Form M-1 have been made, this year's Form M-1 instructions have been updated to reflect changes brought about by the final regulations on association health plans (AHPs). As a reminder, AHPs are MEWAs and, as a result, must file Form M-1 annually and following certain events. Thus, in an effort to provide additional guidance, the DOL has issued a list of Form M-1 filing tips for MEWA administrators. Here are some highlights:
- Who Must File. The revised instructions define which entities are required to file in certain situations. Under both the instructions and the filing tips, filers are reminded that a MEWA that is an ERISA employee welfare benefit plan must also file Form 5500, and it must use the same name, EIN and other identifying information on both forms. Further, the instructions now describe the special filing rules for group insurance arrangements.
- Date and Type of Filing. Item 4 of Form M-1, which identifies the type of filing, now requires filers to enter the event date for a registration, origination or special filing. The filing tips explain that only MEWAs should check "annual" or "registration," and only ECEs will check "origination" or "special." The instructions now emphasize that "operating" for this purpose means "any activity including but not limited to marketing, soliciting, providing, or offering to provide benefits consisting of medical care."
- Additional Details. The instructions for item 13 (actuarial soundness) emphasize the DOL's power to issue a cease and desist order if it appears a MEWA "is fraudulent, or creates an immediate danger to the public safety or welfare." The instructions for item 17 include a new note about completing this line for all applicable states in which the MEWA operates. Also, clarifications have been added to the instructions for item 21 regarding whether the MEWA is subject to Part 7 of ERISA.
- Annually Adjusted Penalties. The instructions specify that the maximum penalty for Form M-1 filing failures is currently $1,558 per day, but they remind filers to check for increases, since required annual adjustments take place after the Form M-1 has been published.
- Self-Compliance Tool. The self-compliance tool is no longer included on the informational Form M-1, but the form describes where to locate the tool online.
- Filing Tips. The filing tips state that insurance information for every state in which the MEWA operates must be provided, and that the information must be correct. Another tip explains that only medical insurance must be reported -- not, for example, dental or vision insurance. Another reminds MEWAs that are also employee benefit plans to retain the M-1 filing confirmation number because this will be needed for the Form 5500 filing. The tips also explain that more than one Form M-1 filing requirement could apply for a year: a registration filing and an annual filing.
The filing tips and additions to the instructions appear to indicate the DOL's expectation of an increase in Form M-1 filings due to the final AHP regulations ( see June 28, 2018 edition of Compliance Corner ). Therefore, MEWAs (AHPs are MEWAs) should work with their advisor and service vendors to ensure compliance with ERISA and Form M-1 filing obligations.
2018 Form M-1 >>
M-1 Filing Tips for AHPs and Other MEWAs >>
Federal Agencies Release Regulatory Agenda
The Departments of Labor, Treasury (IRS) and HHS recently released their semi-annual regulatory agendas. The agencies highlight possible action on several different employee benefit plan issues and are meant to help employers as plan sponsors and industry professionals prepare for potential changes in the benefits compliance world. The agendas do not provide a final timeline or publication dates, but they do provide insight into what could be on the horizon for the upcoming year. Here are some highlights from the agendas:
DOL
- For health and welfare plans:, proposed rules on HRAs and other account-based group health plans
- For health and welfare plans: final rules relating to religious and moral exemptions and accommodations for coverage of contraceptive preventive services under the ACA
- For retirement plans: proposed rules on association retirement plans and other multiple employer plans
- For retirement plans: final rules for adoption of amended and restated voluntary fiduciary correction program, the fiduciary rule and prohibited transaction exemptions
- For retirement plans: final rules on amendment of abandoned plan programs and electronic filing of apprenticeship and training plan notices and top hat statements
Treasury Rule List
- For health and retirement plans: proposed rules on determination of governmental plan status and the definition of "church plan"
- For health plans: proposed rules on medical and dental expenses (for HRA, HSA and FSA reimbursements and individual deductions) and on collectively bargained welfare benefit funds
- For health plans: proposed rules on the Cadillac tax and supplemental rules on the employer mandate
- For health plans: final rules on the health insurance tax (HIT)
- For retirement plans: proposed rules on spousal IRAs, SEPs and IRA technical changes, on hardship distributions from 401(k) plans, and on multiple employer plans (MEPs) and the unified plan rule
- For retirement plans: final rules on qualified non-elective contributions (QNECs) and qualified matching contributions (QMACs)
HHS
- Proposed rules on OTC drugs and sunscreen products, which could potentially impact reimbursements from HRAs, FSAs and HSAs
- Proposed rules on grandfathered health plans in the individual and small group markets
- Proposed rules that rescind the adoption of the standard unique health plan identifier (HPID) and other entity identifier
- Proposed rules on miscellaneous Medicare Secondary Payer (MSP) clarifications and updates and related penalties for MSP reporting requirements
Main Agenda List >>
DOL Rule List >>
Treasury Rule List >>
HHS Rule List >>
Retirement Update
IRS Clarifies "Once In, Always In" Rule for 403(b) Plans
On Dec. 4, 2018, the IRS released Notice 2018-95, clarifying 403(b) plan eligibility requirements. As background, 403(b) plans are subject to a universal availability rule which requires employers to offer the 403(b) plan to all their employees. There is an exception that allows employers to exclude part-time employees who are expected to work less than 20 hours per week if they work less than 1,000 in their first year and in any year that the person worked less than 1,000 hours per week in the immediately preceding plan year.
Many employers read those rules to allow for an employer to potentially stop 403(b) plan deferrals for a part-time employee that might have been in the plan before, but later had a year where they worked less than 1,000 hours. However, the IRS released model 403(b) plan language in 2013 and 2015 that made it clear that they don't acknowledge that reading of the rule. Instead, the IRS recognizes a "once in, always in" rule that mandates that a part-time employee that gains eligibility cannot lose it later, even if they work less than 1,000 hours in a subsequent year.
Notice 2018-95 provides relief to employers that subscribe to the incorrect reading of the rule. Specifically, as long as those employers correct their practice by Jan. 1, 2019, they will not be held accountable for failing to comply with the universal availability rule for the years preceding 2018. Keep in mind, though, that they will need to offer any part-time employees that were improperly excluded the opportunity to contribute to the plan in 2019.
403(b) plan sponsors that have improperly excluded part-time employees should work with their TPA or other service provider to come into compliance, including amending plan documents if necessary.
Announcements
Next Edition of Compliance Corner Cancelled
The next edition of Compliance Corner is scheduled for release on Tuesday, Dec. 25, 2018. However, that edition will be cancelled because of the holidays, and the next edition will be released on Tuesday, Jan. 8, 2018.
FAQ
How does an employer determine if they are over the 250-form threshold for the Forms W-2 reporting requirement? And if over the threshold, what types of coverage must be reported?
Generally, the count is based on the number of Forms W-2 filed under each separate EIN for the previous calendar year. To determine if an employer must provide the cost of coverage for 2018, the employer would look back and determine if they filed fewer than 250 Forms W-2 under their EIN in 2017. If less than the 250-form threshold, then they wouldn't be subject to the Form W-2 cost of coverage reporting for 2018, even if they are self-insured.
Please note that the aggregation/controlled group rules don't apply when it comes to the 250 threshold for the Forms W-2 reporting requirement. This means that if there are entities that have different EINs and that separately file their Forms W-2, their employees can be counted separately. So, if each EIN corresponded to less than 250 Forms W-2 in the prior year, the reporting requirement would not apply. However, if the entity is set up with different divisions within the same EIN, then they would have to look at the entire employee count for this reporting requirement.
If an employer did file more than 250 Forms W-2 during the previous year, what coverage costs are included within the report? The total cost of coverage to be included is the employee and employer contributions that are excludable from the employee's gross income under IRC Section 106 (or that would be excludable if it were paid by the employer). This includes employer-sponsored major medical coverage, both fully and self-insured (e.g., PPO, POS or HDHP). It would also include prescription drug coverage and any dental/vision coverage that is combined with major medical coverage.
An employer would not report any "excepted benefits" (those not subject to HIPAA, and thereby exempt from ACA), including stand-alone dental or vision plans, non-coordinated and independent benefits (such as hospital indemnity or specific-illness plans), and health FSA salary reduction elections (but there are special rules regarding optional employer flex credits that could be used to contribute to an FSA). HRAs, HSA contributions, long-term care and coverage under Archer MSAs also are not included.
Employers will also want to review their EAP, wellness and on-site medical clinic arrangements and programs. If COBRA applies to those plans, then the cost of these programs will need to be included in the reportable cost. Whether COBRA applies is a bit trickier analysis, but it basically comes down to whether the EAP, wellness program or on-site medical clinic is providing medical care. Employers should work with outside counsel in making that determination.
If the employer continues to have questions, they should review their obligations under this requirement with their advisor or legal counsel. Additionally, the IRS has provided a Q&A; ( https://www.irs.gov/newsroom/employer-provided-health-coverage-informational-reporting-requirements-questions-and-answers ) to assist employers in both determining whether they are subject to the reporting requirement and calculating the total cost of coverage. You can also download PPI's Form W-2 Whitepaper HERE.
State Updates
Indiana
Guidance for Short-Term Health Insurance
On Sept. 4, 2018, Insurance Commissioner Robertson released Bulletin 244 to remind carriers and producers who issue policies in Indiana of the state insurance requirements for short-term health insurance. This bulletin is intended to remind carriers doing business in the state that state law isn't preempted regarding short-term health insurance and, thus, carriers doing business in Indiana must continue to comply with state law.
As background, the federal government issued a rule in August 2018 that extended the initial contract term of short-term policies issued on or after Oct. 2, 2018, to be no more than 12 months while limiting renewals or extension of such policies to no more than 36 months. Unlike the federal rule, Indiana law limits a short-term policy to a term that is less than 6 months. Moreover, short-term policies in Indiana are nonrenewable.
This bulletin was for informational purposes only and employers need not take any action at this time. The intent was to remind carriers that Indiana insurance law continues to apply to short-term health insurance, and carriers must factor in Indiana policies before issuing a product in response to the federal guidelines.
Kentucky
Guidance for Short-Term Health Insurance
On Oct. 18, 2018, Commissioner Atkins released Bulletin 2018-02 to remind carriers and producers that issue policies in Kentucky of the state insurance requirements for short-term health insurance. This bulletin is intended to remind carriers doing business in the state that state law isn't preempted regarding short-term health insurance and, thus, carriers doing business in Kentucky must continue to comply with state law.
As background, the federal government issued a rule in August 2018 that extended the initial contract term of short-term policies issued on or after Oct. 2, 2018, to be no more than 12 months while limiting renewals or extension of such policies to no more than 36 months. Like the federal rule, Kentucky law limits a short-term policy to a term that is less than 12 months, and a maximum 36-month duration (including renewals and extensions, if applicable) for the same contract. Moreover, in Kentucky, short-term policies are subject to state coverage mandates.
The Department also included a reminder that the commissioner may disapprove any form or withdraw previous approval where the benefits provided within an individual health insurance policy (i.e., short-term health insurance policy) "are unreasonable in relation to the premium charged."
This bulletin was for informational purposes only, and employers need not take any action at this time. The intent is to remind carriers that Kentucky insurance law continues to apply to short-term health insurance, and carriers must factor in Kentucky requirements and recommendations before issuing a product in response to the federal guidelines.
Maryland
Mandated Coverage for 12-Month Contraceptive Supply
Effective for group health insurance policies issued or renewed on or after Jan. 1, 2020, HB 1283 requires coverage for a single dispensing of prescription contraceptives up to a 12-month supply, which are prescribed by a health care provider. The previous limitation was a 6-month supply.
Mandated Coverage for Lymphedema
Effective for group health insurance policies issued or renewed on or after Jan. 1, 2019, HB 847 requires coverage for the medically necessary diagnosis, evaluation and treatment of lymphedema. Coverage must include equipment, supplies, complex decongestive therapy, gradient compression garments and self-management training and education. Gradient compression garments refers to custom-fit garments prescribed by a health care provider and does not refer to disposable over-the-counter supplies. The plan's normal annual deductibles, copayments and coinsurance requirements may apply to the coverage.
Missouri
Review of Federal Regulation of Association Health Plans and State Law
On Nov. 21, 2018, Insurance Director Lindley-Myers issued Bulletin 18-04. The bulletin discusses the state and federal regulation of AHPs after the DOL's final rules on AHPs were issued this summer. As background, AHPs are MEWAs and can fall under the jurisdiction of both federal and state law. This bulletin addresses fully insured and self-insured group health plans and how Missouri law applies to them.
The bulletin essentially confirms that insurers in Missouri may issue group health insurance to associations that either satisfy the requirements under state law or the DOL's final rule. Additionally, Missouri laws regarding the filing and review of group health coverage apply to policies issued to associations that meet the DOL's requirements.
Finally, the Missouri Department of Insurance recommends that any insurer or entity wishing to organize or insure an AHP should submit proposed form and rate filings to the Department. A submitted filing will enable the Department to review the individual facts and circumstances and address any specific organizational questions or concerns that interested parties may have.
Ohio
Guidance for Short-Term Health Insurance
On Oct. 24, 2018, Director Froment released Bulletin 2018-05 to remind carriers and producers that issue policies in Ohio of the state insurance requirements for short-term health insurance. This bulletin was intended to remind carriers doing business in the state that state law isn't preempted regarding short-term health insurance and, thus, carriers doing business in Ohio must continue to comply with state law.
As background, the federal government issued a rule in August 2018 that extended the initial contract term of short-term policies issued on or after Oct. 2, 2018, to be no more than 12 months while limiting renewals or extension of such policies to no more than 36 months. Like the federal rule, Ohio law limits a short-term policy to a term that is less than 12 months. Moreover, in Ohio, short-term policies are subject to state coverage mandates.
A non-exhaustive list of requirements and coverages applicable to short-term, limited-duration policies includes:
- Internal and external reviews
- Required provider network disclosures for consumers
- Coverage for mammography screenings
- Coverage for autism spectrum disorder
If the short-term, limited-duration policy offers family coverage, additional coverage mandates may apply, including but not limited to coverage for newborn children.
This bulletin was for informational purposes only and employers need not take any action at this time. The intent was to remind carriers that Ohio insurance law continues to apply to short-term health insurance, and carriers must factor in Ohio policies before issuing a product in response to the federal guidelines.
Virginia
Coverage for Partial Supply Prescription Drugs
Effective for group health insurance policies issued or renewed on or after Jan. 1, 2019, HB 234 requires policies that cover prescription drugs to provide coverage for a partial supply of a prescription drug if the prescribing provider or pharmacist determines the fill or refill to be in the best interest of the participant or for the purpose of medical synchronization. Medical synchronization means the coordination of prescription refills for a patient who is taking two or more maintenance drugs; this is believed to improve medication adherence. The policy is prohibited from denying a prescription refill on the basis that it is being filled too soon if the purpose is medical synchronization. Lastly, the cost-sharing for the partial supply must be prorated accordingly.
Prescription Drug Pricing Limits
Newly enacted HB 1177 applies to contracts between pharmacies and pharmacy benefit managers or carriers entered into or renewed on or after Jan. 1, 2019. Under the new contracts, an insured cannot be required to pay a charge that exceeds the retail price of the prescription drug. In other words, the insured will pay the plan's coinsurance amount or the retail price, whichever is lower. Additionally, the pharmacist must be permitted to discuss with the insured information about a more affordable, therapeutically equivalent prescription drug, if available, and sell that drug to the insured.
West Virginia
Mandated Coverage for Substance Use Disorder
All group health insurance policies issued or renewed on or after Jan. 1, 2019, that provide hospital or medical expense benefits must provide coverage for inpatient and outpatient treatment of substance use disorder at in-network facilities at the same level as other medical services offered by the group policy. While federal law requires small employer plans to provide coverage for the treatment of substance use disorder, there is not a similar requirement for large employer plans. The mental health parity regulations require equal treatment between medical and substance use disorder benefits if the large plan is already providing coverage for substance use disorder. This law will require all insured plans issued in West Virginia to provide such coverage.
Further, a facility shall notify the insurer of the insured's admission and initial treatment within 48 hours. If there is no in-network facility immediately available, the policy shall provide necessary exceptions to its network for treatment. If an insured is being treated at an out-of-network facility and an in-network facility becomes available, the insurer may require transfer to the in-network facility.
The benefits for the first five days of intensive outpatient or partial hospitalization services shall be paid without retroactive review of medical necessity by the plan. The insured's health provider shall determine medical necessity. Coverage for day six and every subsequent six-day period shall be subject to the insurer's concurrent review for medical necessity.
Coverage for Amino-Based Formula
Effective for group health insurance policies issued or renewed on or after Jan. 1, 2019, SB 299 requires certain coverage for amino-based formula for infants and children. The coverage must be for the treatment of severe protein-allergic conditions or impaired absorption of nutrients caused by disorders affecting the absorptive surface, function, length and motility of the gastrointestinal tract for insureds through the age of 20. Coverage must include medically necessary medical foods for home use that have been prescribed by a physician. The new law does not apply to persons with an intolerance for lactose or soy.
Coverage for Lyme Disease Treatment
Effective for group health insurance policies issued or renewed on or after Jan. 1, 2019, SB 242 requires coverage for long-term antibiotic therapy for an insured with Lyme disease. The therapy must be determined to be medically necessary and ordered by a licensed physician after the physician has made a thorough evaluation of the insured's symptoms, diagnostic test results or response to treatment.
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.