PPI Benefit Solutions

COVID-19 Update

Benefits Compliance and COVID-19: Return to Work Frequently Asked Questions - Updated June 4, 2021

Healthcare Reform

Agencies Issue FAQs Concerning 2022 Out-of-Pocket Limits

On June 4, 2021, the DOL, HHS and the Treasury (the agencies) issued two FAQs concerning the maximum out-of-pocket limit for plan years beginning January 1, 2022. In previous years, the limit was adjusted annually based upon the premium adjustment percentage described under the ACA. The method used in 2020 and 2021 relied upon estimates of private health insurance premiums for the private health insurance market (excluding Medigap and the medical portion of property and casualty insurance) as a measure of premium growth. Using this method, the maximum out-of-pocket limits for plan years beginning in 2021 are $8,550 for self-only coverage and $17,100 for other than self-only coverage. These limits were covered in an article in the May 28, 2020 edition of Compliance Corner.

However, continued use of this calculation would result in more rapid increases in consumer costs than would have occurred had HHS retained the method used to calculate the premium adjustment percentage prior to the 2020 plan year. Accordingly, the agencies adopted a method that utilizes estimates of employer-sponsored insurance premiums as a measure of premium growth. By applying this method, the maximum out-of-pocket limits for plan years beginning in 2022 will be $8,700 for self-only coverage and $17,400 for other than self-only coverage.

FAQs About Affordable Care Act Implementation Part 46 »

IRS Releases 2021 Draft Versions of 6055 and 6056 Informational Reporting Forms

On May 24, 2021, the IRS released the 2021 drafts of Forms 1094-C and 1095-C. Earlier in the month, the IRS released the 2021 drafts of Forms 1094-B and 1095-B. These forms are informational reporting forms that insurers and self-insured employers will use to satisfy their obligations under IRC Section 6055 and that large employer plan sponsors and health plans will use to satisfy their obligations under IRC Section 6056. These forms, once finalized, will be filed in early 2022 relating to 2021 information. All forms appear to be unchanged from their 2020 versions. (Note that 2021 draft instructions for these forms have not yet been released.)

The ACA imposes two reporting requirements under Sections 6055 and 6056. Section 6055 requires insurers and small self-insured employers to report on Forms 1094-B and 1095-B that they provided minimum essential coverage to covered individuals during the year. Section 6056 requires applicable large employers (under the employer mandate) to report on Forms 1094-C and 1095-C that they provided affordable and minimum value coverage to full-time employees.

As a reminder, the forms must be filed with the IRS by February 28, 2022, if filing by paper, and March 31, 2022, if filing electronically. The Forms 1095-B and 1095-C must be distributed to applicable employees by January 31, 2022. The penalties for failure to file and report are $280 per failure. This means that an employer who fails both to file a completed form with the IRS and to distribute a form to an employee/individual would be at risk for a $560 penalty. Keep in mind that the IRS allows reporting entities not to distribute the Form 1095-B if certain conditions are met.

Employers should become familiar with these forms in preparation for filing information returns for the 2021 calendar year. However, these forms are only draft versions, and they should not be filed with the IRS or relied upon for filing. We will keep you updated of any developments, including release of the finalized forms and instructions.

Draft Form 1094-B »
Draft Form 1095-B »
Draft Form 1094-C »
Draft Form 1095-C »

Federal Updates

IRS Letter Addresses Deductibility of In Vitro Fertilization Expenses

On April 9, 2021, the IRS released a private letter ruling regarding the deductibility of medical costs and fees arising from in vitro fertilization (IVF) procedures and gestational surrogacy.

The agency issued the letter in response to a request by a married male same sex couple (the “taxpayers”) planning to have a child using the sperm of one spouse and the egg of the other spouse’s sister, with an unrelated surrogate carrying the child to term. The couple sought a ruling as to whether they could deduct the expenses for the sperm donation and freezing, egg retrieval, and IVF process, as well as the childbirth, medical and legal expenses related to the surrogacy.

Code Section 213 permits a taxpayer to deduct expenses paid for medical care that exceed 7.5% of the taxpayer's adjusted gross income. Medical care includes amounts paid for the “diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.”

In the ruling, the IRS emphasizes that expenses eligible for the Code Section 213 deduction are limited to those of the taxpayer, the taxpayer’s spouse and/or the taxpayer’s dependent. Recent tax court precedents are cited in support of this position.

Accordingly, the letter concludes that expenses involving the egg donation, IVF process and gestational surrogacy are not deductible expenses for the taxpayers. I.e., these costs incurred by third parties are not incurred for treatment of a disease or for the purpose of affecting any structure or function of the taxpayers’ bodies.

However, the medical costs paid for medical care directly attributable to the taxpayers, including the sperm donation and sperm freezing, are deductible medical expenses (subject to the above noted adjusted gross income limitation).

Although the ruling technically only apples to the requesting taxpayers, employers who offer IVF benefits may want to be aware of the recent IRS release.

Private Letter Ruling 202114001 »

EEOC Adds New FAQs Regarding COVID-19 Vaccinations

On May 28, 2021, the EEOC updated its "What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws" webpage. The revised guidance confirms that an employer may require all employees returning to a physical worksite to be vaccinated for COVID-19. However, the employer must provide reasonable accommodation for employees who do not get vaccinated for COVID-19 because of a disability or a sincerely held religious belief, practice or observance.

An accommodation is deemed reasonable if it does not create undue hardship for the employer. Examples of reasonable accommodations include an unvaccinated employee wearing a face mask at the worksite, working at a social distance from coworkers or nonemployees, working a modified shift, getting periodic tests for COVID-19, being given the opportunity to telework or accepting a reassignment.

An employer may offer an incentive to employees to voluntarily provide documentation or other confirmation that they received a vaccination. This could include certification from a pharmacy, public health department or other healthcare provider. However, the incentive cannot be so substantial as to be coercive. Unfortunately, the EEOC did not provide greater detail or examples of acceptable incentive amounts or limits.

Finally, all employee documentation related to vaccinations must be maintained confidentially.

What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws »

Retirement Update

IRS Updates Operational Compliance List for 2021 and 2022

On June 3, 2020, the IRS updated their operational compliance list (“OC List”) to recognize the final regulations relating to required minimum distributions and eligibility for long-time part-time workers, further reflecting all the changes made by the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The OC List is provided by the IRS to help plan sponsors and practitioners achieve operational compliance by identifying changes in qualification requirements effective during a calendar year.

Specifically, the updated list incorporated the final regulations relating to the updated life expectancy and distribution period tables used for determining required minimum distributions. It also incorporated Notice 2020-68, which provides a question and answer related to long-term part-time employees under the SECURE Act. (We discussed the SECURE Act at length in the January 9, 2020 edition of Compliance Corner.) Finally, the changes effective in 2021 include an extension of the temporary relief from the requirement for spousal consents to take place in person.

The IRS periodically updates the OC List to reflect new legislation and guidance. As such, it is a useful tool for plan sponsors. However, the list is not intended to be a comprehensive list of every item of IRS legislation or guidance. Plan sponsors should work with their advisors to ensure their continued compliance with the retirement plan regulations.

Operational Compliance List »

Announcements

Reminder: PCOR Fee, Form 720 Filing Due July 31

The ACA imposed the PCOR fee on health plans to support clinical effectiveness research. The PCOR fee applies to plan years ending on or after October 1, 2012, and before October 1, 2029. The PCOR fee is generally due by July 31 of the calendar year following the close of the plan year. (Keep in mind, though that the actual due date will be August 2, 2021, since July 31 falls on a Saturday.)

PCOR fees are required to be reported annually on Form 720, Quarterly Federal Excise Tax Return, for the second quarter of the calendar year. Plan sponsors that are subject to PCOR fees but no other types of excise taxes should file Form 720 only for the second quarter. No filings are needed for the other quarters for such employers.

The PCOR fee is generally assessed based on the number of employees, spouses and dependents that are covered by the plan. For plan years ending in 2020 on or before October 1, 2020, the fee was $2.54 multiplied by the average number of lives covered under the plan. For plan years ending between October 1, 2020, and October 1, 2021, the fee increased to $2.66. Form 720 and corresponding instructions were revised to reflect the increased fee.

The PCOR fee can be paid electronically or mailed to the IRS with the Form 720 using a Form 720-V payment voucher. According to the IRS, the fee is tax-deductible as a business expense.

As a reminder, the insurer is responsible for filing and paying the fee for a fully insured plan. The employer plan sponsor is responsible for filing on a self-insured plan, including an HRA. A stand-alone dental or vision HRA would be excepted and wouldn’t be subject to the PCOR fee.

Form 720 »
Form 720 Instructions »

FAQ

What is a “minimum essential coverage” (MEC) plan? Can an applicable large employer offer an MEC plan to comply with the employer mandate?

Prior to January 1, 2019, all US taxpayers and dependents had to maintain a certain level of health insurance, minimum essential coverage (MEC), or pay a tax penalty. This was known as the "individual mandate" or "individual shared responsibility." There is no longer a penalty attached to the federal requirement for individuals to maintain MEC. However, several states have implemented a state version of the requirement.

An employer with 50 or more full-time employees, including equivalents (otherwise known as an “applicable large employer” or ALE), must comply with two conditions of an employer shared responsibility imposed by federal law. If an ALE fails to meet this "employer mandate," then it is at risk for two penalties. Each penalty corresponds with one of the two conditions of the employer mandate. Penalty A requires employers to offer MEC to at least 95% of full-time employees and their dependent children. This is one reason that it is important for employers to correctly identify employees versus independent contractors and full-time employees versus part-time employees. If they were to incorrectly classify more than 5% of their population and fail to offer coverage to those workers, the penalty is $2,700 (in 2021) times each full-time employee (minus the first 30 employees).

Penalty B requires employers to offer each full-time employee coverage meeting minimum value and affordability thresholds. Minimum value is a higher threshold than MEC. Minimum value must include hospitalization and prescription coverage. In contrast, MEC only needs to provide coverage for preventive care.

Affordability is measured by applying one of the three employer safe harbor tests to the employee's required monthly contribution for the lowest cost self-only coverage tier.

Rate of Pay: The employee's required contribution is 9.83% (2021) or less of the employee's monthly salary. If the employee is hourly, the contribution is 9.83% or less of the employee’s hourly rate times 130 hours (regardless of the number of hours worked). Importantly, an employer cannot use this method for tipped or commissioned employees.
Form W-2: The employee’s required contribution is 9.83% or less of the employee’s 2021 Box 1 earnings. Box 1 includes tips, wages, overtime, bonuses, commissions, etc., but does not include pre-tax retirement and health contributions.
Federal Poverty Level: The employee’s required contribution is 9.83% or less of the federal poverty level. The 2021 contribution threshold would be $104.52 or less per month.

An ALE must meet both Penalty A and Penalty B conditions to comply with the employer mandate. If it only offers MEC, any full-time employee who waives that coverage in favor of purchasing individual coverage in the exchange with a premium tax credit would trigger a penalty for the employer. Alternatively, if an employer offers an MEC along with a minimum value/affordable plan, both requirements would be met regardless of whether the employees waive coverage, enroll in the MEC or enroll in the richer minimum value plan.

State Updates

Arkansas

June 8, 2021

Annual Medical Ethics and Diversity Filing Requirement Reminder

On May 25, 2021, the Department of Insurance issued Bulletin No. 8-2021 regarding the Medical Ethics and Diversity Act (“Act 462”). The communication reminds insurers, HMOs and employer health plans of the annual filing obligations under Act 462.

Act 462 grants medical practitioners, healthcare institutions and healthcare payers the right to conscientiously object to any healthcare service based on religious, moral or ethical grounds.

A payer intending to use the conscience objection to refuse payment must annually collect a list of billing codes for the healthcare items, services and procedures that will not be paid for reasons of conscience. Payers are encouraged to develop an annual form with the specific required information for this purpose. The list must be filed with the Commissioner by December 31 of each year, provided to plan beneficiaries and published on the healthcare payer’s website.

Alternatively, the payer may designate in writing that it will not exercise its rights under Act 462 for the year.

Employers that sponsor health plans should be aware of this bulletin.

Bulletin No. 8-2021 »

Indiana

June 8, 2021

All COVD-19 Executive Orders Are Rescinded

On May 28, 2021, Gov. Holcomb issued Executive Order 21-15, rescinding all executive orders related to COVID-19 effective June 30, 2021. This includes executive orders 20-03 through 20-53; and 21-01 through 21-13. Of note, this includes (but is not limited to) the following:

Executive Order 20-05, which states that mental health professionals are permitted to practice via telemedicine; that premium payments required for the Healthy Indiana Plan (HIP) and Children’s Health Insurance Program (CHIP) are waived; and expands telehealth services (by suspending restrictions and requirements for face-to-face encounters for certain health services).
Executive Order 20-13, which expands access to telehealth by suspending the prohibition against audio-only telemedicine; permitting physical therapists, occupational therapists and speech therapists to practice via telemedicine (but not audio-only); and requiring health insurers to provide coverage for expanded telemedicine.
Executive Order 20-19, which allows healthcare providers without an active license to obtain temporary authorizations to provide healthcare services as outlined in the Executive Order in response to the global COVID-19 public health emergency.

Note, though, that Senate Bill 3 expands telehealth services separately from COVID-19 related guidance, and is effective as of April 20, 2021.

In the event the public health emergency continues past June 30, 2021, another executive order will be issued with directives likely limited to supporting the vaccination program and financial assistance.

Employers should be aware of these developments.

Executive Order 21-15 »

Massachusetts

June 8, 2021

COVID-19 Emergency Paid Sick Leave Mandated

On May 28, 2021, Gov. Baker signed House No. 3702 into law, mandating COVID-19 emergency paid sick leave for Massachusetts residents. From June 7, 2021, through September 30, 2021, employees can take up to 40 hours of COVID-19 Massachusetts emergency paid sick leave (MA EPSL). All employers, except for the federal government, must provide MA EPSL, and the law establishes a state fund that will be used to reimburse employers for the leave they provide.

Under MA EPSL, employers are required to offer up to 40 hours of EPSL to Massachusetts employees who usually work 40 hours per week. Employees working part-time hours would be entitled to the number of hours they would normally work in a 14-day span. Employees may take MA EPSL if they are absent from work due to:

The employee’s need to self-isolate and care for themselves due to a COVID-19 diagnosis.
The employee’s need to care for a family member who is self-isolating due to a COVID-19 diagnosis or needs diagnosis, care or treatment for COVID-19 symptoms.
A quarantine order or other determination by a local, state or federal public official, a health authority, or the employee’s employer that the employee’s presence at work would jeopardize the health of others because of the employee’s potential symptoms of or exposure to COVID-19.
The employee’s need to care for a family member who has received one of the above orders or determinations.
The employee’s inability to telework because of a COVID-19 diagnosis with inhibiting symptoms.

For these purposes, a family member includes the spouse, domestic partner, child, parent or parent of a spouse or domestic partner of the employee. An employee may also take leave to care for a person who stood in loco parentis to the employee when such employee was a minor child or a grandchild, grandparent or sibling of the employee, but only if the employee has a personal relationship with the person.

Importantly, MA EPSL must be provided in addition to any other job-protected leave, including leaves provided pursuant to the Massachusetts Earned Sick Time Law, collective bargaining agreements, federal law or the employers existing leave policies. The maximum compensation for MA EPSL is up to $850 per week, and that amount would be reduced if the amount an employee would receive due to other forms of paid time off (plus the MA EPSL) exceeds their normal pay.

The newly established COVID-19 EPSL Fund will reimburse eligible employers for providing employees with the COVID-19 EPSL. In order to claim the reimbursement, the employer should request that employees requesting the leave provide the employer a written request for COVID-19 EPSL which includes the following:

The employee’s name.
The dates for which leave is requested and taken.
A statement of the reason the employee is requesting leave and written support for it.
A statement that the employee is unable to work, including by telework.
If the reason for leave is based on a quarantine order or self-quarantine recommendation, the employee should include the name of the governmental entity or healthcare provider that ordered the quarantine. If the employee is taking care of a family member that is quarantining, the employee should include the name of the family member.

Massachusetts will soon provide a notice regarding MA EPSL, and employers are required to distribute that to all employees. The state also intends to provide additional guidance on the law as employers implement it.

Given that the law became effective on June 7, 2021, employers with Massachusetts employees should immediately familiarize themselves with this bill and provide EPSL in accordance with the requirement.

H. No. 3702 »

Washington

June 8, 2021

Washington Cares Fund Premiums Begin Soon

Back in 2019, Gov. Inslee signed the Long-Term Services and Supports Trust Act into law, creating the Washington Cares Fund to address the future long-term care crisis. The fund will be paid for by Washington employees, who will be able to access state-funded long-term care beginning in 2025.

To be eligible for the long-term benefits, Washington residents must be at least 18 years old and need assistance with at least three activities of daily living. Eligible Washingtonians will be able to use the benefit for a range of services, such as:

Professional personal care in their home, an assisted living facility, an adult family home or a nursing home
Adaptive equipment and technology like hearing devices and medication reminder devices
Home safety evaluations
Training and support for paid and unpaid family members who provide care
Home-delivered meals
Care transition coordination
Memory care
Environmental modifications like wheelchair ramps
Personal emergency response system
Respite for family caregivers
Transportation
Dementia supports
Education and consultation

Beginning in January 2022, Washington workers will pay up to $0.58 per $100 of earnings out of their paychecks. Employers will remit the employees’ contributions to the state, but they do not have to contribute to the fund. Self-employed individuals may also opt-into the program. Employees may apply for an exemption from the program if they have private long-term care insurance in place before November 1, 2021. Exemption applications will be available between October 1, 2021, and December 31, 2021.

Employers with Washington employees will need to begin to collect premiums from their employees on January 1, 2022. They will also need to collect copies of approval letters for any employees who will apply for an exemption from the program. Employers should work with their payroll provider and other HR vendors in implementing this law.

Washington Cares Fund Home Page »
Long-Term Services and Supports Trust Program, Chapter 50B.04 »

COVID-19 Testing and Telehealth Rules Extended

On May 28, 2021, Commissioner Kreidler extended Emergency Order No. 20-02 until June 27, 2021, requiring that COVID-19 testing be provided without cost sharing or preauthorization requirements and that insurers provide increased flexibility regarding the use of telemedicine.

Employers can notify their plan participants who need testing that it will still be provided without cost sharing and that telemedicine will still be available.

Further Partially Extending Emergency Order 20-02 »

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.

PPI in the News Compliance Corner -June 10, 2021 Archive
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COVID-19 Update

Healthcare Reform

Agencies Issue FAQs Concerning 2022 Out-of-Pocket Limits

IRS Releases 2021 Draft Versions of 6055 and 6056 Informational Reporting Forms

Federal Updates

IRS Letter Addresses Deductibility of In Vitro Fertilization Expenses

EEOC Adds New FAQs Regarding COVID-19 Vaccinations

Retirement Update

IRS Updates Operational Compliance List for 2021 and 2022

Announcements

Reminder: PCOR Fee, Form 720 Filing Due July 31

FAQ

What is a “minimum essential coverage” (MEC) plan? Can an applicable large employer offer an MEC plan to comply with the employer mandate?

State Updates

Arkansas

June 8, 2021

Indiana

June 8, 2021

Massachusetts

June 8, 2021

Washington

June 8, 2021

FAQ

Compliance Corner Archive

PPI in the News Compliance Corner -June 10, 2021 Archive You are here: Home / PPI in the News / Compliance Corner -June 10, 2021 Archive

COVID-19 Update

Healthcare Reform

Agencies Issue FAQs Concerning 2022 Out-of-Pocket Limits

IRS Releases 2021 Draft Versions of 6055 and 6056 Informational Reporting Forms

Federal Updates

IRS Letter Addresses Deductibility of In Vitro Fertilization Expenses

EEOC Adds New FAQs Regarding COVID-19 Vaccinations

Retirement Update

IRS Updates Operational Compliance List for 2021 and 2022

Announcements

Reminder: PCOR Fee, Form 720 Filing Due July 31

FAQ

What is a “minimum essential coverage” (MEC) plan? Can an applicable large employer offer an MEC plan to comply with the employer mandate?

State Updates

Arkansas

June 8, 2021

Indiana

June 8, 2021

Massachusetts

June 8, 2021

Washington

June 8, 2021

FAQ

Compliance Corner Archive

PPI in the News Compliance Corner -June 10, 2021 Archive
You are here: Home / PPI in the News / Compliance Corner -June 10, 2021 Archive