The IRS has provided interim guidance in Notice 2015-43 on the application of certain provisions of the Affordable Care Act to expatriate health insurance issuers, expatriate health plans, and employers in their capacity as sponsors of expatriate health plans.  The interim guidance is effective for policies that are issued or renewed on or after July 1, 2015, and for plan years that start on or after July 1, 2015.  We discussed ACA issues for U.S. expatriates and expatriate health plans in an earlier post.

Background

As background, the regulatory agencies issued temporary relief in FAQs XIII and FAQs XVIII  that exempted certain expatriate health plans from some of ACA’s market reforms if they complied with a number of pre-ACA mandates.  The FAQs applied only to insured plans with enrollment limited to primary insureds who live outside their home country or outside the U.S. for at least 6 months during a 12-month period and their dependents.  The FAQs provided no relief for self-insured plans.
Continue Reading Interim Guidance for Expatriate Health Plans

The final shared responsibility regulations under the Affordable Care Act, issued earlier this month, in large part maintain the rules set forth in the proposed regulations.  However, there are several ways in which the final regulations modify or clarify these rules.  Below is a top ten list (which we’re sure David Letterman would use if he were a benefits lawyer) of things to know about the final regulations.

The rules govern the requirement that employers with at least 50 full-time employees could owe a “shared responsibility” excise tax if they fail to offer group health coverage.  One penalty (known as the “A” penalty) applies if an employer fails to offer group health coverage to 95% of its employees on every day of a month and at least one employee purchases coverage through an exchange with a federal subsidy; the “A” penalty each month is an excise tax of 1/12 of $2,000 for each full-time employee in excess of 30.  Even if the employer meets the 95% test, a separate penalty (known as the “B” penalty) applies if the employer fails to offer affordable health coverage to an employee, and the employee purchases coverage through an exchange with a federal subsidy; the “B” penalty each month is an excise tax of 1/12 of $3,000 per each such employee who actually purchases coverage through an exchange with a federal subsidy.  A “full-time employee” is a common-law employee who works an average of at least 30 hours per week. (You will find a more detailed description of the shared responsibility rules here and here.)

Below are our top 10 highlights of the final regulations:
Continue Reading Top Ten Things to Know about the Final Shared Responsibility Regulations

By now, employers who sponsor self-insured medical plans are familiar with the fees they must pay to fund Patient-Centered Outcomes Research (“PCORI”) and the Transitional Reinsurance Program. This post describes a detail that can have a significant effect on the amount that each sponsor must pay.

Both fees are calculated as a dollar amount per covered life.  The implementing regulations describe three ways to determine the number of covered lives:

  1. Actual count (averaging), where you count the number of covered lives on each day of a period (a year for the PCORI fee and 9 months for the Reinsurance fee), and then divide by the number of days;
  2. Snapshot, where you count the number of covered lives on one or more days per calendar quarter and then divide by the number of days; and
  3. Form 5500, where the number of covered lives is based on the number of participants reported on the plan’s Form 5500.

There are minor differences in the calculations for the PCORI fee and the Reinsurance fee.  Those differences and other details are not discussed in this post.

Whereas the actual count and snapshot methods require counting every person in the plan–including employees, spouses, and dependents–the Form 5500 method offers a shortcut that can produce significant savings for large employers.  Instead of actually counting covered lives, the plan sponsor simply deems the number of covered lives to be the number of participants at the beginning of the year plus the number of participants at the end of the year.

The reason for this shortcut is that a Form 5500 reports only the number of participants, and not spouses or dependents.  The shortcut assumes an average of one spouse or dependent per participant.  For plans that have an average of more than one spouse or dependent per participant, this shortcut will result in savings.
Continue Reading Potential Savings Opportunity for Sponsors of Self-Insured Medical Plans

A federal appeals court recently ruled that a private equity fund might be responsible for the unfunded pension liabilities of its bankrupt portfolio company.  This ruling could have broader repercussions for private investment funds and the companies they own.  If the companies are considered to be related employers under the rules that govern employee benefits, they might acquire other unexpected obligations, such as the obligation to provide health care to their employees.
Continue Reading Private Investment Funds Face Potential Liability for Portfolio Companies’ Employee Benefits

Earlier this year we described the IRS’s Voluntary Classification Settlement Program (VCSP), which substantially reduces an employer’s liability for back taxes when the employer voluntarily reclassifies employees who have been treated as independent contractors.  Through June 30, the relief program is available even if the employer did not file Forms 1099 reporting the compensation paid to the workers.  Starting in July, however, an employer will be eligible for the program only if the employer filed all required Forms 1099 for the previous three years with respect to the workers it wishes to reclassify.

What does worker classification have to do with health reform?  Quite a lot, as it turns out.  Starting in 2014, employers with more than 50 full-time employees will owe a “shared responsibility” excise tax if they fail to offer group health coverage on every day of the month to at least 95% of their full-time employees and the employees’ dependent children.  A “full-time employee” is a common-law employee who works an average of at least 30 hours per week.  (You will find a more detailed description of the shared responsibility rules here and here.)
Continue Reading Misclassified Workers Create Penalty Risks Under Health Reform

The Affordable Care Act requires an employee to have a minimum amount of health coverage starting in 2014, and requires an employer to offer affordable health coverage to its employees.  But how do these health mandates apply to the employee’s spouse and dependents?  Recent IRS regulations fill in several pieces of this puzzle.

Several provisions of the Affordable Care Act work together to expand health coverage.  An individual mandate requires most individuals to maintain minimum essential health coverage or pay a penalty.  In order to encourage employers to offer health coverage to their employees, an employer mandate imposes an excise tax on large employers that fail to offer affordable, minimum value coverage to their full-time employees.  If a lower-income individual is not eligible for affordable coverage from another source and purchases individual health insurance, the individual receives a refundable premium tax credit that helps make the coverage affordable.  Although these provisions are related, each provision applies in a different way to an employee’s family members.  The family coverage rules have important implications for the design and administration of employer group health plans.

Continue Reading IRS Clarifies Family Health Coverage Mandates

Starting in 2014, large employers will have to pay a “shared responsibility” excise tax up to $3,000 per employee if they fail to provide affordable health coverage to full-time employees and their dependents.  The Treasury Department and IRS have published a proposed regulation and frequently-asked questions that make important changes in prior guidance. 
Continue Reading IRS Proposes Shared Responsibility Tax Rules for Employers

On November 26, 2012, the IRS and Departments of Labor and Health and Human Services published in the Federal Register proposed regulations that would permit group health plans to provide greater incentives for participation in wellness programs.  The proposed regulations include a welcome implementation of statutory changes that were made by the Affordable Care Act, but they leave unanswered important questions about compliance with the Genetic Information Nondiscrimination Act of 2008, as amended (GINA) and the Americans with Disabilities Act, as amended (ADA).  Employers putting wellness programs in place should be mindful of the possibility that a program might comply with the proposed regulations but still violate a requirement of GINA or the ADA.

If finalized, the proposed regulations will be effective for plan years beginning in 2014 or later–the same effective date as the changes to the statute.  Until then, existing regulations that were issued in 2006 continue to apply.  Comments on the proposed regulations are due by January 25, 2012.
Continue Reading Proposed Regulations Will Permit Greater Incentives for Participation in Wellness Programs