Category: Blog

By Linda Rowings
Chief Compliance Officer
United Benefit Advisors

On February 10, 2014, the IRS issued final regulations on the employer-shared responsibility requirements, often known as “play or pay.” The final regulations follow the proposed regulations in many respects, but also contain some transition rule surprises.

For many employers, the most important part of these regulations is the transition rule – while employers with 100 or more full-time or full-time equivalent employees will still need to meet the play or pay requirements in 2015, those with 50-99 full-time or full-time equivalent employees do not have to comply until 2016 if they meet certain requirements. For these mid-size employees to be eligible for the delay, the employer will have to certify that:

• It has not reduced the size of its workforce or the overall hours of service of its employees so that it could qualify for this delay; and
• It has not eliminated or materially reduced any coverage it had in effect on February 9, 2014. A material reduction means that:
  • The employer’s contribution is less than 95% of the dollar amount of its contribution for single-only coverage on February 9, 2014, or is a smaller percentage than the employer was paying on February 9, 2014;
  • A change was made to the benefits in place on February 9, 2014, that caused the plan to fall below minimum value; or
  • The class of employees or dependents eligible for coverage on February 9, 2014, has been reduced.

It is expected that this certification will be part of the reporting form.

This delay does not affect the effective date of the insurance market rules – employers still must implement the changes required for 2014, including the 90-day maximum for waiting periods, discontinuance of pre-existing condition limitations, removal of annual dollar maximums, and cost-sharing maximums (out-of-pocket and sometimes deductible) limits. Small insured groups still need to offer the 10 essential health benefits at the metal levels (i.e., platinum, gold, silver, and bronze) and use community rating starting in 2014.

Large Employer Responsibilities and Potential Penalties

If an employer is large enough for the play or pay requirements to apply, two separate requirements, and potential penalties, apply.

The first requirement is that the large employer offer “minimum essential” (basic medical) coverage to most of its employees. For 2015, “most” means 70% of its employees. For 2016 and later, “most” means 95% of its employees. If the employer does not meet this requirement, it will owe $2,000 per full-time employee, even on employees who are offered coverage. However, for 2015 the first 80 employees are excluded from this calculation. Beginning in 2016, the first 30 employees are excluded.

Beginning in 2016, the requirement to offer minimum essential coverage includes dependent children (up to age 26). An employer that offered coverage for dependent children in 2013 or 2014 is expected to maintain that eligibility. Coverage does not have to be offered to stepchildren or foster children or to spouses.

The second requirement is that the large employer offer coverage that is both “affordable” and “minimum value” to its full-time (30 or more hours per week) employees or pay a penalty of $3,000 per year for each full-time employee who receives a premium tax credit. Therefore, an employer that provides minimum essential coverage to most of its employees and avoids the $2,000 per employee penalty, still may have to pay the $3,000 penalty on an employee who is either in the group that is not offered coverage or who is offered coverage that is not both affordable and minimum value if the employee receives a premium tax credit. 

Under both the proposed and final regulations, coverage is considered affordable if the cost of single coverage for the least expensive plan option that provides minimum value does not exceed 9.5% of the employee’s income or Federal Poverty Level (FPL). The cost of single coverage is always the measure of affordability, even if the employee has family coverage. An employer may use any of three safe harbors when measuring the employee’s income:

• The employee’s Box 1 W-2 income for the current year.
• The employee’s rate of pay on the first day of the plan year, multiplied by 130 for hourly employees to create the employee’s assumed monthly income.
• The most recently published FPL for a single person (for 2014, FPL for a single person in the 48 contiguous states is $11,670, for Alaska it is $14,580, and for Hawaii it is $13,420).

Coverage is considered minimum value if the actuarial value of the coverage is at least 60%.

Additional information is available through a U.S. Treasury Department fact sheet.

UBA has also developed an analysis of the Employer Shared Responsibility (Play or Pay) Final Regulations. To request the analysis, click here.

2/13/2014

By Carol Taylor
Employee Benefit Advisor
D&S Agency, a UBA Partner Firm

With open enrollment for the Marketplace close to 60% complete, one would like to think what they were told about the subsidy they will be receiving is accurate. How can you be sure that you were given correct information? Let’s take a look at the 2014 Federal Poverty Level (FPL) tables and see if the information given is accurate. Considering those numbers were just released January 23, 2014, it is unlikely the information given previously on www.healthcare.gov will be updated. The FPL amounts increased by 1.5%, which may benefit some, but for others it will likely lower subsidy determinations. So, what does this mean for you?

First, you might have to pay back some of the subsidy. The Advanced Premium Tax Credits (APTC) are the subsidy amounts paid toward the medical insurance premiums by the federal government. Those subsidies are based on your household income and where that falls within the FPL tables. For those that received too high of a subsidy, some, or all, of those amounts must be paid back at the time you file your IRS 1040 annual tax form.

Second, for those qualifying for Medicaid, again based on the household income and where that falls within the FPL tables, you might just as quickly “unqualify” for Medicaid. Of course, since the tables were just released recently, by the time the state you reside in can reassess the determinations made, they may not have adequate time to notify you before the end of the Marketplace open enrollment. This could lead to a person not having time to enroll in qualifying coverage, and then facing the individual mandate tax penalty when filing annual tax forms.

One more item to be mindful of before agreeing to enroll in your state Medicaid program, you should seek advice on whether that gives the state a right to your assets once you are deceased. Many states have long look back periods, so even if you were to transfer a vehicle, home or land to an heir, the state may have the right under their laws to take that property to recoup monies paid for your medical care.

With even shorter open enrollment periods for the Marketplaces in the years to come, the late release of the FPL tables will continue to be an issue. With open enrollment scheduled to end in late December or mid-January, how can you make an accurate, fact-based decision when you cannot know the facts until well after the annual open enrollment ends? Even worse, some will not find out that they must repay subsidies back to Uncle Sam until a year later when filing their taxes. Seek out a trusted advisor so that you can make sure you don’t find yourself with an unexpected tax bill.

By Josie Martinez
Senior Partner and Legal Counsel 
EBS Capstone, A UBA Partner Firm

Lately, it seems we have been getting the same compliance questions over and over again from our clients.  Below are some of our most frequently asked questions.

1)    Can employers offer a Flexible Spending Account (FSA) to employees that are not eligible for the employer’s medical plan?

As you may recall, in September 2013, the U.S. Department of the Treasury published Notice 2013-54 addressing health reimbursement arrangements (HRAs).  This ruling made clear that a health FSA must qualify as an excepted benefit to be exempt from the Patient Protection and Affordable Care Act (PPACA) market reforms. The guidance clarified that in order to be excepted, a health FSA must satisfy two conditions: (1) the maximum benefit payable cannot exceed two times the salary reduction, or, if greater, the amount of the salary reduction for the FSA plus $500, and (2) other non-excepted group health plan coverage must be made available to employees.

Consequently, employers with health FSAs must also sponsor a group medical plan and only individuals eligible for the employer-sponsored medical plan may be offered the health FSA.  So an unintended consequence of PPACA is if an employee is not eligible for the health plan coverage, then that employee may no longer be eligible to enroll in the health FSA either.   

2)    Must our medical insurance plan provide eligibility for a former spouse? 

Most health plans limit eligibility to the legal spouse and the spouse loses eligibility upon divorce unless the former spouse is eligible for, and elects, COBRA. However, some states, including Massachusetts, have insurance laws that require insurers to offer continued eligibility to a covered spouse following divorce. In such states, more often than not, the issue of former spousal coverage is addressed in the divorce decree and it is usually stipulated that the spouse who provided coverage to the family will continue to do so, particularly if the other spouse did not have access to an employer-sponsored medical plan. In Massachusetts, for example, fully insured health plans are generally required to provide that a divorced spouse must be allowed to remain eligible for coverage, without additional premium, as if no divorce had occurred, until the remarriage of either the employee or former spouse, unless the divorce judgment says otherwise.  The former spouse’s eligibility generally follows the eligibility of the employee and, even after the employee remarries, the former spouse may continue on the health plan on a separate individual contract (at additional cost).  In situations like this, it is very important for employers to be aware of the interaction between COBRA and the state’s divorce continuation law.

3)    Can an employer contribute to the Health Savings Account (HSA) of an employee enrolled in Medicare? 

Contributions cannot be made to an individual’s HSA if the individual has other disqualifying health coverage or is eligible for Medicare. The HSA regulations specify that the contributions must be zero for any month in which the individual is entitled to benefits under Medicare.  Therefore, if an employee has an HSA and will soon be eligible for Medicare, planning ahead is imperative because contributions made by an employer to an employee’s HSA are included in the gross income of the employee to the extent that they exceed the individual’s maximum contribution amount or are made on behalf of an employee who is not an eligible individual.  All such amounts are considered “excess contributions.”

In order to continue to contribute to an HSA, some employees may choose not to enroll in Medicare Part A when they reach age 65. These individuals may continue to contribute to the HSA. However, enrollment in Medicare is automatic for individuals 65 or older who are receiving Social Security retirement benefits, triggering a possible unintended loss of eligibility to contribute to an HSA. Inadvertent loss of eligibility to contribute to an HSA could also occur with respect to individuals that have already reached full retirement age because these individuals may receive retroactive Social Security and Medicare benefits for up to six months in the past. Employees may be surprised to learn that up to six months of contributions to the HSA need to be reversed.  If contributions are not stopped in time, or reversed before the next tax deadline, a tax penalty may ensue.   An excise tax of 6% for each taxable year is imposed on the HSA holder for all excess contributions (whether the amounts were contributed by the account holder or by his or her employer). Thus, although IRS guidance limits the employer’s responsibility for determining whether contributions to employees’ accounts are excludable, it’s a good practice to adopt procedures that will help employees avoid non-qualifying contributions.

For more detailed PPACA compliance information, download a complimentary copy of UBA’s white paper, “The Employer’s Guide to Play or Pay.” http://bit.ly/1chiLEQ.

By Dave Woodruff
The A.I. Group, Inc.

Most of us have heard of “concierge medicine” and it’s gaining popularity, especially among executives.  As more people enroll, more questions are popping up that we haven’t heard before.  One of the most frequent questions we’ve heard is, “Can I fund the cost of the concierge with my health savings account (HSA) or flexible spending account (FSA)?”

The answer is an absolute “maybe!”

Why, the squishy answer?  It’s because not all medical concierge services operate alike and the portion of the expenses that are qualified aren’t always in a particular model.

Here’s a brief description of the four prevalent models of concierge services and what is qualified for reimbursement:

1. Fees for Care.  In this model, the participant subscribes to a medical concierge to have access to care.  At the time services are rendered, additional fees are charged that are directly related to the medical care given.  The subscription portion of the fee is not eligible, but generally the amount related to actual care provided would be considered as an eligible medical expense under the HSA guidelines. 
2. Annual Physical. Here a fee is charged for an annual physical, usually more comprehensive than covered under the Patient Protection and Affordable Care Act (PPACA) requirements, and the model includes no additional non-medical services or “amenities.”  The physical is considered to be medical care and would also generally be considered an eligible medical expense under the HSA guidelines.  If the fee is payable up front, it would only be reimbursable once the physical has actually been performed.
3. Annual Physical Plus Amenities. Here a fee is charged for an annual physical and with it some additional non-medical services (amenities) are added. The physical is considered to be medical care and would generally be considered an eligible medical expense under the HSA guidelines, assuming the billing outlines the service(s) and their associated cost(s).The amenities (e.g., retainer fess, access fees, or expedited appointment access to a physician, etc.) are not eligible medical expenses under the HSA guidelines even if the bill has a line item for the access or amenities portion. If the medical provider only furnishes a global bill with no itemization for specific services, it may be difficult to substantiate the service was an eligible expense.
4. Amenities Only. Here the fees are exclusively for access to the medical concierge.  These fees pay for the amenities like retainer fees, access fees, or expedited appointment access. These are not qualified medical expenses and, therefore, are generally not eligible for reimbursement through the participants HSA or FSA.  

A quick rule of thumb is if the bill is directly related to a qualified medical service or expense, it is reimbursable.  If it is only for access to, or the right to “get in the door,” then it is not a qualified medical expense for HSA/FSA reimbursement purposes.  As with everything, there are exceptions and qualifications and only the participant’s qualified tax consultant can properly advise. 

Finally, the participant can reimburse him/herself from his/her HSA or send payment to the medical concierge directly from his/her HSA regardless of the qualification of the expense.  If the expense is non-qualified, they simply have to declare non-qualified disbursals on their Federal Income Tax and pay both the appropriate ordinary income tax as well as the excise penalty of 20% of the disbursement.

The 90-day maximum for eligibility waiting periods is effective as of the start of the 2014 plan year.  As employers are beginning to implement this new requirement, many have questions. For instance, what should employers do if they hired an employee under the prior rules?  

The 90-day limit applies as of the start of the 2014 plan year, even for those hired under the prior plan rules. This means that an employee who had worked 90 days by the start of the 2014 plan year must be covered as of the start of the year. Those who had worked fewer than 90 days must be credited with all time worked.

Here are some examples to help explain this scenario:

Ellen was hired October 2, 2013. Ellen’s employer has a calendar year plan and during 2013 it used a “first of the month after 90 days of employment” waiting period. Ellen must be offered coverage on January 1, 2014, because she will have completed at least 90 days of employment by that date.

Fred was hired October 22, 2013, to work part-time. Fred’s employer has a calendar year plan and during 2013 it used a six month waiting period. Fred must be offered coverage with an effective date on or before January 20, 2014, because that is Fred’s 91st day of employment. (It does not matter that Fred works part-time because the waiting period limit applies to both part-time and full-time employees.)

Jane was hired December 10, 2013, and Jim was hired January 29, 2014. Jane and Jim’s employer has a May 1 plan year and has been using a “first of the month after 90 days” waiting period. The employer is switching to a “first of the month after 45 days” waiting period as of May 1, 2014. Jane must be offered coverage with an effective date of April 1, 2014 (because the first of the month after 90 days is allowable for Jane’s employer until May 1). Jim must be offered coverage with an effective date of May 1, 2014, because Jim will have completed 90 days of employment by then.

United Benefit Advisors (UBA) has created a Patient Protection and Affordable Care Act (PPACA) Advisor that addresses a number of other recurring questions about this new provision that include, but are not limited to:

• Does PPACA affect eligibility waiting periods?
• May a plan use a 3-month waiting period?
• May a plan impose a probationary period or cumulative service requirement before applying a waiting period?
• May a plan allow employees to buy or bank hours toward an “hours of service for eligibility” requirement?

Click here to access the Frequently Asked Questions (FAQ) about waiting periods resource.