IRS Provides Informal Views on Employer Mandate and Measurement Periods

Posted by admin on July 28, 2014  |   No Comments »

The Joint Committee on Employee Benefits of the American Bar Association issued a report on its May 2014 Q&A session with IRS officials. There are 30 questions and answers in total; however, Q/A-24 through Q/A-29 are of particular note. These directly address the employer shared responsibility penalty, specifically:

  • Q/A-24: clarifying the confusion between using 120 or 130 hours for purposes of determining if an employer is an applicable large employer subject to the mandate
  • Q/A-25: whether employers may take employment contracts into account in determining whether a new employee is a variable-hour employee
  • Q/A-26: whether an initial measurement period and the standard measurement period must be the same length
  • Q/A-27: clarifying whether an employer would be subject to the employer mandate penalty for employees who failed to satisfy a substantive eligibility condition (such as failing to obtain a license)
  • Q/A-28: clarifying on-call employees, such as nurses, flight attendants and possibly substitute teachers (not specifically named)
  • Q/A-29: whether an employer can apply both a monthly measurement period and a look-back measurement period to the same employee or same category of employee

The remaining questions not specifically listed relate to 401(k) issues, including correction of several common operational errors, the stock diversification requirement, safe harbor limitations and Roth contributions.

May 2014 Q&A Session

Proposed Regulation Addresses Exchange Eligibility Redeterminations and Enrollment Process for 2015

Posted by admin on July 25, 2014  |   No Comments »

On July 1, 2014, CMS released a proposed regulation on how the exchange will determine eligibility to enroll in qualified health plans (QHPs) and receive premium tax credits and cost-sharing reductions for that coverage. The proposed regulation also addresses the re‑enrollment process for individual and small group exchange plans for 2015. Under the proposed regulation, many who have already enrolled in exchange coverage in the individual market, even subsidized coverage, will not have to fill out a new application or go back through in 2015.

Redeterminations for Subsidies

The regulation provides three options for redeterminations of eligibility for the premium tax credits or cost-sharing subsidies. Exchanges can choose one of the three sets of procedures for making annual eligibility redeterminations:

  • Existing procedures set forth in July 2013 final regulations with minor amendments.
  • Alternative procedures specified by HHS for each plan year.
  • Subject to HHS approval, exchange‑specific alternative procedures requested by the exchange that meet certain standards. The preamble notes that if the proposed regulation is finalized, the federally facilitated exchange will use the HHS alternative procedures for 2015.

Alternative Procedures for 2015

Contemporaneously with the proposed regulation, HHS released a separate memorandum specifying what its alternative procedures would be for 2015 if the proposed regulation is finalized. Under these alternative procedures, exchanges would request updated tax data only from the IRS and only for individuals currently receiving affordability assistance. These individuals will receive a standard notice describing the annual redetermination and renewal process, the requirements and process for reporting changes affecting eligibility for affordability assistance, and the eligibility determination for 2015. Additional notices would be required for individuals with income levels near or above the eligibility threshold for affordability assistance. Some consumers may have to go back into the exchange and renew their coverage if, for example, their income changed, they experienced a qualifying event or they want to switch their health insurance plan.

Enrollment Process for 2015

Under the proposed regulation, insurance carriers will issue notices to consumers informing them that unless the consumer instructs otherwise, they will be re-enrolled in the same plan and receive the same subsidy, unless their income has changed in 2015. In the event that a consumer is enrolled in a plan that will no longer be offered on the exchange in 2015 and the consumer does not proactively select a new insurance plan, that consumer will be automatically enrolled in a different plan of the same carrier and metal level. If the carrier does not offer a different plan of the metal level the consumer was previously enrolled in, the consumer will be enrolled in a plan one metal level higher or one metal level lower than the plan in which they were previously enrolled. If none of the above options are available, the consumer will be enrolled in “any other plan offered under the product in which the enrollee’s current QHP is offered in which the enrollee is eligible to enroll.” Further, if a consumer’s cancelled plan is not available on the exchange the next year and the above scenarios are not possible, the carrier may re-enroll the consumer in a different product offered by the same carrier if permitted by state law. In this case, if the consumer is enrolled in an off-exchange plan, any potential subsidies would no longer be available.


Separately, HHS issued draft standard notices for insurers to use when discontinuing or renewing a product in the small group or individual markets. In addition to content required by the eligibility redetermination regulation described above, the renewal and discontinuation notices include insurer contact information and information about other health coverage options. Renewal notices also address premiums, premium tax credits and plan changes. Insurers will provide notices for the small group market to the employer sponsoring the plan. An accompanying memorandum explains that HHS is accepting comments before finalizing the notices, but the draft notices may be used at least through Sept. 30, 2015.

There is a 30-day comment window on this regulation with comments due by July 28, 2014.

Proposed Regulation
News Release
Guidance Memorandum for 2015
Draft Notices
Instructions for Draft Notices


Posted by admin on July 23, 2014  |   No Comments »

On July 3, 2014, CMS posted five new frequently asked questions (FAQs) to REGTAP related to the federally facilitated SHOP (FF‑SHOP).

  • FAQ #2565 describes the payment process for 2015. Insurers will not handle billing or payments in the FF‑SHOP. Premiums will be paid through the SHOP and not directly to the insurers.
    FAQ #2565
  • FAQ #2598 states that premium rate calculations and tobacco surcharges are determined only once per year. An employee attesting midyear that he/she has completed a tobacco cessation program would not receive non-tobacco user rates until the group’s annual renewal.
    FAQ #2598
  • FAQ #2606 clarifies that it is not an employer’s responsibility to offer a tobacco cessation program to employees. Final regulations require that an insurer offer such a program if the insurer is imposing a tobacco surcharge. The surcharge would be removed if the individual agrees to participate in the program. Of course, a small employer is always welcome to implement a wellness program on its own, but it is not required to do so.
    FAQ #2606
  • FAQ #2594 explains that the FF‑SHOP will not support a fixed-dollar contribution design for small employers. Employers may contribute a fixed percentage amount toward employee and dependent medical and dental coverage.
    FAQ #2594
  • FAQ #2597 provides an overview of the employee choice model, which will be available in some states beginning in 2015. Employers in states with employee choice may choose to offer employees either 1) all medical plans across a single metal level and all dental plans across a single coverage level, or 2) a single medical plan and a single dental plan. Employers without employee choice in 2015 may offer employees only a single medical plan and a single dental plan.
    FAQ #2597

Reminder: Form 5500 Filing Deadline for Calendar-year Plans Is July 31

Posted by admin on July 22, 2014  |   No Comments »

Plan sponsors are required to file Form 5500-series returns on the last day of the seventh month following the end of their plan years. For calendar-year plans, sponsors must file by July 31, 2014 (reporting on the 2013 plan year). Plans may request a 2.5‑month extension to file by submitting Form 5558, Application for Extension of Time to File Certain Employee Plan Returns, by that plan’s original due date. Ask your advisor if you need assistance with filings.

DOL Form 5500 Website
Form 5558, Extension of Time

PCOR Fee Payable by July 31; Revised Form 720 Now Available

Posted by admin on July 21, 2014  |   No Comments »

The deadline to pay the PCOR fee is July 31, 2014. The fee is generally due by July 31 of the calendar year following the year in which the plan year ends. In other words, for plan years ending in 2013, the PCOR fee is due July 31, 2014. The fee is payable annually through 2019.

Importantly, the IRS released a revised version of Form 720 (which is the form used to report and pay the fee) as well as the related Form 720 Instructions (further describing the PCOR counting methods and amounts due). For plans paying the PCOR fee for the first time, the fee is $1 per covered life; for plans paying the PCOR fee for the second time (those with plan years ending Oct. 1 – Dec. 31), the fee is $2 per covered life. Previous versions of Form 720 did not include the option to pay the increased $2 fee for plans paying the PCOR fee for the second time. Plan sponsors should ensure they are using the most current version of this form.

For insured plans, the carrier is responsible for paying the PCOR fee. However, for self‑insured plans, including HRAs, the plan sponsor (generally, the employer) is responsible for such payment. Employers should be aware of whether any plans they sponsor, including major medical plans, prescription drug plans and HRAs, are considered self-insured and subject to the PCOR fee. For most types of plans, the fee is payable for each covered life (i.e., employees and dependents), and there are three methods that may be used to determine the number of covered lives in calculating the fee amount.

More Information on PCOR Fee
Form 720
Form 720 Instructions
IRS Information on PCOR Fee

August Training Opportunities, Register Now

Posted by admin on July 18, 2014  |   No Comments »

NFP Benefits Compliance is hosting a series of webinars in August. Training dates are Aug. 6, 13 and 20, 2014, at 3 p.m. ET. Topics are “The Well‑designed Wellness Program,” “COBRA Compliance” and “Legislative Update.” NFP Benefits Compliance reserves the right to change training topics in the event of significant legislative, judicial or regulatory developments.

There is required registration information. Participants must enter their name and the name of their NFP office or Benefits Partners firm into the “Broker Name” and “Broker’s Firm Name” fields.

See Content and Register

“PPACA Fee Overview: What Employers Need to Know About PCOR and Reinsurance Fees” Webcast Now Available

Posted by admin on July 17, 2014  |   No Comments »

A 30 minute recorded webcast is available that answers commonly asked questions regarding the PCOR and reinsurance fees. The webcast is presented by Jill Brooking, vice president, NFP Benefits Compliance. Our webcast covers common questions about the PCOR fee, which is due July 31, and provides an overview of the reinsurance fee, which requires contributing entities, including insurers, self‑insured employers and third-party administrators (TPAs), to submit the enrollment count of the average number of covered lives in a plan by Nov. 15, 2014.

It also explains:

  • Methods for calculating the average number of covered lives
  • The amount of the fees
  • When payment is due

View the Webcast

IRS Clarifies Treatment of Midyear Post-Windsor Amendments for Safe Harbor 401(k) Plans

Posted by admin on June 6, 2014  |   No Comments »

On May 15, 2014, the IRS issued Notice 2014-37, which provides additional clarifications for retirement plan sponsors of safe harbor 401(k) plans. The notice builds on the previously issued Notice 2014-19, which was released on April 4, 2014.

As background, retirement plans must recognize same-sex marriages for purposes of issuing survivor benefits, obtaining spousal consent, eligibility for joint and survivor annuities and other administrative functions. These steps are required as a result of last summer’s U.S. Supreme Court decision in U.S. v. Windsor. The IRS previously clarified that the deadline to incorporate the post-Windsor required plan amendment recognizing same-sex marriages under the terms of the plan would be the later of the plan’s remedial amendment period or Dec. 31, 2014.

However, this deadline raised issues for sponsors of safe harbor 401(k) plans, which are required to adopt any amendments before the beginning of the plan year unless a specific exception to the rule applies. As such, Notice 2014-37 clarifies that safe harbor 401(k) plans can adopt a midyear plan amendment in order to comply with theWindsor decision without risking the plan’s status as a safe harbor plan.

IRS Notice 2014-37

IRS Announces Late Filer Penalty Relief

Posted by admin on June 4, 2014  |   No Comments »

On May 9, 2014, the IRS released Notice 2014-35 and Revenue Procedure 2014-32, which provide relief from IRS penalties to certain group plans that are delinquent in filing their annual reporting. As background, certain group health and retirement plans are required to timely file Form 5500 on an annual basis. A plan administrator that is delinquent in filing may be subject to penalties imposed by the DOL and IRS. If the plan voluntarily complies through the DOL’s Delinquent Filer Voluntary Compliance (DFVC) Program, the DOL penalties are reduced and there is relief from the IRS penalties.

Certain retirement plans are required to file Form 8955-SSA to report information about vested benefits payable to separated plan participants. Prior to this announcement, relief was not available under the DFVC Program for plans that were delinquent in such filing. IRS Notice 2014-35 now provides for the DFVC Program to be available for such failures. To take advantage of the program, plans must file the delinquent Form 8955-SSA in paper format with the IRS by Dec. 1, 2014.

Form 5500-EZ must be filed by retirement plans with one participant and by foreign plans. The program is subject only to the IRC’s Form 5500 filing requirement. Thus, the DFVC Program and DOL penalties would not apply. In Revenue Procedure 2014-32, the IRS announced a one-year late-filer program for Form 5500-EZ filers. No penalty would be due if an eligible plan completed and submitted delinquent forms and any applicable schedules starting June 2, 2014, and ending June 2, 2015.

IRS Notice 2014-35
Revenue Procedure 2014-32

IRS Issues Regulations on Tax Treatment of Qualified Retirement Plan Payment of Accident or Health Insurance Premiums

Posted by admin on June 2, 2014  |   No Comments »

On May 12, 2014, the IRS published final regulations on the tax treatment of payments from qualified retirement plans (including 401(k) plans) for health, accident or long-term care premiums. The final regulations track previous IRS guidance – including a 2003 IRS revenue ruling and 2007 proposed regulations – and do not allow participants to pay for health, accident or long-term care premiums on a pretax basis from their qualified retirement plan accounts. Specifically, under the proposed regulations, such premium payments were considered taxable distributions under IRC 402(a) (although there are a few exceptions for retiree health benefits).

The final regulations add an exception that allows disability insurance premiums to be paid from a qualified plan without resulting in a taxable distribution. To meet that exception, though, in the event of a disability, the disability insurance contract proceeds must be paid to the qualified plan trust on a participant’s behalf. The regulations further expound on the conditions that must be met for that exception. Employers that want to rely on the exception should engage outside counsel to assist.

The final regulations also make conforming amendments to IRC Section 106, which governs the income exclusion for employer-provided health coverage. Specifically, Section 106 has been amended to reflect the definition of “dependent” made by the Working Families Tax Relief Act of 2014 and the availability of the exclusion for children under age 27 under PPACA. The final regulations are effective for taxable years beginning on or after Jan. 1, 2015 (although taxpayers may rely on them in earlier taxable years).

Final Regulations
IRS Web Page