The Employee Retirement Income Security Act of 1974 (ERISA) requires employers to provide a Summary Plan Description (SPD) to employees if they offer health, dental, vision, life, disability or other benefits. To learn more about why group health plans are almost always subject to ERISA, click here. The plan documents that are provided by the insurance carrier fail to include all the required language and disclosures of the ERISA law. That means employers must supplement the carrier materials with additional document or risk costly penalties. Many employers choose to use a single document which “wraps around” all the benefits they offer so that they don’t have to prepare multiple documents, hence the name Wrap Document.

Here is a list of the 25 most common things not included in documents provided by insurance carriers but that are required to be included by the ERISA law:

1. Name of the plan or the plan’s common name.
2. Name and address of the plan sponsor.
3. Name, address and phone number of the plan administrator.
4. Plan year (which may be different than the policy year).
5. Plan number (as defined in the Form 5500 reporting rules).
6. Employer identification number (EIN), also known as the Tax ID number or (TIN).
7. Type of welfare plan (e.g. health, life, disability).
8. How the plan is administered (e.g. self-administered, insured, TPA).
9. Eligibility requirements for participation.
10. Name and contact information of the Agent for Service of Legal Process.
11. COBRA statement of rights.
12. Circumstances that could result in the disqualification, ineligibility, denial, loss, forfeiture, suspension, offset, reduction, or recovery of any benefit.
13. FMLA procedures.
14. Source of premium contributions (e.g. employer and employee contributions).
15. Schedule of premium contributions.
16. Funding medium (e.g. employer general assets or trust).
17. Procedures for qualified medical child support orders (QMSCO).
18. Statement indicating all plan documents will be available free of charge after an adverse benefit determination.
19. Statement of ERISA rights.
20. If the plan is collectively bargained, details on where a copy of the agreement can be found.
21. HIPAA special enrollment rights and privacy procedures.
22. Newborns’ and Mothers’ Health Protection Act disclosure.
23. Women’s Health and Cancer Rights Act disclosure.
24. CHIPRA special enrollment rights disclosure.
25. Terms under which the employer may amend or terminate the plan.

It’s that time of year. Applicable large employers (ALEs) and certain other employers need to focus on completing their reporting obligations required under the Affordable Care Act (ACA). Here are some
helpful tips and reminders to get you through.

The reporting is used by the Internal Revenue Service (IRS) for three purposes:

• Help enforce the Individual Mandate which was still in place for the 2018 calendar year.
• Help enforce the Employer Mandate.
• Help verify eligibility for subsidies on the Health Insurance Marketplace.

While the reporting is sometimes done by the insurance carrier, employers need to be cognizant of their reporting obligations. Employers with fewer than 50 employees (based on average number of employees in 2017) are generally exempt from the reporting requirements for the 2018 reporting year. The exception is for those employers with fewer than 50 employees who offered a self-insured medical plan. In this case, the employer must complete Form 1095-B for every covered employee and their covered dependents. Additionally, one copy of Form 1094-B must be completed for the organization.

Employers with 50 or more employees (based on average number of employees in 2017) are subject to the reporting requirements for the 2018 reporting year. In general, the employer must complete Form
1095-C for every full-time employee (those working 30 hours per week or 130 hours per month) with information pertaining to the offer of coverage. Section III of Form 1095-C only needs to be completed by employers with 50 or more employees who offer a self-insured medical plan. Additionally, one copy of Form 1094-C must be completed for the organization.

There are three deadlines to be aware of:

• Copies of the forms must be provided to employees. Under normal circumstances, copies of the forms must be provided to employees by January 31, however, the IRS has issued an extension and the forms must now be provided to employees by March 4.
• If filing the reporting to the IRS manually, the forms must be submitted by February 28.
• If filing the reporting to the IRS electronically, the forms must be submitted by April 1. Employers who have to submit 250 or more forms must file electronically.

For more information on the reporting requirements, click here.

You may be familiar with Medicare’s open enrollment period (OEP) which occurs each fall. From October 15 until December 7 of each year, Medicare beneficiaries can enroll in a Medicare Advantage or Part D plan of their choice. This includes enrolling in a plan for the first time or changing to a new plan.

But did you know there is a second OEP specific to Medicare Advantage plans?

This is something new for 2019 and future years. It replaces the Medicare Advantage disenrollment period that was in place in previous years. Now, from January 1 until March 31, anyone who is enrolled in a Medicare Advantage plan can make a one-time change to their coverage. Permissible changes include, but are not limited to the following:

Changing from a Medicare Advantage plan without Part D coverage to a Medicare Advantage plan that includes Part D coverage (or vice versa)

• Changing from a Medicare Advantage plan with an HMO network to a Medicare Advantage plan with a PPO network (or vice versa)
• Changing to another Medicare Advantage plan offered by the same insurance company
• Changing to another Medicare Advantage plan offered by a different insurance company
• Canceling the Medicare Advantage plan and returning to Original Medicare; a stand-alone Part D plan can also be obtained in this scenario

Changes will generally be effective on the 1st of the month after the request is made. For example, if an application to change Medicare Advantage plans was submitted on January 20, the change will be effective on February 1.

It should also be noted that this OEP does not apply to individuals who are currently enrolled in a stand-alone Part D plan. No changes are permitted to stand-alone Part D plans until the fall open enrollment period, unless there is a qualifying event which makes a person eligible for a midyear special enrollment period.

The special enrollment period is for people who qualify to enroll due to a special circumstance or situation, such as: 

• Moving into or out of a plan service area
• Gaining or losing eligibility for Medicaid financial assistance
• Qualifying for extra help for prescription drug coverage
• Losing employer-sponsored insurance coverage
• Terminating current plan
• Turning 65 while already on Medicare disability

Health Savings Accounts (HSAs) allow eligible individuals to put money aside tax-free to pay for out-ofpocket medical expenses, but HSAs work differently than other tax-advantaged accounts. Here are 10 helpful tips and reminders as the year comes to an end.

1. HSA contributions for 2018 can be made up until the tax filing deadline, which is April 17, 2019.
2. The maximum annual contribution to an HSA for 2018 is $3,450 for those covered by a singleonly qualified high deductible health plan (HDHP) and $6,900 for those covered by a family HDHP.
3. There is also a catch-up contribution of $1,000 for people covered by an HDHP who are age 55 or older. If an HDHP covers two spouses who are both age 55 or older, a $1,000 catch-up contribution for each spouse can be made, but only if each spouse has established their own HSA.
4. If covered by an HDHP for only a portion of the year, HSA contributions are pro-rated based on the number of full months covered under the HDHP. There is one exception. If a person becomes covered under an HDHP by December 1, 2018, and they anticipate being covered by the HDHP during all of 2019, the full annualized contribution can be made for 2018.
5. HSA account holders will receive Form 1099-SA by January 31, 2019 from the trustee or custodian who maintains the HSA. This form will show the total amount of money that was withdrawn from the HSA in 2018. If any of the money was withdrawn for non-qualified medical expenses, this amount of money will need to be reported as income, subject to state and federal income taxes and a 20% penalty.
6. HSA account holders will receive Form 5498-SA by May 31, 2019 from the trustee or custodian who maintains the HSA. This form will show the total contributions made for the 2018 tax year. Because HSA contributions for 2018 can be made up until April 17, 2019, account holders should not expect to receive Form 5498-SA prior to filing their taxes.
7. Account holders should contact their HSA provider if they think they may have contributed more than their maximum limit for the year. Adjustments can usually be made to avoid penalties.
8. Any amounts withdrawn from an HSA to pay for administrative or monthly fees are not taxable.
9. If a person will no longer be covered by an HDHP in 2019, they will no longer be eligible to make contributions to the HSA. However, they can continue to use remaining funds tax-free for outof-pocket medical expenses.
10. It’s up to the HSA account holder to maintain proof (e.g. receipts) that funds were withdrawn tax-free for qualified medical expenses. These may be needed if ever audited by the IRS.

Whether it be inflation adjustments, new laws, or tweaks to existing regulations, each new year brings changes to health plans and other benefits.

Here is a summary of 10 health plan changes taking effect in 2019: 

1. There will be no penalty under federal law if you don’t have health insurance. The Tax Cuts and Jobs Act made the cost for not having health insurance $0 starting in 2019.
2. The maximum out-of-pocket (OOP) allowed under health insurance plans will increase to $7,900 for single coverage and $15,800 for family coverage. Please note that the maximum OOP allowed under an HSA-qualified plan is lower. Those OOP limits will be $6,750 for single coverage and $13,500 for family coverage.
3. The maximum contribution an employee can make to an FSA will increase to \$2,700, unless their employer sets a lower limit.
4. Patient-Centered Outcomes Research Institute (PCORI) fees will rise to $2.45 per covered life for most health plans. Click here for more details.
5. Standardized plan options on the Health Insurance Marketplace will disappear. Standardized plans were available in 2017 and 2018. These plans were offered by different insurance carriers and included the same deductibles, copays and out-of-pocket expenses to make comparing plans easier. The Department of Health and Human Services (HHS) will not be encouraging standardized plans anymore.
6. Transitional health plans (sometimes called grandmothered plans) can continue to be renewed up until October 1, 2019 so long as they end by December 31, 2019. This is subject to state regulatory approval and an insurance carrier’s willingness to continue offering these plans. Click here for more details.
7. The affordability percentage under the Employer Mandate will rise to 9.86% in 2019. Click here for more details.
8. Employers and insurance carriers will have additional time to provide employees with copies of Form 1095-B and/or 1095-C. The due date was originally January 31st, but it has been extended to March 4th. Reporting to the IRS has remain unchanged. If filing manually, forms must be submitted to the IRS by February 28th. If filing electronically, forms must be submitted to the IRS by April 1st.
9. New HRA rules are expected to get finalized and will open the door for more employers to reimburse individual health insurance plans on a tax-free basis. The new rules aren’t expected to become effective until 2020, but we should have a better idea on how the new rules will work next year.
10. The Affordable Care Act (ACA) imposes a tax on health insurance companies, but the tax has been suspended for 2019 which will help to keep health insurance premiums a little lower. If the tax were in place, health insurance premiums would likely be 2-3% more expensive.

Last Friday, a federal judge in Texas ruled the Affordable Care Act (a.k.a. Obamacare) unconstitutional.

The judge’s decision came in response to a lawsuit filed by 20 Republican state attorneys general earlier this year. The lawsuit was filed after the Tax Cuts and Jobs Act zeroed out the Individual Mandate penalty. The lawsuit claimed the Individual Mandate was so essential to Obamacare, and without it, all of Obamacare must go. The judge agreed.

The judge’s decision will not have any immediate effect. A group of intervening states led by Democrats have promised to appeal the decision. It’s unclear how quickly an appeal will be heard, but all signs are now pointing to an eventual Supreme Court hearing.

In 2012, the Supreme Court heard a similar case challenging the constitutionality of Obamacare. At the time, House Republicans had challenged whether the federal government could require Americans to obtain health insurance or pay a penalty. House Republicans argued this requirement exceeded the power of Congress.

In this case, the Supreme Court ruled that this requirement was within the power of Congress. Chief Justice Roberts wrote in the majority opinion, “The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax.” Congress does have the power to tax, so the law was upheld at the time.

At the same time, when commenting about the Commerce Clause that gives Congress the power to regulate the economy, Chief Justice Roberts said, “That Clause authorizes Congress to regulate interstate commerce, not to engage in it.”

In 2019, the requirement to have health insurance still exists under Obamacare, however, the penalty for not having coverage is $0. A big part of the argument from the 20 Republican state attorneys general in the current lawsuit is that Congress cannot force people to buy health insurance without a tax, and we now know at least one federal judge agrees.

We are once again in a “wait and see what happens” when it comes to Obamacare. The underlying issue that higher courts will have to decide is whether the Individual Mandate is severable from the rest of Obamacare. In other words, can the Individual Mandate be eliminated in its entirety while the rest of the law remains intact?

Illinois state legislators passed a law last month which makes several changes to short-term medical (STM) plans. The most significant change limits the maximum duration of coverage to periods that are less than 181 days (i.e. 180 days). This change applies as of November 27, 2018, which is the date the law was enacted. The immediate effective date did not provide a window of time for insurance carriers to adjust their STM plans to the shorter durations of coverage. As a result, insurance carriers who offer STM plans have continued to sell plans with longer durations after this date.

It appears the Illinois Department of Insurance (IDOI) is aware of this information, and they are working to ensure this new change is implemented by insurance carriers as soon as possible. It’s unclear what additional guidance may be provided or when it will be provided in response to these circumstances. However, it does appear that carriers are starting to adjust to the new rules, but the exact date that these changes are being implemented varies by carrier.  

Additionally, there are other rules that will now apply STM plans sold in Illinois. As it relates to renewals, a new STM plan cannot be purchased from the same carrier within 60 days after the expiration of a previously purchased STM plan. It does appear that a new STM plan could be purchased from a different insurance carrier, however, medical questions may be asked to determine eligibility and there generally won’t be any coverage for pre-existing conditions. Policyholders must also be given the option to terminate their STM plan after any 30-day interval of coverage. 

A new disclaimer with specific information must also be communicated prior to purchase. For plans that are sold online, the disclaimer must be provided on the webpage where a person would purchase coverage. The disclaimer language is as follows:

NOTICE: The short-term limited duration insurance benefits under this coverage do not meet all federal requirements to qualify as “Minimum Essential Coverage” for health insurance under the Affordable Care Act. This plan of coverage does not include all essential health benefits as required by the Affordable Care Act. Pre-existing conditions are not covered under this plan of coverage. Be sure to check your policy carefully to make sure you understand what the policy does and does not cover. If this coverage expires or you lose eligibility for this coverage, you might have to wait until the next open enrollment period to get other health insurance coverage. You may be able to get longer term insurance that qualifies as “Minimum Essential Coverage” for health insurance under the Affordable Care Act now and help to pay for it at www.healthcare.gov.

A copy of the new law can be found by clicking here. 

ICHRAs and the Employer Mandate

In October, regulatory agencies proposed new rules for Health Reimbursement Arrangements (HRAs) that would take effect in 2020. The proposed rules would allow HRAs to be integrated with individual health insurance plans, something which is generally prohibited under current regulations. These new types of HRAs are now being referred to as ICHRAs. The primary use of an ICHRA would be to reimburse employees for individual health insurance plans.

There was one big question that was left unanswered in the proposed rules: How could an employer who was subject to the Employer Mandate offer an ICHRA and avoid penalties? The Employer Mandate requires coverage to provide minimum value and be affordable to avoid the risk of penalties.

The Internal Revenue Service (IRS) has issued Notice 2018-88 as a follow up to the proposed rules. The Notice provides preliminary thoughts from the IRS on how employers could comply with the Employer Mandate when offering an ICHRA. The IRS is inviting comments on the content in the Notice.

In general, the Employer Mandate requires an employer to offer a health plan that charges an employee no more than 9.5% (adjusted for inflation) of their household income for coverage. With an ICHRA, the Notice indicates an employer could use the lowest-priced silver plan available on the Exchange as the benchmark plan when determining affordability. Coverage will be deemed affordable based on the premium for employeeonly coverage.

However, individual health insurance rates vary by age and geographic location, so this will create an administrative burden to employers. As a safe harbor, employers could use each employee’s worksite as the geographic location when determining the rate of the lowest-priced silver plan. Employers would still need to know the cost of the lowest-priced silver plan by age.

Employers with a calendar year ICHRA could base affordability on the lowest-priced silver plan available in the previous year. Employers with a non-calendar year ICHRA would have a plan that spreads over two years. The Notice indicates coverage that is affordable at the start of the plan year will be considered affordable for all months of the plan year even if some of those carry into a new calendar year.

As it relates to minimum value, ICHRAs that are affordable and meet the rules that apply to these arrangements, will be deemed to have provided minimum value for purposes of the Employer Mandate.

Stay tuned on the new ICHRA rules as they are still in a proposed format. We will see additional information or changes as comments are received and time progresses.

Illinois Limits STM Plans to 180 Days

Illinois lawmakers have taken steps to limit the maximum duration of short-term medical plans (STM plans) to 180 days. Earlier this year, Gov. Bruce Rauner vetoed a bill that would apply this limitation, but Illinois lawmakers had enough votes to override that veto. We will be reaching out to our carriers for additional information and will provide more updates as they become available.

Many employers offer a cash payment to employees who waive health insurance coverage. These cash payments are always taxable to employees who waive health insurance coverage, but did you know employees who elect the health insurance coverage may be subject to paying taxes on the cash payment that they didn’t receive?

Wait! What?

The Internal Revenue Service (IRS) has a term they use called “constructive receipt.” In simple terms, constructive receipt means a person has control over money that is not yet in their possession. As an example, think about an employee who receives their final paycheck for the year on December 31, 2018, but the employee doesn’t cash the check until January 10, 2019. The IRS will consider the employee to have been in constructive receipt of this money in 2018, and subject to income taxes for 2018, even though the employee didn’t physically have the money until 2019.

Constructive receipt also needs to be taken into consideration when an employer provides a cash payment to employees who waive health insurance coverage. Employees who are eligible for the health insurance plan have control over whether they receive a cash payment. That control exists because they have the option to waive coverage under the health insurance plan in return for a cash payment. This is a form of constructive receipt. 

This means an employee may actually elect health insurance coverage and have to pay taxes on the money they could’ve received had they waived coverage……unless the employer takes the appropriate steps and makes the cash payment available through a Cafeteria Plan. 

First, let’s illustrate this the wrong way and assume an employer offers employees $1,000 in taxable compensation if they waive health insurance coverage. Employees who waive coverage will receive an additional $1,000 in compensation. This compensation should be treated like a cash bonus, subject to income and employment taxes. Employees who enroll in coverage will be considered to have constructively received $1,000, even though they didn’t receive any additional compensation. Employers will need to apply the appropriate wage-withholding and employment taxes to money the employee never received due to constructive receipt.  

Yikes!

But there is some good news. As long as an employer has a Cafeteria Plan in place which allows for the choice between health insurance and a cash payment, then constructive receipt will not apply to those employees who enroll in health insurance coverage. In other words, the employees who elect health insurance coverage can do so tax-free. The bottom line is to make sure the Cafeteria Plan document addresses this information so adverse tax consequences can be avoided. 

With healthcare costs continuing to grow, employee benefit programs are becoming a must-have for your employees to pay for eligible expenses with tax-free dollars.

Below is a summary of the 2019 contribution limits for these various employee benefit programs: 

Health Flexible Spending Account (Health FSA)

• Employees may contribute up to $2,700 to a Health FSA.
• In addition, employers may contribute up to $500 or a dollar-for-dollar match of the employee’s contribution, whichever is greater.
• Carryover balances (of up to $500) do not count toward the contribution limits.

Dependent Care Flexible Spending Account (DC FSA)

• Employees may contribute up to $5,000 to a DC FSA if they file their taxes as a single or married jointly. 
• Employees may contribute up to $2,500 to a DC FSA if they are married but file their taxes separately. 
• Employers may contribute to a DC FSA, but employer contributions count toward the limits. 
• DC FSA limits do not adjust for inflation.

Commuter Plans

• The monthly contribution limit for mass transportation is $265.
• The monthly contribution limit for qualified parking is $265.
• Employees can participate in both a mass transportation and qualified parking plan.
• Employers may contribute to a Commuter Plan, but employer contributions count toward the limits. 

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

• The contribution limit is $5,150 for single coverage and $10,450 for family coverage.
• Only employers can contribute to a QSEHRA. Employee contributions are prohibited.

Health Reimbursement Arrangement (HRA) – other than a QSEHRA

• Employers establish the contribution limits.
• Only employers can contribute to the HRA. Employee contributions are prohibited.
• These type of HRAs include those that are integrated with a group health plan, those that only reimburse excepted benefits (e.g. dental/vision), and those that only reimburse former employees (e.g. retirees). 

Health Savings Account (HSA)

• Employees may contribute $3,500 if they have single coverage and $7,000 if they have family coverage.
• A catch-up contribution of $1,000 is available for people age 55 or older.
• Employers may contribute to the HSA, but employer contributions count toward the limits.
• Employees must be enrolled in a qualified high deductible health plan (HDHP) and meet other eligibility criteria to participate in an HSA. 

Wait! What?

The Internal Revenue Service (IRS) has a term they use called “constructive receipt.” In simple terms, constructive receipt means a person has control over money that is not yet in their possession. As an example, think about an employee who receives their final paycheck for the year on December 31, 2018, but the employee doesn’t cash the check until January 10, 2019. The IRS will consider the employee to have been in constructive receipt of this money in 2018, and subject to income taxes for 2018, even though the employee didn’t physically have the money until 2019.

Constructive receipt also needs to be taken into consideration when an employer provides a cash payment to employees who waive health insurance coverage. Employees who are eligible for the health insurance plan have control over whether they receive a cash payment. That control exists because they have the option to waive coverage under the health insurance plan in return for a cash payment. This is a form of constructive receipt. 

This means an employee may actually elect health insurance coverage and have to pay taxes on the money they could’ve received had they waived coverage……unless the employer takes the appropriate steps and makes the cash payment available through a Cafeteria Plan. 

First, let’s illustrate this the wrong way and assume an employer offers employees $1,000 in taxable compensation if they waive health insurance coverage. Employees who waive coverage will receive an additional $1,000 in compensation. This compensation should be treated like a cash bonus, subject to income and employment taxes. Employees who enroll in coverage will be considered to have constructively received $1,000, even though they didn’t receive any additional compensation. Employers will need to apply the appropriate wage-withholding and employment taxes to money the employee never received due to constructive receipt.  

Yikes!

But there is some good news. As long as an employer has a Cafeteria Plan in place which allows for the choice between health insurance and a cash payment, then constructive receipt will not apply to those employees who enroll in health insurance coverage. In other words, the employees who elect health insurance coverage can do so tax-free. The bottom line is to make sure the Cafeteria Plan document addresses this information so adverse tax consequences can be avoided.