Benefits in Brief: Deadlines and ACA Guidance for the New Plan Year

Administering a health and welfare benefit plan means keeping up with deadlines, and that can be a challenge. It also means planning well in advance for each new plan year and open enrollment period–and for employers with calendar year plans, that work is now underway. This newsletter highlights some deadlines and regulatory guidance available to assist employers and benefit professionals with these tasks.

Affordable Care Act (ACA) and Employee Retirement Income Security Act of 1974 (ERISA) Deadlines

Form 5500: If you are required to file a Form 5500, and you have a calendar year plan, your 2016 Form 5500 is due July 31, 2017. Unless the plan filed for an extension (Form 5558), Form 5500s are due the last day of the seventh month after the plan year ends (so, July 31 for a calendar year plan).

Summary Annual Report (SAR): Filing the Form 5500 triggers the due date for the SAR. The SAR, which is a narrative summary of the Form 5500, must be provided to participants receiving benefits within9 months after the end of the plan year, or 2 months after the due date for filing the Form 5500 (with an approved extension).

Patient-Centered Outcomes Research Institute Fee (PCORI): July 31, 2017  –  For employers with self-funded plans, PCORI fees must be paid-and the IRS Form 720 must be filed-by. The fee applies to plan years ending on or after October 1, 2012, and before October 1, 2019. What is the amount? It changes each year. Pursuant to IRS Notice 2016-64, the amount is $2.26 for the plan year ending on or after October 1, 2016, and before October 1, 2017. More information is available at this link: https://www.irs.gov/uac/newsroom/patient-centered-outcomes-research-institute-fee

Summary of Benefits & Coverage (SBC): New sample templates for the SBC have been issued. They must be used for the first open enrollment period on or after April 1, 2017. For employers with fully insured plans, the carrier/HMO will provide updated forms. For employers with self-funded plans, the employer is responsible for drafting new SBCs. If you have a calendar year plan, the new forms should be in use during the open enrollment period for 2018 coverage.

IRS Forms 1094/1095: Remember that reporting is still required for 2016 and 2017; the ACA remains the law of the land. The deadlines have passed to file the 2016 forms; for 2017, employers must continue to track and report for the year. Note: The IRS has been sending out form letter 5699 asking about the status of 2015 returns.

Disability Claims Procedure Regulations: The Department of Labor (DOL) has issued final regulations updating the claims procedure regulations for disability benefits. The regulations took effect January 18, 2017, but apply to all claims for disability benefits filed on or after January 1, 2018. If you have a self-funded disability plan, you might want to start working on updated claims and appeal language for your summary plan description.

Affordable Care Act (ACA):  2018 Affordability Calculations

For employers with calendar year plans, open enrollment is right around the corner. Federal regulators have issued some important guidance that employers and producers will need as they work on plan designs, rates, and contributions for 2018 health plans.

To ensure the employer avoids the §4980H(b) shared responsibility penalty, the affordability calculations must be re-done each year. The issue: What is the maximum amount an employer can require an employee to contribute toward the cost of self-only coverage for the employer’s lowest cost health plan (that also qualifies as “minimum essential coverage” and that is “minimum value”)? To avoid the penalty, that employee contribution must be “affordable” (as defined by ACA). To make this calculation, you need to know that, as it does each year, the IRS adjusted the contribution percentage for 2018:

  • 2017: 9.69%
  • 2018: 9.56%

In addition, for employers relying on the federal poverty level (FPL) affordability safe harbor, it is important to remember that the FPL is also adjusted each year. When calculating the contribution amount under the FPL safe harbor, employers may use the FPL in effect within six months before the first day of the plan year. Therefore, for employers with calendar year plans, the 2017 levels may be used:

  • 2017 FPL: $12,060 (for a one-person household in the 48 contiguous states and D.C.)

New Federal Plan Limits

Speaking of open enrollment preparation, plan limits also change each year. The IRS has announced the limits for 2018.

ACA – Out-of-Pocket Limits: The ACA 2018 maximum annual out-of-pocket (cost sharing) limits for non-grandfathered plans have been announced by the IRS: 

Maximum Annual Out-of-Pocket Limits for Non-Grandfathered Plans

2018

2017

Self-Only Coverage $7,350 $7,150
Family Coverage $14,700 $14,300

 

HSA/HDHP Limits: The IRS has announced the out-of-pocket expense limits for health savings account (HSA)-qualified high deductible health plans (HDHPs), as well as the minimum deductible for an HDHP, and HSA contribution limits for 2018: 

Type of Plan/Limit

 

2018

2017

HSA Contribution Limits Self-Only $3,450 $3,400
  Family $6,900 $6,750
HSA Catch-up Contribution Age 55 or Older $1,000 $1,000
HDHP Minimum Deductibles Self-Only $1,350 $1,300
  Family $2,700 $2,600
HDHP Maximum Out-of-Pocket Expense Limits Self-Only $6,650 $6,550
  Family $13,300 $13,100

 

Health Flexible Spending Account (Health FSA) Limit: The IRS has not yet announced the maximum amount an employee may contribute to a health FSA for 2018. For 2017, the limit is $2,600. An employer may set a lower employee contribution limit, but may not exceed the IRS limit.

Affordable Care Act (ACA): New Administrative Action

A new storyline emerges almost daily on the fate of the ACA in Congress. While the deliberations continue (or not), the federal government has been taking action at the administrative level. While most of these changes, at least so far, tend to impact primarily the individual and small group markets, changes to either available coverage options or the insurance market overall do not generally happen in a vacuum, so it is important to watch the latest developments, even if you are a large employer. Some administrative actions that have already been taken include the following:

“Silent Returns”

    • The individual shared responsibility penalty is shown on line 61 of the 2016 Form 1040
    • For 2016, if the individual leaves line 61 blank, the IRS will not automatically reject the return
    • The IRS can still ask for additional information and impose the penalty

Market Stabilization Regulations (Individual and Small Group)

  • Annual open enrollment period for individual coverage will be reduced to 11/01/17 – 12/15/17 (in past years, open enrollment ran at least through the end of January); plans sold during open enrollment will start January 1, 2018
    • Note: Will Covered CA adopt the same open enrollment period as the federal marketplace? Watch for announcements from Covered California.
  • Individuals requesting a mid-year special enrollment will have to provide proof of eligibility for special enrollment
  • For individual plans, the regulations place limits on the ability to change metal levels upon special enrollment, and newly married couples would have to show that one spouse had prior coverage
  • For individual plans, the regulations allow carriers to apply past due premium payments before re-enrolling a participant
  • For individual and small group plans, the regulations make changes in the actuarial value of metal plans
  • For individual and small group plans, the regulations defer issues of network adequacy to states

Small Employers and the Federal Marketplace

  • New regulations may be issued by CMS that will prevent small employers and their employees from enrolling in SHOP plans on-line; enrollment will have to be handled through the insurer or an agent

New Federal Notices and Forms

                Have you reviewed your benefits notices recently? The government has issued some updated forms:

  •  New Model Notice for Employers Who Offer a Health Plan to Some or All Employees (a.k.a. the Exchange Notice)
    • Must be provided to new hires
    • Newest edition, posted on EBSA website, expires 5/31/20
  •  New CHIP notice (“Premium Assistance under Medicaid and the Children’s Health Insurance Program (CHIP)“) (in both English and Spanish) (expires 12/31/19)
  •  New COBRA Model General Notice and COBRA Model Election Notice (in both English and Spanish) (expires 12/31/19)

A Brief Update on Some California Benefits Legislation

A.B. 72 -Balance Billing: Out-of-Network Coverage (Chapter 492)

Last year, the California legislature passed A.B. 72, which prohibits out-of-network providers working at in-network facilities from balance billing patients over and above what the patient’s cost sharing obligations (copayments, etc.) would be if the patient was treated by an in-network provider at the facility. For example, if you are admitted to an in-network hospital, but are treated by an out-of-network anesthesiologist, the doctor can only charge you the same copayment amount an in-network doctor could charge. An out-of-network provider may be able to charge more than that in certain circumstances, but only if the provider obtains a written consent from the patient, and jumps through some related hoops.

A.B. 72 went into effectJuly 1, 2017. The Department of Managed Health Care (DMHC) has issued FAQs explaining the law:

http://www.dmhc.ca.gov/Portals/0/HealthCareInCalifornia/FactSheets/fsab72.pdf?ver=2017-06-22-151500-417


S.B. 562 – Single-Payer: The Healthy California Act

California’s response to the discussions in Congress about the fate of the ACA was to introduce S.B. 562, which would create a single-payer health care system in California. It has been announced, however, that S.B. 562 will be put on the back-burner for the time being. Assembly Speaker Anthony Rendon’s statement is available here: https://speaker.asmdc.org/press-releases/speaker-rendon-statement-health-care

S.B. 1234 – California Secure Choice Retirement Savings Program (Ch. 804)

Switching gears from health benefits to retirement benefits, there is another legislative development that may be of interest to many California employers. In 2016, the California Legislature passed S.B. 1234, establishing the California Secure Choice Retirement Savings Program. Under this program, private employers with 5 or more employees, and that do not already offer their employees a 401(k), SEP, or other designated retirement savings plan, will be required to allow their employees to contribute to a state-run retirement plan through payroll deduction. The program will set up individual IRAs for each employee. As the program is currently envisioned, employer contributions will not be allowed.

Other states, as well as cities and counties, have been looking into setting up similar plans. An important hurdle to overcome is ensuring that these government-run retirement plans, even though they include some employer involvement, are not deemed subject to ERISA. S.B. 1234 contains language and provisions that are intended to ensure that the program is not considered an employer-sponsored plan governed by ERISA.

To address these concerns, in August and December 2016, the DOL issued regulations outlining safe harbors that, if followed, would exempt these government-run plans from ERISA. There was some resistance to this idea in Congress, however. In response, two bills were introduced that would repeal the two sets of DOL regulations (H.J. Res. 67 and H.J. Res. 66). President Trump recently signed both.

The California Legislature remains undaunted. The opinion of an outside law firm was obtained that opined that, even without the 2016 DOL regulations, the California Secure Choice Retirement Savings Program could qualify as a non-ERISA plan under earlier DOL regulations and case law, but a tweak to the bill’s language was needed. Two bills were introduced this year (A.B. 119 and S.B. 104) to accomplish the necessary amendment; A.B. 119 was signed by the governor in June (Chapter 21).

A great deal of work will have to be done before this program is up and running, but it is another development from Sacramento that employers-particularly those that do not already offer a retirement savings plan-should keep their eye on. In addition, there could still be legal challenges to the program on ERISA grounds; the legal opinion obtained by the legislature is not binding on the courts or federal regulators.

Legislative Reports:

Monahan Law Office’s most recent California legislative summary will be available later this week.  Please contact us if you are interested in subscribing to our legislative reporting service.

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