On Monday, the IRS announced an extension to the due dates for 1094 and 1095 forms:
- The deadline to provide employees with 1095-B & 1095-C Forms has been extended from January 31, 2016 to March 31, 2016.
- The deadline to file paper 1094-B, 1094-C, 1095-B & 1095-C forms has been extended from February 29, 2016 to May 31, 2016.
- The deadline to e-File electronic 1094-B, 1094-C, 1095-B & 1095-C forms has been extended from March 31, 2016 to June 30, 2016.
Despite the extensions, the IRS encourages employers and other coverage providers to provide the appropriate forms to employees and file information as soon as they are ready.
What is PCORI?
The Patient Centered Outcomes Research Institute (PCORI) is an organization established by the Patient Protection and Affordable Care Act (PPACA) aimed at giving patients a better understanding of the prevention, treatment, and care options available, and the science that supports those options. The final rule issued by the IRS, applies to both fully insured and self-insured health plans ending on or after October 1, 2012 and before October 1, 2019. To fund the PCORI, the PPACA imposes a fee on health insurers and employers who sponsor self-insured health plans.
What Plans Are Subject to PCORI Fees?
Generally, any plan established or maintained by one or more employers for their employees that provides accident or health coverage, any portion of which is provided other than through an insurance policy, is a self-insured plan subject to PCORI fees.
- Medical plans
- Prescription Drug Plans
- Self-insured dental or vision plans, if provided without a separate election or premium charge
- Health Reimbursement Arrangements (HRAs)
- Retiree-only health plans (even though some are exempt from other PPACA mandates)
PCORI fees do not apply to excepted benefits:
- Separately insured dental or vision plans
- Self-insured dental or vision plans, if subject to separate coverage elections and employee contributions
- Expatriate coverage provided primarily for employees who work and reside outside of the U.S.
- Health savings accounts (HSAs)
- Most flexible spending accounts (FSAs)
- Employee assistance programs (EAPs), wellness programs and disease management programs that do not provide “significant benefits in the nature of medical care or treatment.”
How to Calculate the Average Number of Covered Participants?
The IRS recommends four different methods for calculating the PCORI fee. The simplest and best method is:
Sum of covered lives on one or more dates in each quarter divided by the applicable number of dates used. For example, if you tally the number of covered lives on the 1st day of each quarter, you would then divide that total by four.
Form 720 – Paying the PCORI Fees
Sponsors of the qualified plans will be required to file IRS Form 720 and pay the accompanying Patient Centered Outcome Research Institute (PCORI) Fee by July 31, 2015. With respect to fully insured group health plans, the fee will be paid by the applicable insurance company. With respect to self-funded group health plans and HRA plans, the plan sponsor is responsible for payment.
The fee is $2 per plan participant with plan year end date between October 1, 2013 and September 30, 2014. Plan years ending between October 1, 2014 and September 30, 2015, the fee is $2.08 per plan participant.
The filing deadline for Form 720 is July 31, 2015.
For additional information on this topic, please visit the IRS site at www.irs.gov
Voters in Massachusetts, Trenton and Montclair, New Jersey, and Oakland, California approved ballot initiatives requiring employers within each jurisdiction to provide sick leave to their employees.
For Massachusetts employers with 11 or more employees, sick time must be paid; for employers with 10 or fewer employees, the sick time may be unpaid. This new sick time law is effective July 1, 2015. Employers should review their current leave policies or prepare new policies to address this new sick time requirement before its effective date.
The law has an expansive definition of “sick time.” It covers employees who need time (1) to care for the employee’s child, spouse, parent, or parent of a spouse who is suffering from a physical or mental illness, injury or medical condition that requires homecare, professional medical diagnosis or care, or preventative medical care, or (2) to care for the employee’s own physical or mental illness, injury or medical condition that requires homecare, professional medical diagnosis or care, or preventative medical care, or (3) to attend the employee’s routine medical appointments or the routine medical appointments for the employee’s child, spouse, parent, or parent of a spouse or address the psychological, physical or legal effects of domestic violence.
Under the law, employers are required to provide a minimum of one hour of earned sick time for every 30 hours worked by an employee. Employees begin to accrue the earned sick time commencing on the date of their hire (or, for current employees, the effective date of the law, July 1, 2015), but they are not entitled to use their accrued sick time until the 90th calendar day following their hire date.
The law caps the amount of sick time earned in a calendar year at 40 hours. Employees may carry over up to 40 hours of unused earned sick time to the next calendar year, but employees are not entitled to use more than 40 hours of sick time in one calendar year. Moreover, employers are not required to pay out unused earned sick time upon separation from employment (as opposed to earned but unused vacation pay, which must be paid out upon separation).
The law also states that employers who provide paid time off to employees under a paid time off, vacation or other paid leave policy that provides for the same or better accrual for reasons covered by the new law are not required to provide additional earned paid sick time. Employers with PTO or sick time policies who will continue those policies, therefore, should review their policies to determine if such policies comply with the new law.
The law empowers the Massachusetts Attorney General’s Office to enforce its provisions, but also provides for a private right of action by aggrieved individuals. The private right of action provision provides for the recovery of mandatory triple damages and attorneys’ fees.
In addition, the law requires the Attorney General’s Office to prepare a workplace poster advising employees about the new law and to adopt rules and regulations regarding earned sick time, including regulations on employer obligations to make, keep, and preserve records regarding earned sick time. We anticipate the Attorney General’s Office will adopt these rules and regulations in the coming months.
Employers in Massachusetts should review their leave policies, including those that provide for paid time off, to ensure compliance prior to the July effective date.
The full text of the Massachusetts ballot question can be found here. Employers in the jurisdictions where this law passed, should familiarize themselves with the law in their respective locations, as each law contains its own intricacies, and prepare for compliance with the requirements therein.
This alert is intended to communicate and inform and does not constitute as legal advice. Please contact an attorney for advice on specific legal issues.
Many employers remain unaware that under Medicare Part D regulations, entities offering prescription drug coverage to Medicare Part D eligible employees and retirees must disclose annually to individuals whether their health plan has creditable or non-creditable prescription coverage. This requirement stems from the fact that Medicare eligible individuals who are not covered by creditable prescription drug coverage and who choose not to enroll before the end of their initial enrollment period, and enroll at a later date, will most likely pay higher premiums. To this end, Centers for Medicare and Medicaid Services (CMS) has issued guidance on this matter over the past few years and have done so through various channels of communication. In addition, our firm has also disseminated information since the inception of this legislation in 2006 and health insurance carriers have also provided additional information on this topic. It is our understanding that your plan has been deemed creditable, but if you have changed your prescription plan or if you are unsure if the creditable standard will still be met, please feel free to contact our office directly for assistance.
NOTE: No action is needed on your behalf if you do not have Medicare Part D eligible individuals. See below for list of included individuals / beneficiaries.
DISCLOSURE TO MEDICARE PART D ELIGIBLE INDIVIDUALS:
Who must receive the disclosure Notices?
The disclosure notice (creditable sample) must be provided to Part D eligible beneficiaries (individuals) enrolled in or seeking to enroll in the employer’s prescription drug coverage. This includes the following Part D eligible beneficiaries: Active employees, spouses, dependents, disabled employees, retired employees, individuals eligible for Medicare due to a disability or end stage renal disease. A communication plan may include a general notice to all employees followed by a targeted effort to those individuals you know are affected by Medicare D. It is our recommendation that you provide this information to all employees at your renewal each year as part of the open enrollment process in order to remain in compliance with CMS. Employers may also consider posting a disclosure notice on their intranet, include the notice with their Summary Plan Description (SPD), or include information/updates on this topic within other employee communications.
When must the notices be provided?
At a minimum, Disclosure Notices for creditable and non-creditable coverage must be provided as follows:
- Prior to the Medicare D Annual Coordinated Election Period – October 15th each year.
- Prior to an individual’s Initial Enrollment Period for Part D
- Prior to the effective date of coverage for any Medicare eligible individual that joins the plan
- Whenever prescription drug coverage ends or changes so that it becomes creditable or is no longer creditable
- Upon a beneficiary’s request
NOTE: If you have Medicare Part D beneficiaries and have not provided a disclosure notice in the past, we would recommend you send out the model notice with a short cover letter stating that your plan has been creditable since 2006 and continues to be creditable.
DISCLOSURE TO CENTERS FOR MEDICARE AND MEDICAID SERVICES (CMS):
Entities that provide prescription drug coverage to Medicare Part D eligible individuals must also disclose to CMS whether the coverage is “creditable prescription drug coverage”. This disclosure is required whether the entity’s coverage is primary or secondary to Medicare. The form that needs to be completed and submitted to CMS can be found at www.cms.gov.
NOTE: It is important that you provide this note to participants – including COBRA participants – no later than October 15, 2014 to allow them time to file by December 7th, 2014.
Additional information on the creditable coverage disclosure requirements can found at www.cms.gov.
Certain employers must comply with the Affordable Care Act’s Employer Shared Responsibility provisions (also known as “Pay or Play”) in less than 6 months. HR360’s attorney-reviewed, downloadable Pay or Play Toolkit and Calculators can help prepare those subject to the law.
Three Calculators Available
The Large Employer Status Calculator can be used to calculate an employer’s average number of full-time employees (including full-time equivalent employees or FTEs) to determine whether the employer is subject to Pay or Play for a calendar year.
There are two separate Penalty Calculators for 2015 that can be used to calculate the potential amount of a penalty–one for employers with 50 to 99 full-time employees and one for employers with 100 or more full-time employees.
- Employers with 50 to 99 full-time employees (including FTEs) are subject to Pay or Play, but the requirements will not apply until 2016 for employers who certify that they meet certain eligibility criteria related to workforce size, maintenance of workforce and aggregate hours of service, and maintenance of previously offered health coverage.
- Employers with 100 or more full-time employees (including FTEs) are subject to the requirements for 2015 and must offer coverage to at least 70% of full-time employees (and their dependents, unless transition relief applies) to avoid a penalty for failing to offer health coverage, rather than 95% which will begin in 2016. An employer that offers coverage to at least 70% of full-time employees may nevertheless owe a penalty if any full-time employee receives a premium tax credit.
Visit our Pay or Play (Employer Shared Responsibility) section within the HR Library in the Client Resource Center for more information, including an outline of the transition relief available for 2014 and 2015.
The Internal Revenue Service (IRS) recently released draft forms to help employers prepare for the new information reporting provisions under the Affordable Care Act. Because of transition relief provided for 2014, reporting entities will not be subject to penalties if they first report beginning in 2016 for 2015.
ACA Information Reporting
The Affordable Care Act requires insurers, self-insuring employers, and other parties that provide minimum essential health coverage (MEC) to report information on this coverage to the IRS and to covered individuals. Large employers (generally those with 50 or more full-time employees, including full-time equivalents) are also required to report information to the IRS and to their employees about their compliance with the employer shared responsibility provisions (“pay or play”) and the health care coverage they have offered. Final rules regarding MEC reporting and large employer reporting are currently available.
As a general method, large employers will file Form 1094-C (a transmittal) and Form 1095-C (an employee statement). Entities reporting as health insurance issuers or sponsors of self-insured group health plans that are not reporting as large employers will generally report on Form 1094-B and Form 1095-B. The following forms are now available:
The applicable forms will be required to be electronically filed only if the reporting entity is required to file at least 250 of the specific form.
Draft instructions relating to the forms are expected to be posted to IRS.gov this month, and the IRS intends to finalize both the forms and instructions later this year. For more information on the reporting requirements, click here.
Be sure to check out our ACA by Year & Company Size section within the HR Library in the Client Resource Center for updates on additional requirements related to Health Care Reform.
The U.S. Equal Employment Opportunity Commission (EEOC) recently issued updated Enforcement Guidance on pregnancy discrimination and other related issues, along with a Q & A document about the guidance and a Fact Sheet for Small Businesses. This is the first comprehensive EEOC update on the subject of discrimination against pregnant workers since 1983.
In addition to addressing the requirements of the Pregnancy Discrimination Act (PDA), which prohibits sex discrimination on the basis of pregnancy, childbirth, or related medical conditions, the guidance discusses the application of the Americans with Disabilities Act (ADA) to individuals who have pregnancy-related disabilities. The updated guidance also discusses:
- The fact that the PDA covers not only current pregnancy, but discrimination based on past pregnancy and a woman’s potential to become pregnant;
- The circumstances under which employers may have to provide light duty for pregnant workers;
- Issues related to leave for pregnancy and for medical conditions related to pregnancy;
- When employers may have to provide reasonable accommodations for workers with pregnancy-related impairments under the ADA and the types of accommodations that may be necessary; and
- Best practices for employers to avoid unlawful discrimination against pregnant workers.
Both the PDA and ADA generally apply to employers with 15 or more employees. Additional protections may be provided under state and local nondiscrimination laws, which may apply to smaller employers.
Visit our section on Discrimination within the HR Library in the Client Resource Center for more information regarding employer obligations under the PDA, ADA, and other federal nondiscrimination laws
Final rules were recently issued by the Internal Revenue Service regarding the use of longevity annuity contracts in certain tax-qualified defined contribution plans, including 401(k) and 403(b) plans, individual retirement annuities and accounts (IRAs), and certain other plans. A longevity annuity is an income stream–a type of “deferred income annuity”–that begins at an advanced age and continues throughout an individual’s life.
The final rules expand the permitted longevity annuities in several respects, including by making them accessible to 401(k)s and other employer-sponsored individual account plans and IRAs. In addition, the rules:
- Increase the maximum permitted investment. Under the final rules, a 401(k) or similar plan, or IRA, may permit plan participants to use up to 25% of their account balance or (if less) $125,000 to purchase a qualifying longevity annuity without concern about noncompliance with minimum distribution requirements. The dollar limit will be adjusted for cost-of-living increases.
Protect individuals against accidental payment of longevity annuity premiums exceeding the limits. The final rules permit individuals who inadvertently exceed the 25% or $125,000 limits on premium payments to correct the excess without disqualifying the annuity purchase.
The regulations apply to contracts purchased on or after July 2, 2014. Click here to review the rules in their entirety.
Visit our section on Retirement Plans within the HR Library in the Client Resource Center to learn more about an employer’s responsibilities with respect to employer-sponsored retirement plans
Starting with plan years beginning on or after August 1, 2012, the Affordable Care Act generally requires non-grandfathered group health plans to cover additional women’s preventive services, such as contraceptive coverage, without cost-sharing. The contraceptive mandate is subject to exemptions and accommodations for religious employers and certain other non-profit religious organizations.
Supreme Court Ruling
On June 30, 2014, the U.S. Supreme Court ruled that the ACA’s requirement to provide certain contraceptive coverage without cost-sharing, as applied to closely held corporations, violates the Religious Freedom Restoration Act (RFRA). As a result of the ruling, closely held for-profit corporations that object to this requirement based on sincerely held religious beliefs cannot be required to provide such coverage. The decision did not address the RFRA’s applicability to publicly traded corporations.
Guidance issued on July 17, 2014 from the U.S. Department of Labor states that closely held, for-profit corporations that intend to cease providing health coverage for some or all contraceptive services mid-plan year will trigger notice requirements to plan participants and beneficiaries if the plan is subject to the Employee Retirement Income Security Act (ERISA).
According to the guidance, if an ERISA plan excludes all or a subset of contraceptive services from coverage under its group health plan, the plan’s summary plan description (SPD) must describe the extent of the limitation or exclusion of coverage.
For plans that reduce or eliminate coverage of contraceptive services after having provided such coverage, expedited disclosure requirements apply. The expedited disclosure requirements generally require disclosure within 60 days of adoption of a “material reduction in covered services or benefits.”
Other disclosure requirements may apply under state insurance laws.
To learn more about the requirement to cover recommended preventive services without cost-sharing, visit our section on Preventive Services within the HR Library in the Client Resource Center.