2014 Employee Benefits Year in Review and Whats Coming for 2015! - - PowerPoint PPT Presentation

JANUARY 29, 2015

2014 Employee Benefits Year in Review …and What’s Coming for 2015!

Brian Gilmore Lead Benefits Counsel

Click here for audio recording

Agenda

The ACA Never Sleeps…

• Employer mandate pay or play rules
• §6055/§6056 Health care reform

information reporting

• 90-day waiting period rules
• Out-of-pocket maximum rules
• Reference-based pricing
• Transitional Reinsurance and PCORI fees
• Health plan identifiers (HPIDs)
• Skinny plans and minimum value issues
• Preventive care services (including

contraception)

• New ACA section 125 permitted election

change events

• Updated COBRA notices to address

exchange coverage

• Individual policy reimbursement guidance

(again)

…Plus a Few Non-ACA Topics

• Wellness programs in the news
• SF Bay Area commuter benefits ordinance
• California paid sick leave law
• Changes to SF Health Care Security

Ordinance (HCSO)

. 2

• Expatriate plans get clarity
• New excepted benefits rules
• End of HIPAA certificates of creditable

coverage

• Health FSA employee salary reduction

inflation increase

• New SBCs for 2015
• U.S. Supreme Court to rule on federal

exchange subsidies

• Big topics we may see in 2015

The ACA – Employer Mandate “Pay or Play” Rules

IRC §4980H penalties generally apply as of January 1, 2015 Generally requires applicable large employers to offer minimum essential coverage that is affordable and provides minimum value to all full-time employees (and their children to age 26) to avoid potential penalties.

• Applicable Large Employer
• Generally an average of at least 50 full-time employees (including full-time

equivalents) in the preceding calendar year

• Minimum Essential Coverage (MEC)
• Includes virtually any employer-sponsored major-medical coverage (but not dental,

vision, health FSA, EAP, disability, etc.)

• Affordable
• Employee share of the premium for the lowest cost self-only plan option that

provides minimum value does not exceed 9.5% of employee’s income under one of three safe harbor approaches

• Minimum Value (MV)
• The percentage of the total allowed costs of benefits provided under the plan is no

less than 60 percent (aka 60% actuarial value, Bronze level plan)

• Full-Time Employees
• Employees averaging at least 30 hours of service per week under the monthly or

look-back measurement method

3

The ACA – Employer Mandate §4980H Penalties

§4980H(a)—The “A Penalty”

• Failure to offer MEC to at least 70% of

all full-time employees (and their children to age 26)

• Threshold rises to 95% in 2016 and

beyond

• The A Penalty is triggered by at least
• ne such full-time employee who is

not offered MEC enrolling in subsidized exchange coverage

• A Penalty liability is $2,000 annualized

($166.67/month) multiplied by all full- time employees

• 80 full-time employee reduction from

multiplier in 2015

• 30 full-time employee reduction from

multiplier in 2016 and beyond

§4980H(b)—The “B Penalty”

• Applies where the employer is not

subject to the A penalty

• Failure to:
• 1) Offer coverage that’s affordable
• 2) Offer coverage that provides MV
• 3) Offer MEC to a full-time employee

(where the employer has still offered at a sufficient percentage to avoid A Penalty liability)

• The B Penalty is triggered by any such

full-time employee enrolling in subsidized exchange coverage

• B Penalty liability is $3,000 annualized

($250/month) multiplied by each such full- time employee who enrolls in subsidized exchange coverage

• Note that although the B Penalty amount is

higher ($3,000 vs. $2,000), the multiplier is generally much lower

• The multiplier is only those full-time

employees not offered affordable/minimum value coverage who enroll in subsidized exchange coverage—not all full-time employees

4

The ACA – Employer Mandate Look-Back Measurement Method

The look-back measurement method provides an alternative to the monthly measurement method. Under look-back, employers test whether an employee averages 30 hours of service per week in a measuring period to lock in full-time or part-time status for the associated stability period. Employers can also place new variable hour, seasonal, and part-time employees in an initial measurement period prior to reaching full-time status.

ONGOING EMPLOYEES

• Generally, if look-back measurement method is

used for one employee to determine full-time status, it must be used for all employees

• Exception: Employer can choose separate

measurement methods for:

• Hourly vs. salaried
• Employees in different states
• Union vs. non-union
• Employees in different union groups
• Typical structure:
• Measurement period: 10/15 – 10/14
• Administrative period: 10/15 – 12/31
• Stability period: 1/1 – 12/31

Note: 90-day administrative period limit prohibits measurement period running from 10/1. NEW HIRES

• New Full-Time Employee: An employee who

is reasonably expected at the employee’s start date to be a full-time employee (i.e., average 30 hours of service per week)—and is not a seasonal employee

• New Variable Hour Employee: The employer

cannot reasonably determine whether the employee is expected to average at least 30 hours of service per week during the initial measurement period

• New Seasonal Employee: An employee who

is hired into a position for which the customary annual employment is six months

• r less, and the period begins each calendar

year in approximately the same part of the year

• New Part-Time Employee: An employee who

is reasonably expected to average less than 30 hours of service per week during the initial measurement period

5

NEW HIRES CONT’D

• New full-time employees must be offered coverage

by the first day of the fourth full calendar month of employment to avoid potential penalties

• New variable hour, seasonal, and part-time

employees may be placed in an initial measurement period before being treated as full- time

• Combined duration of initial measurement period and

initial administrative period cannot exceed 13 months (plus a partial month for mid-month hires)

• Typical structure for new variable/seasonal/part-

time employee:

• Hired on March 15, 2015
• Initial administrative period: 3/15/15 – 3/31/15 (front-

end of split administrative period)

• Initial measurement period: 4/1/15 – 3/31/16
• Initial administrative period: 4/1/15 – 4/30/16 (back-

end of split administrative period)

• Initial stability period: 5/1/16 – 4/30/16

Note: Special rule permits 11-month initial measurement period, which would allow a two-month back-end initial administrative period.

The ACA – Employer Mandate 50-99 FTE Transition Relief

Transition relief provides these mid-sized employers an exemption from the §4980H pay or play penalties in 2015 if they meet certain requirements. Note that the §6055/§6056 reporting requirements still apply!

• Limited Workforce Size: The employer employs on average at least 50 full-time

employees (including full-time equivalents) but fewer than 100 full-time employees (including full-time equivalents)

• Maintenance of Workforce and Aggregate Hours of Service: During the period from

2/9/14 – 12/31/14, the employer did not reduce the size of its workforce or the overall hours of service of its employees to meet the limited workforce size requirement

• above. Reductions for a bona fide business reason are permitted.
• Maintenance of Previously Offered Health Coverage: During the period from 2/9/14 –

12/31/14 (longer for non-calendar year plans), the employer does not eliminate or materially reduce the health coverage offered as of 2/9/14. Employer qualifies if:

• (i) The employer continues to offer eligible employees an employer contribution for

employee-only coverage that either (a) is at least 95% of the 2/9/14 contribution (i.e., can’t reduce dollar amount of contribution by more than 5%), or b) is at least the same percentage of 2/9/14 contribution;

• (ii) If the plan changes, the coverage provides minimum value after the change;
• (iii) The employer does not narrow or reduce the class(es) of employees or dependents

eligible for coverage as of 2/9/14

• Certification of Eligibility for Transition Relief: The employer must certify on the §6056

reporting (via the Form 1094-C at the beginning of 2016) that it meets all of the requirements above to qualify for the mid-sized employer transition relief.

6

The ACA – 6055/6056 Reporting

Background

The ACA added two new tax code sections: §6055 & §6056 §6055: Requires providers of health coverage to report to the IRS and covered individuals that the persons were covered by “minimum essential coverage.”

• This will demonstrate that each person has satisfied their

individual mandate, and therefore will not be subject to the tax penalty. §6056: Applies to “applicable large employers”—or “ALEs”— subject to the employer mandate pay or play rules—generally employers with at least 50 full-time employees, including full-time equivalent employees.

• This will be used to determine whether the employer is subject

to any pay or play penalties under §4980H.

• It will also be used to determine whether the individual is

eligible for the premium tax credit on the Exchange.

7

The ACA – 6055/6056 Reporting

Which Employers need to Report?

Self-Insured Medical Plan All employers with a self-insured medical plan must report.

• Employers under 50 full-time employees (plus full-time equivalents) will

be reporting only for §6055 (minimum essential coverage).

• Employers that are “applicable large employers” will report both for

§6055 (minimum essential coverage) and §6056 (employer mandate). Insured Medical Plan Only “applicable large employers’ – those with 50 or more full-time employees (plus full-time equivalents) .

• FOR INSURED PLANS, THE INSURANCE CARRIER REPORTS FOR

§6055 (MINIMUM ESSENTIAL COVERAGE).

• However, the insurance carrier will not report for §6056 (employer

mandate)—that is always the employer’s responsibility.

8

Health Care Reform Reporting

Which Employers Need to Report?

Flow Chart Is the medical plan fully insured? NO YES ALE? ALE? YES NO YES NO

§6055 & §6056 §6055 (MEC only) §6056 NONE! Form 1094-C Form 1094-B Form 1094-C N/A Form 1095-C Form 1095-B Form 1095-C N/A Part III (MEC): Yes N/A Part III (MEC): No N/A

The ACA – 6055/6056 Reporting

What are the Forms?

• 1094-C – Transmittal Form
• Think of this as the cover sheet for the Forms 1095-C.
• Each member company within the controlled group must file a

separate Form 1094-C.

• Must be one “Authoritative Transmittal,” even if multiple

Forms 1094-C filed.

• This will include aggregate information for all full-time employees of the

entire controlled group.

Information Reported

• Name, contact information, and EIN of the employer.
• Whether any streamlined reporting or transitional relief

applies:

• e.g., 50-99 full-time employee delayed effective date to 2016 plan year.
• e.g., Non-calendar year plan delayed effective date until 2015 plan year

begins.

• Whether the employer offered MEC to at least 70% of full-time

employees for each month in 2015 (95% for 2016 plan year).

• Total number of employees and full-time employees in each

month.

10

The ACA – 6055/6056 Reporting

What are the Forms?

• 1095-C – Employer Offer Details and Coverage Form
• This form will be completed for every full-time employee
• Self-insured plans will also need to report all individuals covered
• Instructions are clear that employer can file only one 1095-C

for each employee in the employer’s controlled group

• Employees who work for more than one division of a company will have
• nly one combined 1095-C reported for that work—even though each

division files a separate 1094-C

• Two main topics being reported:
• 1) §6055: Individuals covered by MEC for individual mandate compliance

– Self-insured plans only – Employers with fully insured plans leave Part III blank. – For insured plans, the insurance carrier uses the Form 1095-B to report MEC. – Requires Social Security Number for all covered individuals

• 2) §6056: Employer mandate pay or play compliance for §4980H penalties

– All ALEs must report on this – both self-insured and fully insured – Requires detail as to plan’s offer of coverage to all full-time employees

14

The ACA – 6055/6056 Reporting

What are the Forms?

• 1095-C – Employer Offer Details and Coverage Form

Information Reported

• Employee name, address, and Social Security Number
• Employer name, address, contact phone number, EIN
• Offer of coverage details for each month of coverage:
• Was the employee offered coverage for each month?
• Was the offer affordable and did it provide minimum value?
• Did the offer include an offer of coverage for dependents?
• Employee share of the monthly employee-only premium for

the lowest cost plan option that provides minimum value

• What affordability or other §4980H safe harbor applies:
• Form W-2 affordability safe harbor
• Federal poverty line affordability safe harbor
• Rate of pay affordability safe harbor
• Non-calendar year transition relief applies for any month

15

The ACA – 6055/6056 Reporting

What are the Forms?

• 1095-C – Employer Offer Details and Coverage Form

Information Reported – SELF-INSURED PLANS ONLY Self-insured plans only will include MEC coverage information in Part III of the Form 1095-C:

• Names of all covered individuals
• SSNs of all covered individuals
• Must make “reasonable efforts” to obtain the SSN for all covered

individuals

• Requires three attempts to solicit the SSN:

1) Initial solicitation at the time the relationship is established 2) If not received, second solicitation by December 31 of that year (by January 31 of the following year if the relationship begins in December) 3) If not received, third solicitation by December 31 of the following year

• Enter date of birth for any covered individuals who don’t provide the

SSN

• Months of coverage (not just offered coverage, but actually

enrolled) for all covered individuals in the plan

16

The ACA – 6055/6056 Reporting

What are the Due Dates?

Form 1095-C: To Employees Must be furnished by January 31 of the following year

• February 1, 2016 first due date because 1/31/16 is a Sunday

Forms 1094-C and 1095-C to the IRS Due date depends on whether the employer files electronically

• Paper: Must be furnished by February 28 of the following

year

• February 29, 2016 first due date because 2/28/16 is a Sunday
• Electronic: Must be furnished by March 31 of the following

year

• Employers that file 250 or more returns must file with the IRS

electronically

18

The ACA – 6055/6056 Reporting

What are the Penalties?

Same Penalties as Apply for Forms W-2 General penalty is $100 for each incorrect return

• Total fine not to exceed $1,500,000
• Penalty reduced to $30 if the corrected return is filed within 30

days after the required filing date—total fine max reduced to $250,000

• Penalty reduced to $60 if corrected by August 1 of the year in

which the filing due—total fine max reduced to $500,000 Special Good Faith Efforts Rule for 2016 For the Forms 1094-C and 1095-C filed at the beginning of 2016, a “good faith efforts” standard applies

• The IRS will not impose the penalties described above if the

employer can show that it has made “good faith efforts” to comply with the information reporting requirements

• Applies to incorrect or incomplete information (including SSNs)

19

The ACA – Final 90-Day Waiting Period Regulations

Effective as of plan years beginning on or after 1/1/14, group health plans are prohibited from applying a waiting period that exceeds 90 calendar days.

• Waiting Period Defined: The period that must pass before coverage for

an individual who is otherwise eligible to enroll under the terms of the plan can become effective.

• Means that the waiting period applies only after the plan’s substantive

eligibility condition is satisfied.

• Permitted Eligibility Conditions Prior to Waiting Period:
• (i) Variable hour employees: The plan may impose an initial waiting period of

up to one year as the eligibility requirement, provided the coverage is effective no later than 13 months from the employee’s start dates (plus a partial month for mid-month hires)—aligns with pay or play rules

• (ii) Cumulative service requirements: The plan may first impose a cumulative

service requirement that does not exceed 1,200 hours as the substantive eligibility condition, then a waiting period of up to 90-days once the employee completes the requisite hours of service

• (iii) Bona fide orientation period: The plan may first impose a bona fide
• rientation period of up to one month (not 30 days), then a waiting period of

up to 90-days once the employee completes the orientation period.

• Be careful with this! To comply with the pay or play rules, the waiting period

should not exceed 60 days plus the remainder of the month in which that 60-day period ends. Otherwise, the employer will not always offer coverage by the first day of the fourth full calendar month. Also beware of §125 nondiscrimination.

20

The ACA – Out-of-Pocket Maximums

Effective as of plan years beginning on or after 1/1/14, non- grandfathered plans must impose an OOPM on essential health

• benefits. For 2015, the ACA OOPM limit is $6,600 for self-only

coverage and $13,200 for other than self-only.

• The non-enforcement policy for separately-administered non-major

medical benefits (e.g., prescription drugs administered by a PBM) no longer applies as of the first plan year beginning on or after 1/1/15

• Plans may divide the annual OOPM across multiple categories of

benefits rather than reconciling claims across multiple administrators, provided the combined amount of the separate OOPMs does not exceed the overall ACA limit

• For example, the plan could impose an employee-only OOPM on major

medical of $5,000, and an employee-only OOPM on prescription drugs administered by a PBM of $1,600 (for a total of $6,600). This would avoid the need for communicating between the plan’s different administrators.

• OOPM applies only to benefits that are EHB
• Remember that grandfathered plans, self-insured plans, and large group

insured plans are not required to cover EHB, but they are still prohibited from imposing lifetime or annual dollar limits on EHB or an OOPM in excess of the ACA limit

• Plans may use any state benchmark plan definition of EHB for these purposes
• Out-of-pocket costs for out-of-network or non-covered items or

services are not required to count toward the plan’s OOPM

21

The ACA – Reference-Based Pricing

Reference-based pricing is an increasingly common plan design mechanism to control benefit costs. It generally caps the amount of plan benefits available for a certain item or service at a fixed dollar

• amount. Participants who seek medical care from a provider that

charges more than the reference price will be responsible for paying the excess out-of-pocket.

• Plans may treat providers that accept the reference price as the only in-

network providers (and therefore not count any amount in excess of the reference price toward the OOPM) as long as the plan uses a reasonable method to ensure that it offers adequate access to quality providers.

• Five factors to assess reasonableness:
• Type of Service: Standards to ensure that the network is designed to enable

the plan to offer benefits for services from high-quality providers at reduced costs

• Reasonable Access: Procedures to ensure that an adequate number of

providers that accept the reference price are available to participants

• Quality Standards: Procedures to ensure that an adequate number of

providers accepting the reference price meet reasonable quality standards

• Exceptions Process: Easily accessible exceptions process where access or

quality are concerns for providers accepting the reference price

• Disclosure: Automatic disclosures regarding the reference-based pricing

structure, services, and exceptions. List of providers upon request

22

The ACA – PCORI and Transitional Reinsurance Fees

Patient-Centered Outcomes Research Institute (PCORI) Fee

• Purpose is to “assist patients, clinicians,

purchasers, and policy-makers in making informed health decisions by advancing the quality and relevance of evidence- based medicine through the synthesis and dissemination of comparative clinical effectiveness research findings.”

• Fee applies to plan years ending after

October 1, 2012 and before October 1, 2019 (seven full plan years)

• Paid on IRS Form 720 by July 31 of the

year following the last day of the plan year

• For plan years that end on or after

October 1, 2014, and before October 1, 2015 (including the 2014 plan year for calendar-year plans), the fee is has increased by eight cents per covered life

• For calendar-year plans, this means that

the fee will be $2.08 multiplied by the average number of covered lives in the plan for the 2014 plan year

• This 2014 amount is reported and paid no later

than July 31, 2015

Transitional Reinsurance Program (TRP) Fee

• Purpose is to “provide payments to

health insurance issuers that cover higher-risk populations and to more evenly spread the financial risk borne by issuers,” and “reduce the uncertainty of insurance risk in the individual market by partially offsetting issuers' risk associated with high-cost enrollees.”

• Fee applies to calendar years 2014 to

2016

• 2014 fee: $63.00 per covered life
• $52.50 initial, $10.50 subsequent
• 2015 fee: $44.00 per covered life
• $33 initial, $11 subsequent
• 2016 fee: $27.00 per covered life
• $21.60 initial, $5.40 subsequent

23

The ACA – HIPAA Health Plan Identifier (HPID)

The purpose of the new HPID requirement is to have a uniform identification method for standard HIPAA transactions (e.g., claims processing). According to HHS, health care providers are frustrated by the fact that identifiers for health plans currently differ in length and format, causing processing errors. The new HPID is intended to address these issues.

• Deadline was November 5, 2014 for large health plans to
• btain the HPID
• However, on Halloween CMS announced that it was

delaying enforcement of the HPID requirement “until further notice”

• Delay is purportedly in response to recommendation from

the National Committee on Vital and Health Statistics (NCVHS) that HHS take steps to “rectify” and “further clarify” its final HPID regulations

• HHS says that it will take the time from the delay to “review the

NCVHS’s recommendation and consider any appropriate next steps”

• For those plans that already completed the process, the

HPID will likely still be applicable when the rules take effect

24

The ACA – Skinny Plans Need to Beef Up

For plan years ending on or after January 1, 2014 (which includes the 2015 plan year for calendar-year plans), the IRS will no longer consider skinny plans with significant limitations (or exclusions) on in-patient hospitalization services or physician services to provide minimum value.

• The ACA establishes that a plan provides minimum value if the

percentage of the total allowed costs of benefits provided under the plan is no less than 60 percent

• One method to establish minimum value is to use the HHS

calculator

• The IRS notice states that employers will no longer be permitted to

rely on the HHS minimum value calculator to establish that a plan excluding substantial coverage for in-patient hospitalization services or physician services (or both) provides minimum value

• This means that these skinny plans will not avoid the potential for B

Penalty liability under the pay or play rules ($3,000/year/full-time employee) because they do not provide minimum value

25

The ACA – Preventive Services

The ACA requires that non-grandfathered health plans provide coverage for certain preventive services, and that any such in- network preventive coverage not be subject to any cost-sharing requirements (e.g., deductibles, copayments, coinsurance).

• The preventive items and services subject to the mandate are those set forth on:
• The United Sates Preventive Services Task Force (USPSTF) A and B

recommendations

• The Health Resources and Services Administration (HRSA) women preventive

services guidelines

• The HRSA guidelines for infants, children, and adolescents
• The Advisory Committee on Immunization Practices (ACIP) immunizations

recommended for routine use

• When a new preventive item or service is added to the USPSTF, HRSA, or ACIP

list of required coverage, the plan must cover the new item or service without cost-sharing (in-network) for plan years that begin on or after the date that is one year after the date the recommendation or guideline is issued

• For example, non-grandfathered plans must cover a new September 24, 2013

USPSTF recommendation regarding medications for risk reduction of primary breast cancer for women who are at increased risk (e.g., tamoxifen or raloxifene) without cost-sharing as of the first plan year beginning on or after September 24, 2014 (i.e., as of January 1, 2015 for a calendar-year plan)

26

The ACA – New Section 125 Cafeteria Plan Permitted Election Change Events

The IRS recently issued guidance adding two new Section 125 mid- year permitted election change events that allow employees to revoke their election for health coverage under their employer’s plan. Both new events are a result of changes under the ACA that create new reasons why an employee would want to opt-out of an employer’s plan prior to the next open enrollment period.

Event #1: Reduction in Hours

• Current Section 125 rules permit mid-year election changes upon experiencing a

change in status, including upon a change in employment status from full-time to part- time

• However, these rules require that the change in status affect eligibility for coverage under

the employer’s plan

• This new permitted election change event applies where an employee who was

expected to average 30 hours of service per week (i.e., full-time under the pay or play rules) experiences a change in employment status that reduces the expectation to fewer than 30 hours of service per week

• Key addition is that the employee may change his or her election to revoke the employer

coverage even if the reduction in hours does not result in the employee losing eligibility under the employer's plan

• The employee’s revocation of employer-sponsored coverage must correspond to the

employee’s (and any related dependents whose coverage is being dropped) enrollment in another plan that provides minimum essential coverage (e.g., coverage through the exchange or a spouse’s employer-sponsored plan)

• Enrollment in the other plan must be no later than the first day of the second month

following the month the employee dropped coverage

• Employers may rely on the employee’s reasonable representation that the above

requirements are satisfied

27

The ACA – New Section 125 Cafeteria Plan Permitted Election Change Events Cont’d

Event #2: Enrollment in Exchange Coverage

• Current Section 125 rules do not permit employees to revoke an

election for employer-sponsored group health plan coverage in order to enroll in coverage on the exchange

• This new permitted election change event allows employees to drop

their employer health coverage, and instead enroll in coverage on the exchange, in the following two circumstances:

• 1) An employee in a non-calendar year cafeteria plan can drop employer

coverage and enroll in exchange coverage without having a gap in coverage between the end of the employer’s plan year and the beginning of the next calendar year

• 2) An employee can also drop employer health plan coverage upon

experiencing a Special Enrollment Period (SEP) on the exchange (e.g., marriage, birth)

• In either case, the employee must intend to enroll in exchange

coverage as of the day immediately following the last day of coverage under the employer-sponsored plan

• Employers may rely on the employee’s reasonable representation that the

above requirements are satisfied

28

The Section 125 cafeteria plan must be amended by the last day of the plan year to add these new permitted election change events. (Note that special 2014 rule permits amendment to be adopted by last day of 2015 plan year.)

The ACA – Updated COBRA Notices

The DOL issued updated model COBRA general and election notices to address exchange coverage options as an alternative to COBRA.

• Individuals with COBRA rights can decline the offer of COBRA and

qualify for a special enrollment period (SEP) on the exchange that lasts for 60 days after the employer-sponsored coverage ends

• Note that unlike COBRA, exchange enrollment will not be retroactive to

the date coverage is lost

• Means will need to elect COBRA to cover expenses retroactively
• However, individuals who elect COBRA will not have another SEP
• n the exchange until they exhaust the COBRA maximum coverage

period (generally 18 months)

• Makes the decision between COBRA or exchange coverage more

important

• In most cases where the individual is subsidy-eligible, exchange will

probably offer cheaper coverage options

29

The ACA – Prohibited Individual Policy Reimbursement Arrangements

At the end of 2014, the Departments issued yet another FAQ strongly cautioning of the dire potential consequences for employers that offer individual policy reimbursement arrangements.

• Individual policy reimbursement arrangements are considered a group health plan that

violates ACA prohibition of annual or lifetime dollar limits on essential health benefits, and the requirement to provide preventive care with no cost-sharing

• Results in a $100/day/employee excise tax under IRC §4980D
• That’s $36,500 in excise taxes per employee, per year!
• Pre-Tax: Departments again confirmed that pre-tax reimbursement arrangements will

never comply

• For example, a stand-alone HRA or old-fashioned §106 employer payment plan will never comply

because they are always considered a group health plan, and they cannot be integrated with the individual policy coverage purchased by the employee.

• Post-Tax: Must meet DOL’s voluntary plan safe harbor to comply
• There must be an “unfettered right by the employee to receive the employer contributions in

cash.” Any payment structure should ensure that:

• Employee has an unrestricted right to receive the funds as cash
• Employee is not required to use the cash to purchase health coverage
• Employee has no health plan-related conditions on receiving the additional cash
• Employee is never required to substantiate the purchase of individual market coverage

30

The ACA – Exempt Expatriate Plans

The last-minute “CRomnibus” bill at the end of 2014 included the “Expatriate Health Coverage Clarification Act.” This replaces previous FAQ guidance that temporarily exempted expatriate plans with a new permanent exemption.

• The main requirement for an expatriate plan to be exempt from much of the ACA

is that substantially all of the covered employees be “qualified expatriates”

• Qualified Expatriates in the U.S.:
• The individual’s skills, qualifications, job duties, or expertise is of a type that has

caused the employer to assign him to the U.S. for a specific temporary purpose or assignment tied to employment, and

• The employer reasonably determines that the individual will require access to

health insurance in multiple countries, and is offered other multi-national benefits

• n a periodic basis (e.g., tax equalization benefits, cross-border moving expenses,

compensation to enable the expatriate to return to his home country)

• Qualified Expatriates Outside of the U.S.:
• The individual is working outside of the U.S. for a period of at least 180 days in a

consecutive 12-month period that overlaps with the plan year.

• Expatriate health plans are minimum essential coverage that satisfy the

enrollee’s individual mandate

• Expatriate health plans are not exempt from the §6055/§6056 reporting

requirements (although the electronic distribution rules are looser) or the Cadillac Tax

31

The ACA – Excepted Benefits

Dental/Vision Benefits

• Fully Insured
• Must be limited-scope (i.e., substantially all

benefits must be for treatment of the mouth or eye)

• Must be provided under a separate policy
• f insurance (i.e., separate dental or vision

policy)

• Self-Insured
• Must be limited-scope (i.e., substantially all

benefits must be for treatment of the mouth or eye)

• Employees must have the right to elect

not to receive the dental or vision benefits

• No longer required to charge employees

an additional premium for the dental/vision benefits

Employee Assistance Plans (EAP)

1) The EAP does not provide significant benefits in the nature of medical care

• Takes into account the amount, scope,

and duration of the covered services

• More guidance to come

2) The EAP benefits are not coordinated with another group health plan

• EAP cannot be the gatekeeper for mental

health/substance use disorder benefits under the major medical

• EAP eligibility cannot be dependent on

participation in the major medical 3) The EAP is free to the employee

• Cannot require that employee pay a share
• f the premium for coverage
• Cannot require any cost-sharing for

covered services

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Excepted benefits are not subject to the HIPAA Portability requirements (e.g., special enrollment rights) or the ACA market reform requirements (which includes most of the provisions applicable to employer-sponsored group health plans). Recent final regulations made key changes.

The ACA – Farewell to HIPAA Certificates of Creditable Coverage

As of December 31, 2014, health plans are no longer required to provide a HIPAA certificate of creditable coverage upon the loss of coverage. This is because the ACA now prohibits all pre-existing condition exclusions.

• The purpose of the HIPAA certificate was to demonstrate that

individuals had maintained creditable coverage and therefore could not be subject to any pre-existing condition exclusions

• The HIPAA certificate of creditable coverage is no longer relevant

in this phase of implementation, and therefore the Departments have eliminated the requirement to provide the document

• It appears some carriers will continue to provide the HIPAA certificate

upon request

• Many carriers previously relied on the HIPAA certificate as

evidence of loss of coverage for purposes of demonstrating a mid- year special enrollment event

• It’s not clear yet what other evidence carriers will use for this purpose
• Some examples might be the insurance ID card, records from medical

providers showing coverage, a written statement or call from the previous plan/carrier verifying coverage

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The ACA – Health FSA Gets Inflation Increase

The ACA capped employee salary reductions to a health FSA at $2,500 for plan years beginning in 2013. This limit was indexed to cost-of-living adjustments tied to the CPI. 2015 represents the first increase in the contribution limit.

• For plan years beginning on or after January 1, 2015, there is a $50

increase in the contribution limit, up to $2,550

• The terms of the Section 125 cafeteria plan document govern whether

the plan offers the higher $2,550 contribution limit

• Plan Document Does Not Incorporate Adjustment:

Cafeteria plans that do not incorporation the inflation adjustment in the written plan document terms will need an amendment to permit the higher $2,550 contribution level for the first plan year beginning on or after 1/1/15

• Plan Document Incorporates Adjustment:

Cafeteria plans that automatically incorporate the inflation adjustment in the written plan document terms will need to offer the higher $2,550 contribution level for the first plan year beginning on or after 1/1/15 (or amend the plan to provide otherwise)

• Don’t forget that ACA prohibits employer contributions of more than

$500 to a health FSA

• Max contribution would therefore be $2,550 (employee salary contribution

reductions) + $500 (employer contribution, if offered) = $3,050 (combined)

34

The ACA – SBCs Refreshed for 2015

At the end of 2014, the Departments issued new SBC proposed regulations to incorporate most of the FAQ guidance we’ve received over the last few years. They also issued an updated SBC template and uniform glossary.

• The new SBC has been streamlined from four double-sided pages to

two and a half pages

• The updated SBC now includes clearer descriptions of whether the plan

satisfies the individual mandate (i.e., is minimum essential coverage) and provides minimum value (i.e., has at least a 60% actuarial value)

• It also includes a new coverage example highlighting the plan’s coverage and

patient responsibility for a simple foot fracture with an emergency room visit (to add to the existing examples for having a baby and managing type 2 diabetes)

• Under the new proposed regulations, employers and insurance carriers

would be required to use the new SBC for the next open enrollment period that begins on or after September 1, 2015

• It’s not clear yet whether the Departments’ current policy not to impose

penalties if the plan is working diligently and in good faith to provide the required SBC content consistent with the rules will continue to apply to the new SBCs distributed on or after September 1, 2015

35

The ACA – Another Landmark U.S. Supreme Court Decision Looms…

In King v. Burwell, the U.S. Supreme Court will decide whether IRS regulations authorizing premium tax credits for coverage on the federal exchange (healthcare.gov) do not properly implement the statutory authority from the ACA.

• Lower courts have split on whether the IRS approach is consistent

with the ACA

• By a literal reading, the ACA permits premium tax credits to flow only on

an exchange “established by the State.”

• Government argues that the provision was intended to apply to federally-

facilitated exchanges, too

• Among the seemingly infinite implications of the court’s decision

will be whether employers based only in states with federal exchanges will be subject to the pay or play penalties

• Only employees who receive subsidized coverage on the exchange can

trigger those penalties—wouldn’t be possible in states without a state-run exchange

• Currently only 14 states have established an exchange
• Decision is expected by June 2015

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The ACA – Big Topics to Come…

While much of the ACA has now been implemented, there are still a few big ticket items that should be on our radar. We may see proposed regulations or other forms of guidance relating to these topics in 2015.

• Nondiscrimination Rules for Insured Plans
• These requirements have been delayed until the Departments issue

regulations

• The Departments have promised that the effective date will not be until plans

following a specified period after the regulations are issued (e.g., first plan year beginning six months after date regulations issued)

• All we know at this point is that the rules will be “similar to” the existing

nondiscrimination rules for self-insured eligibility and benefits under §105(h)

• Automatic Enrollment
• These requirements have been delayed until the DOL issues final regulations
• We may see the DOL issue proposed regulations this year
• Will apply only to employers with more than 200 full-time employees
• Cadillac Tax
• Does not take effect until 2018
• We may see legislative or regulatory activity surrounding these rules in 2015
• 40% nondeductible excise tax on high-cost health coverage

37

Wellness Programs in the News

The HIPAA/ACA issues for wellness programs are fairly well- established at this point based off 2013 final regulations. However, the EEOC is attempting to shut down a common wellness program design based on violations the ADA that are not well understood. This has been very controversial.

EEOC v. Honeywell International Inc.

• EEOC has filed suit in federal court alleging that Honeywell’s wellness

program violates the ADA

• Honeywell’s program assesses a surcharge on employees and spouses who

fail to undergo biometric testing for blood pressure, HDL and total cholesterol, non-fasting glucose, BMI, and waist circumference

• Also includes blood screening to determine whether the employee or spouse

smokes tobacco

• Generally a $500 surcharge for failure to complete the biometrics/blood draw,

a $1,000 tobacco surcharge, and a loss of up to $1,500 in HSA contributions

• ADA generally prohibits requiring employees to undergo medical

exams that are not job-related or consistent with business activity, unless the medical exam is “voluntary”

• EEOC does not interpret meeting the HIPAA/ACA rules as necessarily making

the wellness program “voluntary” under the ADA

• However, it’s still unclear what constitutes “voluntary” under the ADA
• EEOC also arguing that GINA prohibits obtaining medical information of an

employee’s spouse

38

Bay Area Commuter Benefits Program

As of September 30, 2014, employers in the SF Bay Area with 50 or more full-time employees must offer transit benefits to all employees who work at least 20 hours per week in the SF Bay Area.

• Offering the standard pre-tax employee contribution option under §132(f)

satisfies this requirement

• Other options include an employer-provided transit subsidy of at least $75/month,

employer-provided transit (e.g., Google or Facebook busses), or approved alternatives

• Reporting: Employers must designate a Commuter Benefits Coordinator to

report annually on the program option offered to employees

• Recordkeeping: Employers must maintain and retain records, files, and

documents to establish compliance with the program for at least three years

• These documents must be available to the Bay Area Air Quality Management

District upon request

• Notice: Employers must notify employees of the program by “appropriate

means”

• Must be included as part of benefits package to new hires and provided annually
• Enforcement: Penalties generally range from $1,000/day to $10,000/day
• It appears that the Air District will work with employer before levying penalties

39

California Paid Sick Leave

AB 1522 imposes the first statewide paid sick day requirements for employees. Beginning July 1, 2015, employees working at least 30 days in a year will need to start accruing paid sick time.

• Accrual: Must accrue at least one hour of paid sick time for every

30 hours worked (or 3 days/24 hours provided up-front annually)

• Access: Must have access to the paid sick days as of the 90th day
• f employment
• Use: May cap employees’ use of paid sick days at 24 hours or

three days per year

• Carryover: Must carry over unused sick days up to 48 hours or six

days (unless 3 days/24 hours provided up-front annually)

• Notice: California Labor Commissioner has provided model

template for mandatory notice to new non-exempt hires on or after January 1, 2015 (exemptions for public entities and union EEs)

• Poster: California Labor Commissioner has provided model

template for mandatory poster to be displayed in a “conspicuous place” as of January 1, 2015

• Recordkeeping: Must keep three years of records for all the above

40

San Francisco Health Care Security Ordinance Updates

The HCSO generally requires employers with 20 or more employees (50 or more for non-profits) to make a minimum level of health care expenditures for employees performing at least eight hours of work per work in San Francisco.

• Recent HCSO changes also require that all employer health care

expenditures be irrevocable (e.g., not HRA contributions) with a three-year phase in process:

• 2015: At least 60% of the required health care expenditures are irrevocable
• 2016: At least 80% of the required health care expenditures are irrevocable
• 2017: 100% of the required health care expenditures are irrevocable

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Employer Size 2014 Rate 2015 Rate Large: 100+ Employees $2.44/hour payable $2.48/hour payable Medium: Business w/ 20-99 Nonprofit w/ 50-99 $1.63/hour payable $1.65/hour payable Small: Business w/ 0-19 Nonprofit w/ 0-49 Exempt Exempt

Content Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client

• relationship. Questions regarding specific issues should be addressed to the person(s)

who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law). ABD makes no warranty, express or implied, that adherence to, or compliance with any recommendations, best practices, checklists, or guidelines will result in a particular

• utcome. ABD does not warrant that the information in this document constitutes a

complete list of each and every item or procedure related to the topics or issues referenced herein. Federal, state or local laws, regulations, standards or codes may change from time to time and the reader should always refer to the most current requirements and consult with their legal and HR advisors for review of any proposed policies or programs.

2014 YEAR IN REVIEW

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2014 YEAR IN REVIEW

Brian Gilmore

Lead Benefits Counsel ABD Insurance & Financial Services, Inc. BrianG@theabdteam.com For more information, please contact me or your ABD Team Member