December 30, 2014
Compliance Review: Year-End Observations and what to look for in 2015
Looking back on 2014, an amazing array of compliance developments took place - most of it related to implementation of the Patient Protection and Affordable Care Act (PPACA, or simply, health care reform). As unrelenting as the pace of change was this year, it is likely to continue unabated next year. In anticipation, the HUB International Employee Benefits Compliance team has prepared a list of special employee benefit related issues to watch in 2015.
Supreme Court to rule in King v. Burwell
The Supreme Court will rule on the validity of "subsidy" payments in states that have not created their own state exchange platform. Billions of dollars of federal subsidies are at stake for residents of the approximately 75 percent of states that have not established exchanges.
Oral arguments are expected to be held in March 2015, and a decision is expected by late June or early July 2015.
Although Republicans now hold the majority in both the House and the Senate, the GOP still lacks the votes needed to override a veto by President Obama. That means that even if Congress attempts to repeal, or to modify provisions of the PPACA, we do not expect those efforts to be successful in repealing the measure in its entirety.
However, if the Supreme Court rules that PPACA contained a "drafting error" invalidating subsidy payments in certain states, the Republicans would immediately gain huge leverage since the President would urgently need Congress to enact new legislation for the correction -- and Republicans might seek PPACA modifications in exchange for their legislative cooperation.
Last month, HHS postponed its new HIPAA-numbering mandate. We do not know when compliance will be restarted, but the postponement is likely only temporary. As federal, state, and private actions related to data privacy and security increase, complying with HIPAA is more important than ever.
Non-calendar year Mandate Compliance
For employers that satisfy the various conditions needed to start the PPACA coverage mandate on their plan anniversary date in 2015, key requirements apply. For employers who are eligible to start on their plan anniversary date, minimum value affordable coverage must be extended beginning on the plan anniversary date. Minimum Essential Coverage ("MEC") alone is NOT an option for employers who start mandate compliance mid-year.
(Note: MEC is often associated with the "skinny" coverage concept and used to block "sledgehammer" penalties.)
Please also note that minimum value (MV), affordable coverage must be achieved on the newly-revised HHS calculator (revised to address incorporating mandatory hospitalization to MV as specified in the November 4, 2015 HHS announcement). The bottom line is that if MEC alone is being contemplated, the MEC programs must be in place on January 1, 2015.
Smaller, large-sized employers
Employers with more than 50 but fewer than 100 employees are not required to start PPACA mandate compliance until 2016. Part of the requirement to start in 2016 is the ability to satisfactorily document workforce size. Please contact your HUB representative to use our PPACA implementation guide and worksheets. These materials are particularly crucial to internally document that an organization qualifies for the delayed compliance start date.
Variable hour employment
Variable hour is a popular but often misapplied concept. The IRS issued a very specific definition that "variable hour status" is limited to workers for whom the employer cannot, in good faith, determine full-time status in advance. For example, this might be because workers are pulled from a pool of staff that competes for hours and therefore members of the workforce "pool" are subject to fluctuating monthly hours.
Variable hour workers are specifically not individuals who work "temporary" positions on a full-time basis. For example, a person who is employed for a seven-month project and will be working 40 hours per week for those months is not variable. In such a situation, the employer would have to extend an offer of coverage at the end of the waiting period, or else may be subject to a mandate penalty.
PPACA (except for validly "grandfathered" plans) introduced the concept of discrimination testing for insured plans for the first time. That "insured plan" testing obligation is currently on hold and likely to remain pending through 2016. Meanwhile, self-funded plans have always been subject to discrimination testing.
In a nutshell, whether a self-funded plan is discriminatory (or not) will require local testing. Overall group size, the number of favored highly compensated individuals, and the severity of benefit disparity will be key testing factors. Current IRS rules actually permit some discrimination to be present without the employer automatically flunking the discrimination tests. This is because the rules integrate some limited "safe harbor" zones. A skilled actuary will be able to run the tests in a manner that offers the plan sponsor an optimal opportunity to satisfy testing standards.
Form 5500 and M-1
The DOL has issued the 2014 Form 5500 (including 5500-SF) and Form M-1. The new Form 5500 remains mostly the same as prior years although some variations on required numbering counts have been introduced.
Only minor clarifications were made to the Form M-1 that is required to be filed by a multiple employer welfare arrangement (MEWA) to report compliance with a variety of group health plan mandates. (Generally speaking, a MEWA is an arrangement providing benefits to employees of two or more employers not in the same controlled group.)
Paying for individual coverage
The IRS issued several related pieces of guidance to block an employer's ability to fund an employee's purchase of individual health insurance coverage. Most significantly, it blocked the use of health reimbursement arrangements (HRAs) for this purpose. The IRS also took steps to preclude employers from funding such coverage even on an after-tax basis.
CMS Updates Language Listing
Under PPACA, federal law adds a requirement that claims and appeals notices and the summary of benefits and coverage (SBC) be provided in a "culturally and linguistically appropriate manner." Implementing regulations note that group health plans and insurers must provide certain language assistance services (in the applicable language) and must provide written document translations upon request in counties where at least 10% of the local population is only literate in the same non-English language. Applicability of the rule is based on the county in which a plan participant resides - NOT where the employer might be located. As in prior years, only four languages have reached this threshold level: Spanish, Chinese, Tagalog and Navajo.
CMS has issued its newest annual list of counties where the language rule is triggered. Plan sponsors should note materials provided in these counties must include a brief statement in the indicated language regarding the availability of language assistance. The county-by-county listing is available at the following link: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/2009-13-CLAS-County-Data_12-05-14_clean_508.pdf
Model statements, in each of the four languages, is available at the following link: http://www.cms.gov/cciio/Resources/Forms-Reports-and-Other-Resources/index.html#Summary of Benefits and Coverage and Uniform Glossary
Transitional reinsurance fee
Submission of the numbers count, along with billing information to process an ACH payment to the federal government, was due a few weeks ago. Based on those counts a $63 per-covered-life fee will be owed by plan sponsors in the first year of collection. Details about the transitional reinsurance fee and its unusually cumbersome, mandated payment process, are explained in the Client Bulletin shown here: http://learningcenter.hubinternational.com/workplace/health-care-reform/paying-reinsurance-fees/
Please note that based on the way a plan sponsor completed the filing, in some cases CMS erroneously issued "automated letters" intended for insurance carriers (rather than group health plans). If you received such a letter, and are concerned about how to respond, please contact your HUB representative and we would be happy to assist in a review of the correspondence.
2015 IRS and Social Security Annual Limits
Each year the federal government adjusts the limits for qualified plans and Social Security to reflect cost of living adjustments and changes in the law. Here is the link to the 2015 limits: http://www.irs.gov/uac/Newsroom/IRS-Announces-2015-Pension-Plan-Limitations;-Taxpayers-May-Contribute-up-to-$18,000-to-their-401(k)-plans-in-2015
For many employers, year-end brings welcome closure to open enrollment season. However, the arrival of the employer mandate raises the stakes for 2015 as never before. We therefore invite you to contact your HUB International representative and schedule a strategic meeting to review compliance issues and ensure you are positioned to make any necessary tweaks and adjustments for 2015.
We hope that everyone enjoys a happy and festive holiday season, and wish you all much success in 2015.
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