This client alert focuses on recent developments and upcoming deadlines affecting employers’ health and welfare benefit plans. (Our recent client alert about retirement plans is available here.)
PCORI Fee. Extended for 10 years. Under the Affordable Care Act (ACA), employers with self-funded health plans have been required to pay an annual fee to fund the Patient Centered Outcomes Research Institute (PCORI). The fee is based on the number of persons covered by the employer’s plan. The fee was to last only 6 years, with calendar-year plans making their final payment in 2019. In the spending bill passed by Congress in late December, the PCORI fee was extended until 2029. Employers with calendar year plans will need to submit their PCORI fees for 2019 on or before July 31, 2020.
Affordable Care Act Litigation. Only partly resolved on appeal, so nothing changes for now. Under the ACA, most individuals were required to obtain health insurance or pay a penalty. This requirement is known as the “individual mandate.” In 2012, the Supreme Court found that the individual mandate was constitutional as a tax. In 2017, Congress reduced the penalty to $0. In 2018, a federal district court found that as a result of the reduction to $0, the penalty was now unconstitutional. The district court also found that the mandate was not severable from the ACA as a whole, and struck down the entire ACA. In December, the Fifth Circuit Court of Appeals agreed that the mandate was unconstitutional, but sent the case back to the district court for a more detailed examination of the severability issue. The ACA’s defenders have asked the Supreme Court to review the Fifth Circuit’s decision. Until the case is resolved or Congress takes action, the ACA remains the law of the land.
Cadillac Tax. Often delayed, never effective, now repealed. Under the ACA, employers with health plans over a certain value would be required to pay a tax, effective in 2018. The effective date of the tax was delayed until 2020, then until 2022. In the spending bill passed by Congress in late December, the Cadillac Tax was repealed.
Transportation Benefit Tax. Repealed retroactively for nonprofit employers. Before 2018, transportation benefits for employees—such as parking and transit passes—were available on a tax-favored basis. The benefits could be funded by the employer, or by employee pre-tax salary reductions, and generally neither the employer nor the employee paid taxes on the benefits. Beginning in 2018, nonprofit employers were required to pay unrelated business income tax (UBIT) on the amount of the transit benefits. In the spending bill passed by Congress in late December, the UBIT requirement was repealed retroactively. Nonprofit employers do not have to pay the tax for 2019 and may seek a refund for 2018.
California Flexible Spending Account Notice. Effective January 1, 2020. In October, California adopted a new law requiring employers to provide a notice—in two different formats—to their California-resident employees with flexible spending accounts (FSAs). The notice requirement applies if employees must withdraw funds from an FSA before the end of the plan year in order to avoid forfeiture.
ACA Reporting Deadlines. ACA reporting is generally required for large employers (whether or not they offer a health plan) and for employers offering a self-funded group health plan (regardless of the size of the employer).
- February 28. Deadline for filing Forms 1094-C and 1095-C with the IRS, if filing paper forms. (If there are 250 or more Forms 1095-C, electronic filing is required.)
- March 2. Deadline for providing Form 1095-C to full-time employees and employees covered by an employer-sponsored group health plan.
- March 31. Deadline for electronically filing Forms 1094-C and 1095-C with the IRS.
Other Reporting & Disclosure Deadlines.
- February 29. Deadline for notifying the Department of Health and Human Services of HIPAA breaches that occurred in 2019 and involved fewer than 500 individuals. Notification is through an online portal.
- February 29. Deadline for notifying the Center for Medicare and Medicaid Services as to whether the employer’s prescription drug coverage is “creditable.” Notification is through an online portal.
- March 31. Deadline for providing a summary plan description (SPD) to enrollees in calendar-year ERISA plans. If there have been no changes to a plan, and the individual is not a new enrollee, a new SPD is required only after 5 years. However, there are a variety of notices that must be provided annually. If the employer uses the SPD to satisfy these notice requirements, the SPD should be provided annually.
If you have any questions regarding this client alert, or if you would like assistance with any of the requirements described here, please contact a member of Venable’s Employee Benefits and Executive Compensation Practice Group.