Compliance Compilation
For January through December of 2015
CA Insurance License 0449318
Terry Denesha | (661) 873-2200 TABLE OF CONTENTS
January
March
February
April
4 Proposed Rules Issued Regarding
Wraparound Coverage
January 9, 2015
6 ACA Impact on Expatriate Plans Eased
January 9, 2015
7 Proposed Regulations on Summary of
Benefts and Coverage
January 23, 2015
9 Retroactive 2014 Qualifed Transit/
Vanpooling Exclusion Adjustment
January 29, 2015
9 2015 Federal Poverty Line Amounts Issued
February 3, 2015
11 Medicare Part D: Reminder to Notify CMS
February 18, 2015
11 Final Forms Released for Individual and
Employer Mandate Reporting
February 19, 2015
13 Anthem Cyber Attack Frequently Asked
Questions
March 10, 2015
15 Final FMLA Rules Regarding Same-Sex
Spouses
March 11, 2015
16 CMS Announces Special Enrollment Period
in Federal Exchanges
March 12, 2015
17 Guidance Issued Regarding Supplemental
Excepted Benefts
March 19, 2015
18 Relief for Small Employers Reimbursing
Individual Policies
March 19, 2015
19 Should Plan Years be Changed to Delay
Compliance with ACA Provisions?
March 25, 2015
21 2016 Cost-Sharing Limits, Reinsurance
Fee, and Other Changes Related to the
Exchange
April 9, 2015
23 Cadillac Tax: Part 1 — Preliminary Guidance
April 16, 2015
26 Reinsurance Fee Overpayment Refund
Request Deadline is April 30
April 29, 2015
May
June
27 2016 HSA Limits
May 8, 2015
27 Cadillac Tax: Part 2 — Preliminary Guidance
May 19, 2015
30 FAQs Further Clarify New Embedded
Out-of-Pocket Requirement
June 1, 2015
31 Guidance Issued on Coverage for
Preventive Items and Services
June 9, 2015
32 Protections for LGBT Workers
June 9, 2015
33 PCOR Fee Filing Reminder for
Self-Insured Plans
June 11, 2015
34 Form 5500 Filing Reminder
June 15, 2015
34 Supreme Court Upholds Subsidies
June 25, 2015
35 IRS Releases Draft 2015 Forms
June 26, 2015
July
36 Supreme Court Ends State Bans on
Same-Sex Marriage
July 1, 2015
37 Final SBC Rules Issued
July 2, 2015
39 Is Your Company Ready for the New
Reporting Requirements?
July 15, 2015
40 Changing Policy Year to Delay Compliance
July 28, 2015
42 Interim Guidance Addresses Expatriate
Health Coverage
July 31, 2015
43 Reduction in Hours Subject to Lawsuit
in New York
July 31, 2015This document is designed to highlight various employee beneft matters of general interest to our readers. It
is not intended to interpret laws or regulations, or to address specifc client situations. You should not act or
rely on any information contained herein without seeking the advice of an attorney or tax professional.
October
August November
September
56 Employees on Leave May be Full-time
Employees for Employer Penalty Purposes
October 1, 2015
57 The PACE Act Halts Small Group Expansion
October 8, 2015
58 Adjusted PCOR Fee for Fourth Filing
Year Released
October 13, 2015
59 Employer Reporting: Final 2015 Instructions
and Forms Issued
October 13, 2015
60 Employer Reporting: Aggregated ALE
Group and Form 1094-C
October 16, 2015
61 2015 Transitional Reinsurance Fee
October 16, 2015
62 2016 Cost of Living Adjustments
October 27, 2015
63 ACA Automatic Enrollment Provision
Repealed
November 3, 2015
64 2016 New Plan Design Requirements
Checklist
November 9, 2015
44 Additional Guidance Issued on the
Cadillac Plan Tax
August 24, 2015
46 New Law Clarifes Employer Mandate and
HSA Eligibility for Veterans
August 25, 2015
47 Draft 2015 Form 1095-C and Instructions
August 25, 2015
50 Final Rules Address the Contraceptives
Mandate
August 28, 2015
52 Final Rules Clarify Required Coverage of
Preventive Items and Services
August 28, 2015
53 Medicare Part D: Reminder to Distribute
Creditable Coverage Notice
September 18, 2015
December
66 The Departments Issue 29th Set of
ACA FAQs
December 15, 2015
68 House Proposes Two-Year DELAY of the
Cadillac Plan Tax
December 17, 2015
68 Regulations Address Mandated Benefts
December 18, 2015
71 Extension of Deadlines for Forms 1095-C
and 1094-C
December 29, 2015
Appendix
72 Employer Reporting Guide for Large
Employers
April 23, 2015JANUARY 4
On December 19, 2014, the Departments
of Labor, the Internal Revenue Service
and Health and Human Services issued a
proposed rule that provides helpful guidance
with respect to certain wraparound programs.
The concept of the wraparound coverage
excepted beneft was frst introduced in a
proposed rule issued December 24, 2013.
According to the DOL, these proposed rules
would give employees who otherwise may
not be able to get generous employerbased
benefts access to high level benefts and
would give businesses, including small
businesses, new fexibility to meet the unique
needs of their workforce.
Background
As background, an employer cannot offer
employees cash to reimburse the purchase
of an individual policy, whether the employer
treats the money as pre-tax or post-tax to the
employee. Such arrangements are subject to
the market reform provisions of the Affordable
Care Act, including prohibition on annual
limits and the requirement to provide certain
preventive services without cost sharing with
which it cannot comply. Such an arrangement
may be subject to a $100/day excise tax per
applicable employee (which is $36,500 per
year, per employee).
Limited Wraparound Coverage
“Limited wraparound coverage” is limited
benefts provided through a group health plan
that wrap around either “eligible individual
health insurance” or coverage under a
Multi-State Plan. “Eligible individual health
insurance” is individual health insurance
coverage that is not a grandfathered health
plan, not a transitional individual health
insurance market plan, and does not consist
solely of excepted benefts (which include
certain dental and vision plans, health FSAs,
and HRAs). To qualify as excepted benefts,
the limited benefts must meet all of the
following requirements:
Published on January 9, 2015
Proposed Rules Issued Regarding
Wraparound Coverage
1. Cover additional benefts. The
limited wraparound coverage provides
meaningful benefts beyond coverage
of cost sharing under either the eligible
individual health insurance or MultiState Plan coverage. The wraparound
coverage must not provide benefts only
under a coordination-of-benefts provision
and must not merely be an accountbased reimbursement arrangement. This
document is designed to highlight various
employee beneft matters of general
interest to our readers. It is not intended to
interpret laws or regulations, or to address
specifc client situations. You should not
act or rely on any information contained
herein without seeking the advice of an
attorney or tax professional.
2. Limited in amount. The annual cost of
coverage per employee (and any covered
dependents) under the limited wraparound
coverage does not exceed the indexed
maximum annual salary reduction
contributions toward health FSAs ($2,550
for 2015). For this purpose, the cost of
coverage includes both employer and
employee contributions towards coverage
and is determined in the same manner
as the applicable premium is calculated
under a COBRA continuation provision.
3. No discrimination. The limited
wraparound coverage (a) does not impose
any preexisting condition exclusion; (b)
does not discriminate against individuals
in eligibility, benefts or premiums based
on any health factor of an individual; and
(c) does not, nor does any other group
health plan coverage offered by the plan
sponsor, discriminate in favor of highly
compensated individuals.
4. Plan eligibility. Individuals eligible for the
wraparound coverage cannot be enrolled
in excepted beneft coverage that is a
health FSA.
5. Reporting. The plan sponsor of a group
health plan offering wraparound coverage
must report to HHS, in a form and manner
specifed in guidance, information HHS
reasonably requires.JANAURY 5
• Other group health plan coverage, not
limited to excepted benefts, is offered to
the individuals eligible for the wraparound
coverage. Only individuals eligible for
the other group health plan coverage are
eligible for the wraparound coverage.
Limited wraparound coverage offered in
conjunction with Multi-State Plan coverage
must satisfy all of the following conditions:
• The limited wraparound coverage is
specifcally designed and approved by the
Office of Personnel Management (“OPM”)
to provide benefts in conjunction with
coverage under a Multi-State Plan.
• The employer has offered coverage in
the plan year that begins in 2014 that is
substantially similar to coverage that the
employer would need to have offered to
its FTEs in order to not be subject to an
assessable payment under the employer
penalty provisions, if such provisions had
been applicable.
• In the plan year that begins in 2014,
the employer has offered coverage to a
substantial portion of FTEs that provided
minimum value and was affordable
(applying the safe harbor rules).
• The employer’s annual aggregate
contributions for both primary and
wraparound coverage are substantially the
same as the employer’s total contributions
for coverage offered to FTEs in 2014.
• A self-funded plan, or a health insurance
issuer, offering or proposing to offer
Multi-State Plan wraparound coverage
reports to the OPM, in a form and manner
specifed in guidance, information OPM
reasonably requires to determine whether
the plan or issuer qualifes to offer such
coverage or complies with the applicable
requirements.
When Can Limited Wraparound
Coverage be Offered?
The provisions apply to limited wraparound
coverage that is frst offered no later than
December 31, 2017 and that ends on the later
of:
• The date that is three years after the date
wraparound coverage is frst offered; or
• The date on which the last collective
bargaining agreement relating to the plan
terminates after the date wraparound
coverage is frst offered (determined
without regard to any extension agreed to
after the date wraparound coverage is frst
offered).
Under What Circumstances can
Limited Wraparound Coverage be
Offered?
Wraparound benefts offered in conjunction
with eligible individual health insurance must
satisfy all of the following requirements:
• Eligibility for the wraparound coverage is
limited to employees who are not full-time
employees (“FTEs”) and their dependents,
including retirees and their dependents.
• For each year for which wraparound
coverage is offered, the employer that
is the sponsor of the plan offering
wraparound coverage, or the employer
participating in a plan offering wraparound
coverage, offers to its FTEs coverage
that is substantially similar to coverage
that the employer would need to offer to
its FTEs in order not to be subject to a
potential assessable payment under the
employer penalty, if such provisions were
applicable; provides minimum value; and
is reasonably expected to be affordable
(applying the safe harbor rules). If a plan
or issuer providing limited wraparound
coverage takes reasonable steps to
ensure that employers disclose to the plan
or issuer necessary information regarding
their coverage offered and affordability
information, the plan or issuer is permitted
to rely on reasonable representations
by employers regarding this information,
unless the plan or issuer has specifc
knowledge to the contrary.6
On December 16, 2014, as part of the
Consolidated and Further Continuing
Appropriations Act, 2015, President Obama
signed into law amendments to the Affordable
Care Act (“ACA”) that largely exempt expatriate
plans from most ACA compliance requirements.
While federal regulators had allowed expatriate
plans certain transition relief on an ad-hoc
basis for various ACA requirements, the
regulatory approach was piecemeal and
temporary, while leaving many compliance
issues unresolved. The new legislation
signifcantly clarifes the ACA requirements
applicable to expatriate plans. While it is
too soon to expect regulatory guidance, the
legislation is surprisingly detailed and is the frst
signifcant legislative change to the ACA since
the law was passed in 2010.
The new provisions are applicable to
expatriate health plans issued or renewed
after July 1, 2015, except for the health
insurance fee, as noted below.
Expatriate plans are defned as self-funded
and fully insured plans that offer coverage to
qualifed expatriates and their dependents.
Qualifed expatriates are: (1) certain foreign
employees transferred or assigned to the
U.S. for a specifc and temporary employment
purpose or assignment, (2) individuals
working outside the U.S. for at least 180 days
in a 12-month period, and (3) individuals
who are members of certain groups, such as
students or religious missionaries.
The new law:
• Exempts fully insured and self-funded
expatriate health plans from most of the
ACA’s market reforms (though not the
adult dependent/age 26 requirement).
• Deems expatriate health plans to
be “minimum essential coverage”
for expatriate employees and their
dependents, regardless of where they are
located in the world.
• Deems expatriate health plans to be
“minimum essential coverage under an
eligible employersponsored plan” for
purposes of the employer mandate with
respect to certain foreign employees
working in the U.S. and certain U.S.
expatriates working abroad, but does
not exempt employers that provide or
purchase these plans from other employer
mandate requirements including reporting
responsibilities.
Published on January 9, 2015
ACA Impact on Expatriate Plans Eased
JANUARYJANAURY 7
• Exempts expatriate plans from the health
insurance fee (after 2015) (transition
rules for 2014 and 2015), the transitional
reinsurance program fee, and the PCORI
fee.
• Exempts employer-sponsored coverage
owf most categories of expatriates from
the excise tax on high cost employersponsored health coverage.
• Exempts expatriate health plans from a
change in the defnition of a “small group,”
which could have prevented the sale of
expatriate coverage to employers with 50
to 99 lives.
• Exempts insurers of expatriate health
plans and expatriate health plans
from the so-called “administrative
simplifcation” requirements, including
SBC requirements.
Plan sponsors of expatriate plans should
review their plan design carefully to ensure
they are in compliance with certain provisions
of the ACA still applicable to such plans,
including employer shared responsibility and
its associates reporting/disclosure rules,
certain fees and adult-child age 26 mandates.
Published on January 23, 2015
Proposed Regulations on
Summary of Benefts and Coverage
On December 22, 2014, the Departments
of Labor, the Internal Revenue Service and
Health and Human Services issued proposed
regulations and supporting documents
addressing the SBC requirement. The majority
of the proposed regulations incorporate the
guidance previously published in numerous
FAQs, but some new information is provided.
Key items in the proposed regulations, if
adopted, would (a) clarify when and how a
plan administrator or insurer must provide an
SBC, (b) shorten the length of the SBC, (c)
amend the uniform glossary and (d) add a
third coverage example regarding “simple foot
fracture with emergency room visit.” If fnalized,
the new requirements would be effective
for plan years and open enrollment periods
beginning on or after September 1, 2015. Below
you will fnd pertinent information found in the
proposed regulations.
Types of Plans to which SBCs Apply
The proposed regulations confrm that SBCs
are not required for expatriate health plans,
Medicare Advantage plans, health savings
accounts, or plans that qualify as excepted
benefts. Excepted benefts include (when
certain requirements are met) employee
assistance programs, dental and vision
coverage and health FSAs. SBCs are required
for health reimbursement arrangements;
however, an HRA integrated with other major
medical coverage under a group health plan
does not need to separately satisfy the SBC
requirements. The SBC is prepared for the
other major medical coverage and the effects
of employer allocations to an account under the
HRA can be denoted in the appropriate spaces
on the SBC.
Shortened SBC
The regulations propose to shorten the
sample SBC template from four double-sided
pages to two and a half double-sided pages.
The proposed regulations would remove a
signifcant amount of information that is not
required by law and that has been identifed as
not useful to consumers in choosing a plan.
Content Changes to New SBC
Template
Other changes to the SBC template include:
• Adding a cost example for a simple foot
fracture treated in an emergency room
• Authorizing the continued use of the
coverage example calculator8
• Removing references to annual limits for
essential health benefts and preexisting
condition exclusions
• Revising minimum essential coverage and
minimum value information and requiring
it to be included in the SBC
• Allowing (but not requiring) premium
information to be included in an SBC
• Clarifying that for contact information,
only issuers must include an Internet
web address where a copy of the actual
individual coverage policy or group
certifcate coverage can be reviewed and
obtained
• Some defnitions in the uniform glossary
have been changed and new medical
terms have been added. Additional
terms related to health care reform such
as minimum value and cost-sharing
reductions have also been added.
Clarifcation on Providing the SBC
Issued by Issuer: When a health insurance
issuer offering group health insurance provides
the SBC to the employer before application for
coverage, the requirement to provide an SBC
upon application would be deemed satisfed
unless there is a change to the information
required to be in the SBC. If the information
changes, a new SBC that includes the correct
information would have to be provided upon
application. If the plan sponsor is negotiating
coverage terms after an application has been
fled and the information required to be in the
SBC changes, the issuer would not be required
to provide an updated SPD (unless requested)
until the frst day of coverage. The updated
SBC would have to refect the fnal coverage
terms under the contract, certifcate or policy of
insurance that was purchased.
Issued by Employer: If a plan provides an SBC
to employees prior to application for coverage,
the plan is not required to automatically provide
another SBC upon application if there is no
change to the information required to be in
the SBC. However, if there is any change to
the information by the time the application
is fled, the plan must update and provide a
current SBC as soon as practicable following
receipt of the application, but in no event later
than 7 business days following receipt of the
application. If the terms of coverage are not
fnalized after an application has been fled
and the information changes, the plan is not
required to provide an updated SBC (unless
requested) until the frst day of coverage. The
updated SBC should refect the fnal coverage
terms under the contract, certifcate or policy of
insurance that was purchased.
Elimination of Duplication
The proposed regulations clarify prior
guidance and would help prevent unnecessary
duplication where (a) a group health plan
contracts with another party who agrees to
assume responsibility to provide the SBC,(b) a
group health plan uses two or more insurance
products from different issuers to insure
benefts under a single group health plan,
and (c) the SBC for student health insurance
coverage is provided by another party, such as
an institution of higher education.
Employer Action
No employer action is required at this time until
fnal regulations are issued. For templates,
instructions and related materials, visit:
http://www.dol.gov/ebsa/healthreform/
regulations/ summaryofbenefts.html9
The monthly exclusion limitation for
transportation in a commuter highway vehicle
(vanpool) and any transit pass was previously
announced as $130 for calendar year 2014,
and the monthly exclusion limitation for
qualifed parking expenses was $250.
Congress recently enacted the Tax Increase
Prevention Act. Section 103 of the Act amends
the prior limits and raises the 2014 pre-tax
transit and vanpool limit from $130 to $250,
once again retroactively establishing parity
with the pre-tax parking beneft for the year.
Employers interested in making adjustments
will need to comply with the procedures in IRS
Notice 2015-2 released on January 8, 2015.
Administrators of these programs are working
to implement the increased beneft level into
their systems and will be communicating the
process for moving forward with the increased
limits.
The limits for 2015 are not affected by this
change and remain at $130 and $250,
respectively.
Further information, including how an
employer can use its fourth quarter Form 941
to refect changes in the excludable amount
for transit benefts provided in all quarters of
20-14 can be accessed in IRS Notice 2015-2
at: http://www.irs.gov/pub/irs-drop/n-15-02.pdf
Published on January 15, 2014
Retroactive 2014 Qualifed Transit/
Vanpooling Exclusion Adjustment
Published on February 3, 2015
2015 Federal Poverty Line
Amounts Issued
The Department of Health and Human
Services has announced the Federal Poverty
Line (“FPL”) amounts, as indexed for 2015.
Why is this Important?
Beginning in 2015, large employers may
be subject to the employer penalty under
the Affordable Care Act if they do not offer
affordable, minimum value coverage to all
full-time employees and at least one full-time
employee receives a subsidy in the Exchange.
The FPL is relevant to the affordability of the
coverage, as well as eligibility for a subsidy.
Regarding affordability, coverage is considered
to be affordable if an employee’s required
contribution does not exceed 9.5% of the
employee’s household income. For affordability
purposes, a large employer satisfes the FPL
safe harbor with respect to an employee for
a calendar month if the employee’s required
contribution for the large employer’s lowest
cost self-only coverage that provides minimum
value does not exceed 9.5% of a monthly
amount determined as the FPL for a single
individual for the applicable calendar year,
divided by 12. For example, based on the 2015
levels (see below), for affordability safe harbor
purposes, the applicable FPL is the FPL for
the state in which the employee is employed.
The FPL is $11,770 for a single individual for
every state (and Washington D.C.) except
Alaska or Hawaii. So, if the employee’s
required contribution for the calendar month
for the lowest cost self-only coverage that
provides minimum value is $93.18 (9.5% of
$11,770/12) or less, the employer meets the
FPL safe harbor.
Regarding eligibility for a subsidy, an individual
is only eligible for a subsidy in the Exchange
if s/he is within 100-400% of the FPL and is
not offered affordable, minimum value group
coverage. For subsidy eligibility purposes, for
2015, the applicable FPL is the FPL for the
FEBRUARY10
state in which the employee resides. 100-400% of the FPL is $11,770-
$47,080 for a single individual and $24,250-$97,000 for a family of four
for every state (and Washington D.C.), except Alaska or Hawaii.
Below are the 2015 HHS poverty guidelines:
Final regulations specify that employers are permitted to use the
guidelines in effect 6 months prior to the beginning of the plan year, in
order to provide employers with adequate time to establish premium
amounts in advance of the plan’s open enrollment period.
2015 Poverty Guidelines for the 48 Contiguous States and the District
of Columbia
Persons in family/household Poverty guideline
1 $11,770
2 $15,930
3 $20,090
4 $24,250
5 $28,410
6 $32,570
7 $36,730
8 $40,890
For families/households with more than 8 persons, add $4,160 for
each additional person.
2015 Poverty Guidelines for Alaska
Persons in family/household Poverty guideline
1 $14,720
2 $19,920
3 $25,120
4 $30,320
5 $35,520
6 $40,720
7 $45,920
8 $51,120
For families/households with more than 8 persons, add $5,200 for
each additional person.
2015 Poverty Guidelines for Hawaii
Persons in family/household Poverty guideline
1 $13,550
2 $18,330
3 $23,110
4 $27,890
5 $32,670
6 $37,450
7 $42,230
8 $47,010
For families/households with more than 8 persons, add $4,780 for
each additional person.11
FEBRUARY
Published on February 18, 2015
Medicare Part D
Reminder to Notify CMS
Employers sponsoring a group health plan
are required to report information on the
creditable status of the plan’s prescription drug
coverage to the Centers for Medicare and
Medicaid Services (CMS). Employers must
use CMS’s online reporting system to provide
this information at:
https://www.cms.gov/CreditableCoverage/45_
CCDisclosureForm.asp#TopOfPage
As a reminder, notice must be provided by the
following deadlines:
• Within 60 days after the beginning date of
the plan year;
• Within 30 days after the termination of the
prescription drug plan; and
• Within 30 days after any change in the
creditable coverage status.
An employer with a calendar-year plan
(January 1 – December 31, 2014) must
complete this reporting no later than
March 1, 2015.
You can fnd additional guidance on
completing the form, including screen shots,
at:
https://www.cms.gov/CreditableCoverage/40_
CCDisclosure.asp#TopOfPage
A Help Line is also available, should you
experience technical issues or an error
message when submitting the online
disclosure form. The Help Line can be
reached at 1-877-243-1285.
Published on February 19, 2015
Final Forms Released for Individual
and Employer Mandate Reporting
Recently, the Internal Revenue Service
released fnal forms and instructions for
reporting on the individual mandate (Code
Sec. 6055) and the employer mandate (Code
Sec. 6056). While these fnal forms (1094-C
and 1095-C) reference calendar year 2014,
reporting for 2014 is not required. Employers
will be subject to these reporting requirements
for 2015 with flings due in early 2016. We
expect revised forms refecting the year 2015 to
be issued in the future.
These fnalized forms and instructions provide
us with better insight into the information that
employers must collect and track during 2015 in
order to comply with this reporting requirement.
In general, the instructions provide general
clarifcation and additional examples that make
the instructions more manageable than before.
Notable changes include the following:
• Previously, there was confusion as to
how to report self-insured employersponsored health insurance coverage for
non-employees such as non-employee
directors, an individual who was a retired
employee during the entire year, or a nonemployee COBRA benefciary. The fnal
instructions clarify that employers with
self-insured plans may use Forms 1095-
C and 1094-C for non-employees (as
opposed to Forms 1094-B and 1095-B) to
report minimum essential coverage. Those
individuals will be reported on Form 1095-
C by using Code 1G (offer of coverage
to employee who was not a full-time
employee for any month of the calendar
year and who enrolled in self-insured12
coverage for one or more months of the
calendar year) and completing Part III.
• The instructions clarify that an employee
who is treated as having been offered
health coverage for purposes of section
4980H (even though not actually offered)
is treated as offered minimum essential
coverage for reporting purposes. For
example, for the months for which
the employer is eligible for dependent
coverage transition relief, non-calendar
year transition relief, or multiemployer
arrangement interim guidance (if the
employer is contributing on behalf of an
employee but the employee is not eligible
for coverage under the multiemployer
plan) with respect to an employee, that
employee should be treated as having
been offered minimum essential coverage.
• Waiting periods may be reported using the
limited nonassessment period code, 2D.
• Employees in an initial measurement
period will not be counted for purposes of
determining the total percentage of fulltime employees offered coverage.
• Additional clarifcation is provided in
areas where completing the forms for a
self-insured plan are different than for an
insured plan.
• There is clarifcation on which code
prevails when more than one code could
be used. Code 2C generally trumps
everything. Employers should always use
Code 2C if the employee was enrolled
in coverage, but only if he or she was
enrolled for the entire month.
• Under the Qualifying Offer Method and
the Qualifying Offer Transition Relief
Method, it is now clear that full-time
employees covered by a self-insured
plan cannot be furnished the alternative
statement for purposes of Part III, but
should be provided Form 1095-C.
We will be providing additional information
on these forms in the coming weeks. Large
employers should review these forms and
instructions and begin tracking and collecting
data in 2015.
For the revised forms and instructions, visit:
• http://www.irs.gov/uac/About-Form-1095-C
• http://www.irs.gov/uac/About-Form-1094-C
FEBRUARY13
MARCH
Published on March 10, 2015
Anthem Cyber Attack
Frequently Asked Questions
On January 29, 2015, Anthem discovered
that it had experienced a cyber attack
where a hacker gained unauthorized
access to Anthem’s computer systems
and obtained certain personal information
regarding Anthem’s consumers who were
or are currently covered by Anthem or other
independent Blue Cross and Blue Shield
plans that work with Anthem. This includes,
but is not limited to, employer-sponsored
group health plans (both insured and selfinsured). Anthem believes the suspicious
activity occurred over the course of several
weeks beginning in early December 2014. The
below FAQs are intended to provide you with
information regarding the recent cyber attack
experienced by Anthem. Information on this
situation is changing and should be closely
monitored.
Whose Information Was
Compromised?
Anthem’s cyber attack resulted in an improper
disclosure of nearly 80 million records and
may affect participants who received services
from an Anthem Blue Cross and Blue Shield
contracted health provider from 2004 through
the date of the cyber attack. Any health plan
participant that was covered under a Blue
Cross and Blue Shield Plan could have been
impacted if they received services in a state
serviced by the Anthem network of health
care providers.
It may be prudent for any participant who had
Blue Cross and Blue Shield coverage from
2004 on to review the www.anthemfacts.com
website and request credit protection services.
Plan sponsors may wish to include in any
notice to employees that the breach relates to
records created from 2004 on and may affect
employees who had previously been covered
under other employer sponsored health
plans accessing Blue Cross and Blue Shield
network providers. Anthem, formerly known
as Wellpoint, runs health care plans under the
Blue Cross Blue Shield, Empire Blue Cross,
Amerigroup, Caremore, Unicare, Healthlink,
DeCare, HealthKeepers and Golden West
brands.
What Information Was Compromised
In The Breach?
Anthem has indicated that to date, they
believe certain personal information,
including names, dates of birth, member ID
numbers, social security numbers, street
addresses, emails and employment and
income information has been compromised.
Anthem does not currently believe that credit
card or detailed medical information (such as
claims, test results or diagnostic codes) were
compromised.
Is The Anthem Cyber Attack A Breach
Under HIPAA?
According to a Town Hall conference call on
February 11, 2015 and a letter provided to
plan sponsors dated February 23, 2015 from
Kenneth Goulet, President, Commercial and
Specialty Business at Anthem, Anthem views
the unauthorized access of information as
a result of this cyber attack a breach under
HIPAA and under certain state privacy laws.
Anthem continues to investigate this issue and
work with applicable regulators at the federal
and state level.
Generally, self-insured group health plans that
contract with Anthem as a TPA are subject to
HIPAA breach rules, while Anthem is solely
responsible for HIPAA breach issues for fully
insured plans that do not receive PHI. Larger
fully insured health plans that have access to
or are provided with PHI will need to assure
that they are compliant with HIPAA breach
rules if their participants were affected.
What Are Plan Sponsor Obligations?
Because group health plans are subject to the
HIPAA Privacy and Security Rules, the plan
sponsor has obligations to determine whether
a breach of protected health information (PHI)
has occurred and, if so, provide notifcation
to affected participants, cure the cause of the
breach, and attempt to address any harm that
may have occurred to a participant as a result
of the breach.14
What Do Plan Sponsors Need To Do?
Hopefully not much. Anthem has outlined,
in the letter previously referenced, that they
will be assisting clients in fulflling obligations
under HIPAA or state privacy laws. Their
goal is to promote a consistent message
to potentially impacted individuals. In that
regard, Anthem intends to issue notices to
affected participants and to appropriate state
and federal regulators. Anthem has indicated
that it believes these notices will satisfy the
plan sponsor notice requirements, including
notice obligations under the HIPAA breach
notifcation regulations issued.
Specifcally, according to the letter, Anthem
has taken or intends to take the following
actions:
• As a business associate with health plans,
Anthem will provide to the plan sponsor
written notice of the breach and provide
information as required by HIPAA within
sixty (60) days after Anthem discovered
the breach;
• Anthem will provide, on behalf of the
health plan, notice to potentially impacted
individuals for whom Anthem has contact
information within legally required
timeframes;
• Anthem will deliver written notice to
identifed state regulators as required by
state data breach notifcation laws and
that notice will reference any affected
health plan by name;
• Anthem will make substitute notice under
HIPAA or state data breach notifcation
laws on behalf of the affected health
plan to potentially impacted individuals
for whom Anthem has insufficient or
out-of-date contact information or where
otherwise permitted by law; and
• Anthem will notify federal regulators
on behalf of the health plan, including
the Department of Health and Human
Services’ Office for Civil Rights, and that
notice will reference specifcally affected
health plans by name.
Anthem has indicated that while it does
not provide legal advice, it believes that all
notices already delivered, and those that will
be delivered in the future, comply with the
applicable laws that require those notices. It is
Anthem’s position that these notices will fulfll
both Anthem and affected health plan’s notice
obligations relating to the breach of participant
information. However, Anthem encourages
affected health plans to seek advice from
counsel to address specifc questions or
concerns.
What Is Anthem Doing To Help
Affected Participants?
Anthem is notifying potentially impacted
current and former members by U.S. Postal
mail regarding the cyber attack and is
including information on how individuals may
protect themselves. One service Anthem is
offering includes identity protection and repair
services free of charge. Anthem is working
with AllClear ID, an identity protection provider,
to offer 24 months of identity theft repair and
credit monitoring services to current or former
members of an affected Anthem plan dating
back to 2004.
Anthem established a website for ongoing
information regarding this situation,
www.anthemfacts.com.
What Steps Should Plan Sponsors
Take Now?
Plan sponsors should do the following:
• Assess whether health plan participants
may have been affected by the Anthem
breach.
• For self-insured plans using Anthem as a
TPA, determine what contracts the plan
might have with Anthem (TPA service
agreement, BAA agreements, etc.) and
whether those contracts impact Anthem’s
obligations to the plan.
• For insured plans, Anthem is the Covered
Entity so it is directly responsible for
contacting affected participants.
• Notify affected participants of the
opportunity to obtain identity protection by
directing them to the www.anthemfacts.
com website.
• Consult with counsel to assess whether
Anthem’s actions on behalf of your health
plan satisfy any applicable HIPAA and
state law privacy or notice obligations the
plan may have.
MARCH15
MARCH
The DOL amended the regulatory defnition of
“spouse” under the Family and Medical Leave
Act (“FMLA”) so that “spouse” for purposes
of FMLA rights includes a same-sex spouse,
regardless of where the employee and spouse
live. This means the “place of celebration” will
determine whether an individual is a “spouse”
under FMLA. This change is effective March
27, 2015. Current FMLA regulations use a
“state of residence rule,” recognizing a spouse
under the law of the state in which the couple
resides.
Background
In June 2013, the Supreme Court, in United
States v. Windsor, struck down the federal
defnition of “marriage” and “spouse” under
Section 3 of the Defense of Marriage Act
(“DOMA”), holding that same-sex marriages
valid under state law are recognized at the
federal level. The decision affects over 1,100
sections of federal law that have a provision
based on marriage, including the FMLA.
In a nutshell, the FMLA requires certain
employers to permit eligible employees to
take up to 12 weeks (26 weeks in the case
of caring for an injured service member)
of unpaid, job-protected leave each year
because of a new baby, to care for an
immediate family member who has a serious
health condition, or because of their own
serious health condition, or because of an
emergency when a family member is called
to active military duty. A covered employer is
required to maintain group health plan benefts
for an employee on FMLA leave on the same
terms and conditions as if the employee had
continued to work. When the employee returns
from FMLA leave, the employer must restore
the all the employee’s benefts.
Following Windsor, the DOL’s FMLA guidance,
revised in August 2013, required employers
subject to the FMLA to extend FMLA rights to
an eligible employee in connection with his or
her same-sex spouse only when the employee
and spouse reside in a state that recognizes
same-sex marriage; FMLA rights related to
a same-sex spouse currently do not apply to
an employee residing in a state that does not
recognize same-sex marriage.
The Change
Spouse, as defned in the statute, means
a husband or wife. For purposes of this
defnition, as proposed in June 2014, fnal
regulations now have “husband or wife”
Published on March 11, 2015
Final FMLA Rules Regarding
Same-Sex Spouses16
refer to the other person with whom an
individual entered into marriage as defned or
recognized under state law for purposes of
marriage in the state in which the marriage
was entered into or, in the case of a marriage
entered into outside of any state, if the
marriage is valid in the place where entered
into and could have been entered into in at
least one state. This defnition includes an
individual in a same-sex or common law
marriage that either (1) was entered into in a
state that recognizes such marriages or, (2) if
entered into outside of any state, is valid in the
place where entered into and could have been
entered into in at least one state.
The rule means that an eligible employee,
regardless of where s/he lives, is able to:
• take FMLA leave to care for his/her
same-sex spouse with a serious health
condition;
• take qualifying exigency leave due to his/
her same-sex spouse’s covered military
service; or
• take military caregiver leave for his/her
same-sex spouse.
The change entitles eligible employees to
take FMLA leave to care for their stepchildren
(children of the employee’s same-sex spouse)
even if the in loco parentis requirement of
providing day-to-day care or fnancial support
for the child is not met. The change also
entitles eligible employees to take FMLA
leave to care for their stepparents (same-sex
spouses of the employee’s parents), even
though the stepparents never stood in loco
parentis to the employee.
Published on March 12, 2015
CMS Announces Special Enrollment
Period in Federal Exchanges
The Centers for Medicare & Medicaid
Services (“CMS”) announced on February
20, 2015 a special enrollment period for
individuals and families who did not have
health coverage in 2014 and are subject to
the “shared responsibility le their 2014 taxes
in states which use the Federally-facilitated
Marketplaces (“FFM”). This special enrollment
period will allow those individuals and families
who were unaware or didn’t understand the
implications of this new requirement to enroll
in 2015 health insurance coverage through the
FFM.
For those who were unaware or didn’t
understand the implications of the fee for
not enrolling in coverage, CMS will provide
consumers with an opportunity to purchase
health insurance coverage from March 15
to April 30. Those eligible for this special
enrollment period live in states with a
Federally-facilitated Marketplace and:
• currently are not enrolled in coverage
through the FFM for 2015,
• attest that when they fled their 2014 tax
return they paid the fee for not having
health coverage in 2014, and
• attest that they frst became aware of, or
understood the implications of, the Shared
Responsibility Payment after the end
of open enrollment (February 15, 2015)
in connection with preparing their 2014
taxes.
If a consumer enrolls in coverage before the
15th of the month, coverage will be effective
on the frst day of the following month.
Many state-based Exchanges are offering
an extension as well. Below are the special
enrollment periods for the California,
Connecticut and New York state-based
Exchanges:
California: February 23 through April 30
Connecticut: April 1, through April 30
New York: March 1 through April 30
MARCH17
MARCH
Published on March 19, 2015
Guidance Issued
Regarding Supplemental Excepted Benefts
The Departments of Labor (“DOL”), Health
and Human Services (“HHS”), and the
Treasury (collectively, the “Departments”)
have become aware of health insurance
carriers selling supplemental products that
provide a single beneft. At least one carrier
is characterizing this type of coverage as an
excepted beneft. These carriers claim that the
products meet the criteria for supplemental
coverage to qualify as an excepted beneft
outlined in the Departments’ guidance and
are designed to fll in the gaps of primary
coverage in the sense that they are providing
a beneft that is not covered under the primary
group health plan. The Departments issued
an FAQ that provides guidance on whether
health insurance coverage that supplements
group health coverage by providing additional
categories of benefts can be characterized as
supplemental excepted benefts.
Background
The Public Health Service Act (“PHSA”) does
not apply to “excepted benefts” including
“supplemental excepted benefts.” The PHSA
requirements include:
• Dependent coverage for children under
age 26;
• Coverage of preventive services;
• Preexisting condition prohibition;
• Lifetime limits on essential benefts
prohibition;
• Annual limits on essential benefts
restriction;
• Nondiscrimination rule for insured plans;
and
• New appeals process.
A supplemental excepted beneft, under a
safe harbor, is a separate policy, certifcate, or
contract of insurance that satisfes all of the
following requirements:
1. Independent of primary coverage.
The supplemental policy, certifcate, or
contract of insurance must be issued
by an entity that does not provide the
primary coverage under the plan. For
this purpose, entities that are part of the
same controlled group of corporations
or part of the same group of trades or
businesses under common control, within
the meaning of section 52(a) or (b) of the
Code, are considered a single entity.
2. Supplemental for gaps in primary
coverage. The supplemental policy,
certifcate, or contract of insurance must
be specifcally designed to fll gaps in
primary coverage, such as coinsurance or
deductibles, but does not include a policy,
certifcate, or contract of insurance that
becomes secondary or supplemental only
under a coordination-of-benefts provision.
3. Supplemental in value of coverage. The
cost of coverage under the supplemental
policy, certifcate, or contract of insurance
must not exceed 15% of the cost of
primary coverage. Cost is determined
in the same manner as the applicable
premium is calculated under a COBRA
continuation provision.18
4. Similar to Medicare supplemental
coverage. The supplemental policy,
certifcate, or contract of insurance that
is group health insurance coverage must
not differentiate among individuals in
eligibility, benefts, or premiums based on
any health factor of an individual (or any
dependent of the individual).
Relief Provided by the FAQ
One of the requirements that must be satisfed
in order to qualify as a supplemental excepted
beneft, as stated above, is the policy must be
supplemental for gaps in primary coverage.
Regarding this requirement, the Departments
will not initiate an enforcement action as
long as the coverage that provides coverage
of additional categories of benefts are not
“essential health benefts” in the applicable
state where marketed (as opposed to flling in
cost-sharing gaps under the primary plan).
The Departments encourage states that
have primary enforcement authority over
the provisions of the PHSA, to utilize the
same enforcement discretion under such
circumstances.
Published on March 19, 2015
Relief for Small Employers
Reimbursing Individual Policies
An employer cannot offer employees cash to
reimburse the purchase of an individual policy,
whether or not the employer treats the money
as pre-tax or post-tax to the employee. Such
arrangements (called “employer payment
plans”) are subject to the market reform
provisions of the Affordable Care Act (“ACA”),
including prohibition on annual limits and the
requirement to provide certain preventive
services without cost sharing with which it
cannot comply. These arrangements may be
subject to a $100/day excise tax per applicable
employee (which is $36,500 per year, per
employee).
Recently, the Departments of Labor (“DOL”),
Health and Human Services (“HHS”), and
the Treasury (collectively, the “Departments”)
provided temporary relief to employers that
are not applicable large employers (“ALEs”)
from this rule until July 1, 2015. An ALE for
a calendar year is generally an employer
who employed an average of at least 50
full-time employees (taking into account
full-time equivalent employees) on business
days during the preceding calendar year. For
determining whether an entity was an ALE for
2015, an employer may determine its status
as an applicable large employer by reference
to a period of at least six consecutive calendar
months, as chosen by the employer, during
the 2014 calendar year. Since ALE status is
determined annually, the specifc relief is (1)
for 2014 for employers that are not ALEs for
2014 and (2) for January 1 through June 30,
2015 for employers that are not ALEs for 2015.
This relief does not extend to stand-alone
HRAs or other arrangements to reimburse
employees for medical expenses other than
insurance premiums.
MARCH19
MARCH
Published on March 25, 2015
Should Plan Years be Changed to Delay
Compliance with ACA Provisions?
Representatives from several insurance
carriers are encouraging employers with 51-
100 full-time employees to move their policy
years to December 1 – November 30, effective
December 1, 2015, to delay certain design
requirements applicable to non-grandfathered
group health plans for plan years beginning
on or after January 1, 2016. These design
requirements are:
• Small, insured group health plans must
offer essential benefts and provide a
bronze level of coverage.
• Insurance carriers will be subject to
new underwriting rules with respect to
small, insured groups. Instead of using
experience rating, carriers will use
community rating. Rating variations will be
restricted to (a) beneft coverage elected
(plan and tier), (b) geographic area, (c)
age, limited to a ratio of 3 to 1 for adults,
and (d) tobacco use, limited to a ratio of
1.5 to 1.
The defnition of “small employer” will increase
from an employer with up to 50 employees
to an employer with up to 100 employees,
beginning with the 2016 plan year. However, it
is possible that this could be delayed.
There are compliance issues associated with
changing a plan year – importantly:
• Changing the plan year to later in the
calendar year will expose a mid-sized
employer to the employer penalty as of
January 1, 2015 rather than the frst day of
the 2016 plan year.
• Changing plan years to delay the effective
date of certain ACA-related mandates is
arguably impermissible.
Below is a summary of these compliance
issues. It is important that employers
considering changing their policy years
consult counsel.
Plan Year vs. Policy Year
First, changing a policy year is not relevant for
health care reform purposes. The plan year is
relevant. A plan year is an accounting period.
It is usually the same as the policy year (the
period for which rates are locked in), but not
always. To confrm the plan year, employers
can examine the summary plan description
and/or Form 5500.
In addition to any policy year change, there
should be a plan year change. Additionally, if
employees pay premiums on a pre-tax basis,
there should be a plan year change for the
cafeteria plan. Any plan year change would
have to be properly documented. It may
be desirable to change other policy years
and plan years (e.g., for the disability and20
life insurance plans) as well to maintain a
consistent program.
2015 Transition Relief for Employers
with 50-99 Full-Time Employees
Beginning in 2015, large employers can
be subject to a penalty when not offering
affordable, minimum value coverage to all fulltime employees. The fnal rules provide relief
for midsized employers to delay the employer
penalty until 2016.
The transition relief applies to all calendar
months of 2015 plus any calendar months of
2016 that fall within the employer’s 2015 plan
year; it will cover non calendar-year plans, but
only if the employer satisfes certain criteria
– one of which is that the employer did not
modify the plan year after February 9, 2014 to
begin on a later calendar date (for example,
changing the start date of the plan year from
January 1 to December 1).
Thus, if a mid-sized employer changes its plan
year to later in the calendar year, it will no
longer be eligible for the transition relief and
may be subject to the employer penalty as of
January 1, 2015.
Changing the Plan Year to Avoid
Federal Law
Although there does not appear to be any
specifc prohibition at this time, changing a
plan year for the purpose of avoiding Federal
law has been prohibited historically in various
benefts contexts, including one provision
applicable to health care reform. Examples
include the following:
• Under guidance issued under health care
reform, for a health FSA, a short plan year
may only be used for a valid business
purpose which does not include delaying
application of the $2,500 limit. If a change
in the plan year does not satisfy this valid
business purpose requirement, the plan
year for the cafeteria plan remains the
plan year that was in effect prior to the
attempted change. IRS Notice 2012-40.
• A cafeteria plan can have a short plan
year for a valid business purpose. A plan
year may not be changed if a principal
purpose of the change is to circumvent
the requirements of Code § 125 or the
regulations thereunder. IRS Prop Reg. §
1.125-1(d)(2).
• For merger and acquisition purposes,
changing a plan year must be done
for a valid business purpose. Where a
transaction has no substantial business
purpose other than the avoidance or
reduction of Federal tax, the tax law will
not regard the transaction. See Gregory v.
Helvering, 293 U.S. 465 (1935).
• For COBRA purposes, if a principal
purpose of establishing separate plans is
to evade any requirement of law, then the
separate plans will be considered a single
plan to the extent necessary to prevent
the evasion. IRS Reg. § 54.4980B-2,
Q&A-6(c).
• For ERISA purposes, a plan is deemed
to not be established under a collective
bargaining agreement for any plan year
in which the agreement is a scheme,
plan, stratagem, or artifce of evasion,
a principal intent of which is to evade
compliance with state law and regulations
applicable to insurance. 29 CFR § 2510.3-
40(c)(2).
• In the multiemployer pension plan context,
withdrawal liability exists under ERISA
§ 4212(c) where one of the primary
purposes of the transaction is to avoid
withdrawal liability, even if that isn’t the
only purpose. See Santa Fe Pacifc Corp.
v Central States, Southeast & Southwest
Areas Pension Fund, 22 F3d 725 (7th Cir.
1994).
In addition, with respect to any IRS or DOL
audit, senior agents/investigators have wide
discretion in assessing and waiving penalties.
They have been known to go much easier on
employers that appear to be making honest
efforts to comply; they are generally less
inclined to be kind when plan sponsors are
taking advantage of the fexibility they have
with respect to operating and administering
plans.
SBC
Notice of a modifcation to enrollees should
be provided no later than 60 days prior to the
date the modifcation will take effect because
the group health plan is making a material
modifcation to the SBC outside of renewal
or reissuance (e.g., a mid-year plan design
change).
MARCH21
APRIL
Published on April 9, 2015
2016 Cost-Sharing Limits,
Reinsurance Fee, and Other Changes
Related to the Exchange
On February 27, 2015, the Department of
Health and Human Services (“HHS”) changed
cost-sharing and transitional reinsurance
program fee limits and released standards for
health insurers and the Exchange (a.k.a. the
Health Insurance Marketplace). This article
identifes a few items of note for employers.
2016 Cost-sharing Limits
For 2016, the maximum annual out-of-pocket
limits for non-grandfathered plans are $6,850
for individual coverage and $13,700 for
family coverage. These limits generally apply
with respect to any essential health benefts
(“EHBs”) offered under the group health plan.
The fnal regulations established that starting
with the 2016 plan year, the self-only annual
limitation on cost sharing applies to each
individual, regardless of whether the individual
is enrolled in other than self-only coverage,
including in a family HDHP.
Transitional Reinsurance Program
The reinsurance fee for 2016 is $27 per
covered individual. 2016 is the fnal year
for the transitional reinsurance program.
Generally, enrollment counts for the
reinsurance fee are due by November 15 of
the beneft year. Payment is due by January
15 of the following year (and November
15 of the following year if paying in two
installments). The regulations make clear that
when these dates fall on a Saturday, Sunday,
or holiday, submission of this information and/
or payment is due by the next business day.
For 2015:
• Enrollment counts are due by November
16, 2015.
• The fee of $44/per covered life:
• if making a single payment, is due by
January 15, 2016; or
• if paying in two installments, the frst
payment of $33/covered life is due
by January 15, 2016 and the second
payment of $11/covered life is due by
November 15, 2016.
For 2016:
• Enrollment counts are due by November
15, 2016.
• The fee of $27/covered life:
• if making a single payment, is due by
January 16, 2017; or
• if paying in two installments, the frst
payment of $21.60 per covered life is due
by January 16, 2017 and the second and
fnal payment of $5.40 per covered life is
due by November 15, 2017.
The regulations clarify the application of
the snapshot count and snapshot factor
counting methods to a plan that is established
or terminated, or that changes funding
mechanisms, in the middle of a quarter.
Specifcally, if the plan had enrollees on any
day during a quarter and if the contributing
entity uses either the snapshot count or
snapshot factor method, it must choose a set
of counting dates for the counting period such
that the plan has enrollees on each of the
dates, if possible. The enrollment count for a
date during a quarter in which the plan was in
existence for only part of the quarter can be
reduced by a factor refecting the amount of
time during the quarter for which the plan or
coverage was not in existence.
Consistent with the proposed regulations,
the fnal regulation provides that self-funded
expatriate plans are not required to pay the
reinsurance fee for 2015 and 2016 beneft
years. Insured expatriate plans do not make
reinsurance contributions. Self-insured
plans that do not use a TPA do not make
reinsurance contributions in the 2015 and
2016 beneft years. The fnal regulations
clarify that a TPA is an entity that is not under22
common ownership with the self-insured
group health plan or its sponsor that provides
administrative functions in connection with
the core administrative services. Common
ownership should be determined under Code
Sec. 414(b) and (c).
Open Enrollment Period for the
Exchange
For beneft year January 1, 2016, the annual
enrollment period for the Exchange begins
November 1, 2015 and extends through
January 31, 2016. For the beneft year
beginning on January 1, 2016, the Exchange
must ensure coverage is effective:
• January 1, 2016 for plan selections
received by the Exchange on or before
December 15, 2015;
• February 1, 2015 for plan selections
received by the Exchange from December
16, 2015 through January 15, 2016; and
• March 1, 2016 for plan selections received
by the Exchange from January 16, 2016
through January 31, 2016.
Small Business Health Options
Program (SHOP)
In an effort to streamline the administration
of the SHOP, the regulations allow the SHOP
to assist employers in the management
of COBRA continuation of coverage. The
regulations provide that the SHOP is
permitted to collect COBRA premium from
any person enrolled in COBRA coverage
through the SHOP consistent with applicable
and the terms of the group health plan. The
regulations also align the SHOP rules with the
COBRA rules, including COBRA eligibility for
dependents and former dependents. Note that
SHOP does not have capabilities to manage
the entire COBRA process (e.g., send out the
notices).
Minimum Value Plans
In November 2014, in Notice 2014-69, HHS,
the Treasury, and the Internal Revenue
Service (collectively, the “Departments”)
announced their intent to issue regulations
clarifying that a group health plan will
not provide minimum value (MV) if it
excludes substantial coverage for in-patient
hospitalization services or physician services
(or both) (referred to as a “Narrow MV Plan”).
There is a very narrow exception to this
general rule if, and only if, an employer with
a plan year that begins on or before March
1, 2015 has entered into a binding written
commitment to adopt or has begun enrolling
employees in a Narrow MV Plan prior to
November 4, 2014, in which case it will not be
subject to the Employer Penalty for the 2015
plan year.
Consistent with Notice 2014-69 and proposed
regulations, these regulations fnalized the
requirement that an employersponsored plan
must provide substantial inpatient hospital
services and physician services, as well as
meet the quantitative standard of the actuarial
value of benefts plan (cover 60% of the total
allowed costs) in order to provide MV.
Pediatric Age
The regulations provide that pediatric benefts
must be provided at least until the end of the
month in which the enrollee turns 19.
Habilitative Services
Habilitative services and rehabilitative
services are part of the EHB package. The
fnal regulations adopt a uniform defnition of
habilitative services to clarify the difference
between habilitative and rehabilitative
services. Habilitative services are provided
for a person to attain, maintain, or prevent23
APRIL
deterioration of a skill or function never
earned or acquired due to a disabling
condition. Rehabilitative services, are provided
to help a person regain, maintain or prevent
deterioration of a skill or function that has
been acquired but then lost due to illness,
injury or disabling condition.
The fnal regulations adopt the defnition
of habilitative services from the Uniform
Glossary of Health Coverage and Medical
terms, effective for plan years beginning in
2016, and require carriers to have separate
visit limits on habilitative services and
rehabilitative services for plan years beginning
in 2017.
Medical Loss Ratio
The fnal rule clarifes that that federal and
state employment taxes should not be
excluded from premium in the MLR and rebate
calculations. It also provides that subscribers
of non-federal governmental or other group
health plans not subject to ERISA must
receive the beneft of MLR rebates within
three (3) months of receipt of the rebate by
their group policyholder, just as subscribers of
group health plans subject to ERISA do.
Published on April 16, 2015
Cadillac Tax
Preliminary Guidance, Part 1
The IRS issued preliminary guidance regarding
the excise tax on high cost employer-sponsored
health coverage, commonly known as the
“Cadillac Tax.” Notice 2015-16 describes
potential approaches being considered in
developing guidance under Section 4980l.
Specifcally the Notice addresses (1) the
defnition of applicable coverage, (2) the
determination of the cost of applicable
coverage, and (3) the application of the annual
statutory dollar limit to the cost of applicable
coverage. The IRS will seek comments
on potential approaches to a number of
issues both with respect to this Notice and a
subsequent notice that is expected to address
other issues. Additionally, there will be an
opportunity to comment after the proposed rule
is issued.
The Notice is lengthy and full of complicated
details. To simply the information, we will
release two articles regarding this information.
This frst article addresses the defnition of
applicable coverage.
Background
Beginning January 1, 2018, Code Section
4980l imposes a 40% excise tax on any
excess beneft provided to an employee that
exceeds prescribed thresholds. An excess
beneft is the excess, if any, of the aggregate
cost of the applicable coverage of the
employee for the month over the applicable
dollar limit for the employee for that month.
The 2018 thresholds are $10,200 for self-only
coverage and $27,500 for coverage other than
self-only (these thresholds are annualized
and adjusted in certain circumstances). For
example, an employee’s aggregate cost of
applicable coverage for a month is $600. Since
she has self-only coverage, the threshold is
$850 ($10,200/12). There would be no excise
tax because the $600 falls below the $850
threshold. However, if the aggregate cost was
$1,000, then a 40% excise tax on $150 applies
($1,000 – $850), totaling $60 for the month.
Applicable Coverage
“Applicable coverage” generally means
coverage under a group health plan (insured
or self-insured) that is made available to an
employee by an employer that is excludable
from the employee’s income (or would be
excludable if it were employer-provided
coverage). In determining Cadillac Tax liability, it
is important to frst determine what health plan
benefts are considered applicable coverage.
While the Notice provides helpful clarifcation
as to types of benefts potentially impacted by
this tax, it also raises a number or questions
regarding HSAs, on-site clinics, self-insured
dental and vision coverage and EAPs.24
It is important to note that governmental plans, retiree plans, and
multiemployer plans are included as applicable coverage.
Health Savings Accounts
The IRS anticipates that employer contributions to health savings
accounts (HSAs) are applicable coverage. This includes pre-tax salary
reduction contributions. The cost of the coverage equals the amount of all
“employer contributions” (including employee pre-tax salary reductions).
While the statute defnes HSA contributions as applicable coverage
(and the IRS’s interpretation appears consistent with that defnition), the
potential implications of this defnition are troubling. Notably:
• While many employers use qualifed HDHPs to control cost,
the inclusion of employer contributions and employee pre-tax
contributions to the HSA associated with this coverage may result
in many of these arrangements hitting the excise tax threshold. For
example, if an employee with self-only coverage contributed the
maximum HSA contribution amount in 2018 and that amount was
$3,500, this would leave only $6,700 for the major medical plan and
any of the other “applicable coverages” before an excise tax would
apply.
• If these contributions are included as applicable coverage,
employers may be discouraged from making contributions to the
employee’s HSA to avoid exposure to the Cadillac Tax. In addition,
should the employer continue to make a contribution to employees’
HSAs, the employer likely will become subject to rather stringent
comparability rules if pre-tax contributions (through a cafeteria plan)
Applicable Coverage
• Major medical coverage
• Health FSA
• HSA (employer contributions and pre-tax employee
contributions through a cafeteria plan)
• On-site medical clinics
• Coverage for specifed disease, illness or hospital indemnity
policy when paid by the employer or on a pre-tax basis
• Executive physicals
• HRAs
Not Applicable Coverage
• Many excepted benefts
• Long-term care
• Insured dental and vision (see discussion of self-insured dental
and vision)
• Coverage for specifed disease, illness or hospital indemnity
policy when paid for on an after tax basis
• Employee after tax contributions to an HSA25
APRIL
to the HSA account are eliminated in order
to reduce potential excise tax liability
• In the event the ability for an employee to
make pre-tax salary reduction elections
to an HSA is removed, the convenience
factor of contributing to the HSA may
be lost which may result in employees
contributing less to their HSAs.
After-tax contributions made to an HSA are not
applicable coverage and will not be included in
the calculation of the year-end above-the-line
deduction of after-tax HSA contributions made
during the calendar year on their personal
tax returns. This deduction does not affect the
excise tax.
On-site Medical Clinics
Coverage provided through an on-site medical
clinic is generally applicable coverage.
However, the IRS anticipates that forthcoming
guidance will exclude on-site medical clinics
that offer only de minimis medical care to
employees. De minimis is not defned and the
IRS seeks comments in this area. Notable,
the IRS references the COBRA regulations
which exclude an on-site clinic located on the
employer’s premises from the defnition of a
group plan if the health care provided:
1. Consists primarily of frst aid that is
provided during the employer’s working
hours for treatment of a health condition,
illness, or injury that occurs during those
working hours;
2. Is available only to current employees; and
3. Is free of charge to employees who use
the facility.
The IRS seeks comments on the treatment of
clinics that meet the criteria described in the
COBRA regulations as well as clinics that may
provide certain services in addition to (or in lieu
of) frst aid.
While not specifcally addressed in the Notice,
it is likely that fnal guidance will include robust
on-site clinics in the defnition of applicable
coverage. Such arrangements that provide
a wide array of services beyond frst aid and
allow employees and their family members to
receive services will likely not be considered de
minimis.
Dental and Vision Coverage
Insured dental and vision coverages are
excluded from the applicable coverage
defnition and will not be included in the
aggregate cost of coverage for purposes of
determining excise tax liability. However, it is
unclear whether self-insured limited-scope
dental and vision coverage are applicable
coverage. The regulators may consider
excluding self-insured dental and vision
benefts that are excepted benefts from
applicable coverage, thus excluding the cost of
such coverage from the excise tax calculation.
Employee Assistance Programs
Under recently issued regulations, employee
assistance programs (EAPs) that meet certain
criteria are considered excepted benefts. The
IRS is considering excluding excepted EAPs
from the defnition of applicable coverage. The
IRS seeks comments opposing this exclusion.
Unaddressed Benefts
The Notice contains no discussion of certain
benefts that may be viewed as applicable
coverage, including wellness programs and
telemedicine. Further guidance on these
benefts would be helpful.
Additional guidance is expected and it is
anticipated that the benefts community will be
actively voicing comments in response to this
Notice.26
Published on April 29, 2015
Reinsurance Fee Overpayment Refund
Request Deadline is April 30
For the 2014 beneft year, contributing entities
(insurance carriers and employers with selfinsured group health plans) were required to
submit their annual enrollment count and remit
their resulting contributions utilizing the “ACA
Transitional Reinsurance Program Annual
Enrollment and Contributions Submission
Form” (Form) via www.pay.gov by December
5, 2014. By using this website, the contributing
entity (or third party administrators or
administrative servicesonly contractors on
their behalf) entered their self-reported annual
enrollment count in the Form which autocalculated the annual contribution amount due
based on the 2014 contribution rate of $63.00
per covered life.
The Centers for Medicare & Medicaid
Services (CMS) is aware that some
contributing entities may have misreported
their annual enrollment count for the 2014
beneft year due to misapplying the permitted
counting methods or including individuals
who are otherwise exempt for purposes of
reinsurance payments. This potentially may
have resulted in an overpayment. In the case
of such an overpayment, where payment
has been processed, the contributing entity
must re-fle the Form with the correct annual
enrollment count and CMS will rerun the
payment associated with the erroneous fling.
An employer must also send an email to:
reinsurancecontributions@cms.hhs.gov
For the 2014 beneft year, contributing entities
must send refund requests resulting from
annual enrollment count misreporting to CMS
by April 30, 2015 or 90 days from the date of
their Form submission, whichever is later.
For the 2015 and 2016 beneft years, refund
requests resulting from annual enrollment
count misreporting must be submitted 90 days
from the date of Form submission.
Please note that the deadlines outlined above
do not apply when a contributing entity:
• requests a refund because it has paid
reinsurance contributions more than once
for the same covered life; or
• correctly applied one of the counting
methods requests to change its annual
enrollment count and associated payment
after the reporting deadline for the
applicable beneft year.
Inquiries the reinsurance contribution
submission process should be sent to
reinsurancecontributions@cms.hhs.gov.
For more information, contact CMS at
the above email address. A copy of the
announcement of this refund process is
available here:
http://www.cms.gov/CCIIO/Resources/
Regulations-and-Guidance/Downloads/RICGuidance-Refund-Request-Deadline-fnal-.pdf
APRIL27
MAY
The IRS released the 2016 limits for
health savings accounts (HSAs) and their
accompanying high deductible health plans
(HDHPs) effective for calendar year 2016.
Some limits were adjusted from the 2015
amounts.
Annual Contribution Limitation
For calendar year 2016, the limitation
on deductions for an individual with selfonly coverage under a HDHP is $3,350.
For calendar year 2016, the limitation on
deductions for an individual with family
coverage under a HDHP is $6,750.
High Deductible Health Plan
For calendar year 2016, a HDHP is defned as
a health plan with an annual deductible that is
not less than $1,300 for selfonly coverage or
$2,600 for family coverage, and the annual outof-pocket expenses (deductibles, co-payments,
and other amounts, but not premiums) do not
exceed $6,550 for selfonly coverage or $13,100
for family coverage. Non-calendar year plans:
In cases where the HDHP renewal date is
after the beginning of the calendar year (i.e., a
fscal year HDHP), any required changes to the
annual deductible or out-of-pocket maximum
may be implemented as of the next renewal
date.
Catch-up Contribution
Individuals who are age 55 or older and
covered by a qualifed HDHP may make
additional catch-up contributions each year
until they enroll in Medicare. The additional
contribution, as outlined by the statute, is
$1,000 for 2009 and thereafter.
Published on May 8, 2015
2016 HSA Limits
Published on May 16, 2015
Cadillac Tax
Preliminary Guidance, Part 2
The IRS issued Notice 2015-16 to begin
the process of developing regulatory
guidance regarding the excise tax on high
cost employer-sponsored health coverage,
commonly known as the “Cadillac Tax.”
Beginning January 1, 2018, a 40% excise tax
will apply on the cost of applicable coverage
that exceeds prescribed thresholds (described
later in this article).
Our previous article (Part I, dated April 16,
2015) addressed the defnition of applicable
coverage. Part II looks at how the applicable
statutory limit may apply with respect to the
cost of coverage and methods to determine
the cost of applicable coverage.
The IRS seeks comments on these proposed
approaches.
Dollar Limit Adjustments
The statute provides two baseline peremployee dollar limits for 2018:
• $10,200 for self-only coverage, and
• $27,500 for coverage other than self-only.
The guidance clarifes that these amounts are
subject to certain adjustments, as follows:
• Health cost adjustment percentage
(applicable in 2018 only). This adjustment
will be applied to the peremployee dollar
limit for 2018 to determine the actual dollar
limits for that year.
• Cost of living adjustment (applicable
after 2018). For taxable years after 2018,
a cost-of-living adjustment based on28
CPI-U plus one percent will be applied to
determine applicable dollar limits.
• Qualifed retirees1 and high-risk
professions2. An additional amount is
added to the dollar limits for qualifed
retirees and individuals who participate
in a plan sponsored by an employer the
majority of whose employees covered
by the plan are engaged in highrisk
professions or who repair or install
electrical or telecommunication lines.
The additional amounts added to the
prescribed thresholds are $1,650 for selfonly coverage and $3,450 for coverage
other than self-only.
• Age and gender adjustment. For 2018
and beyond, the dollar limits for an
employer may be increased by an age
and gender adjustment if the age and
gender characteristics of an employer’s
workforce are different from those of the
national workforce. The amount of this
adjustment is to be determined.
• Multiemployer plans. Coverage provided
under a multiemployer plan is treated as
coverage other than self-only (e.g., the
$27,500 threshold applies to both self-only
coverage and coverage other than selfonly).
Determination of the Cost of
Applicable Coverage
This new excise tax will apply on the excess,
if any, of the aggregate cost of applicable
coverage of an employee for a month over the
applicable dollar limit.
Under the existing framework, rules similar to
the COBRA rules for determining applicable
premium will be used to determine the
cost of applicable coverage. Given that the
regulators have provided limited guidance on
determining the cost of COBRA coverage, in
particular for self-insured plans and HRAs,
guidance issued under section 4980I is
likely to affect existing COBRA rules (section
4980B).
Currently, the COBRA applicable premium
must be determined for a 12-month
determination period, and must be determined
before the start of such period. For selfinsured plans there are two methods to
determine the COBRA applicable premium:
• the actuarial basis method, and
• the past cost method.
Absent guidance employers and plans must
operate in good faith compliance with a
reasonable interpretation of the section 4980B
statutory requirements.
Briefy, the Notice outlines potential
approaches to determining the cost of
applicable coverage:
• Similarly situated individuals. The
IRS proposes determining similarly
situated individuals through mandatory
aggregation, aggregating individuals
by elected beneft package (e.g., PPO,
HMO, or HDHP). Then, individuals will be
disaggregated by those who have selfonly coverage and those with other than
self-only coverage. This is referred to as
mandatory disaggregation.
• In addition, the IRS is considering
whether to allow permissive
disaggregation, meaning separate
determination of costs of coverage
within family coverage based on
the number of covered individuals.
Another type of permissive
disaggregation under consideration
is disaggregation based on an
employee’s similarly situated status
such as bona fde employmentrelated
criteria (current employee
versus former employee status,
compensation, bona fde geographic29
MAY
distinctions, etc.).
• The IRS has requested comments
on these various aggregation
methodologies.
• Self-insured plans. The IRS is looking to
provide guidance that will likely affect not
only how the cost of applicable coverage
is determined for purposes of the excise
tax, but how self-insured plans determine
the COBRA applicable premium as well.
Notably:
• With limited exception, the method
chosen (actuarial or past cost) would
need to be used for at least 5 years
(exception for the past-cost method
due to signifcant plan changes).
• Under the actuarial method, a
reasonable estimate of the cost of
providing coverage under the group
health plan would be based on the
actual cost the plan is expected to
incur and not minimum or maximum
exposure.
• The IRS asks for comments on
whether an accreditation of individuals
making these actuarial estimates
should be required and whether
it would be preferable to provide
a specifc list of factors that must
be satisfed to make this actuarial
determination.
• For the past-cost method, the IRS
proposes specifc cost factors that
would be taken into account to
determine cost and how those factors
can be applied.
• HRAs. The IRS has issued very limited
guidance on determining the COBRA
premium for HRAs. Briefy, the IRS
has stated that the COBRA applicable
premium for an HRA may not be based
on a qualifed benefciary’s reimbursement
amounts available from the HRA. The IRS
proposes a number of mechanisms for
determining COBRA costs for HRAs and
requests comments on these approaches.
• Determination period. The IRS
also seeks comments as to how the
determination period should be set
for COBRA and whether that same
determination period can be used to
determine the cost of applicable coverage.
Under existing COBRA rules, the method
for calculating the applicable premium
must be elected prior to the determination
period for which the applicable premium
applies.
Conclusion
Determining the cost of applicable coverage
raises a number of issues that affect the30
Footnotes
1. A qualifed retiree means an individual who is
receiving coverage by reason of being a retiree, has
achieved the age of 55, and is not entitled to benefts
or eligible for enrollment in Medicare.
2. High risk professions include:
• Law enforcement officers
• Employees in fre protection activities
• Individuals who provide out-of-hospital emergency
medical care (emergency medical technicians,
paramedics and frst responders)
• Longshore workers
• Construction, mining, agriculture (but not food
processing, forestry and fshing industries; and
• Employees retires from one or more of the listed
high risk professions who was engaged in that
high risk profession for at least 20 years.
Cadillac Tax, COBRA continuation of
coverage, and other areas of benefts law
(e.g., W-2 health coverage reporting). This
Notice provides early indications of how the
IRS contemplates addressing these issues.
Future guidance will have a broad impact
on employer sponsored group health plan
compliance and plan designs. We will be
monitoring future regulatory developments,
along with legislative changes that may
impact the 2018 excise tax. This is the start
of a long regulatory process and additional
guidance and opportunity for comments will
be forthcoming.
For a copy of the Notice and information on
how to submit comments, visit:
http://www.irs.gov/pub/irs-drop/n-15-16.pdf
JUNE
Published on June 1, 2015
FAQs Further Clarify New Embedded
Out-of-Pocket Requirement
As reported earlier, starting with the 2016 plan
year, the selfonly annual limitation on cost
sharing for non-grandfathered plans ($6,850
for 2016) applies to each individual, even if the
individual is enrolled in family coverage.
On May 26, 2015, the Departments of
Labor (DOL), Health and Human Services
(HHS), and the Treasury (collectively, the
Departments) issued new FAQs further
clarifying this new rule, confrming that it
applies to all non-grandfathered group health
plans, including self-insured plans, large group
health plans, and high deductible health plans.
The Departments also provided the following
example:
Assume that a family of four individuals is
enrolled in family coverage under a group
health plan in 2016 with an aggregate annual
limitation on cost sharing for all four enrollees
of $13,000. Assume that individual #1 incurs
claims associated with $10,000 in cost sharing
and that individuals #2, #3, and #4 each incur
claims associated with $3,000 in cost sharing
(in each case, absent the application of any
annual limitation on cost sharing).
In this case, because the self-only maximum
annual limitation on cost sharing ($6,850
in 2016) applies to each individual, cost
sharing for individual #1 for 2016 is limited
to $6,850, and the plan is required to bear
the difference between the $10,000 in cost
sharing for individual #1 and the maximum
annual limitation for that individual, or $3,150.
With respect to cost sharing incurred by
all four individuals under the policy, the
aggregate $15,850 ($6,850 + $3,000 +
$3,000 + $3,000) in cost sharing that would
otherwise be incurred by the four individuals
together is limited to $13,000, the annual
aggregate limitation under the plan, under the
assumptions in this example, and the plan
must bear the difference between the $15,850
and the $13,000 annual limitation, or $2,850.
For the FAQs, visit:
http://www.dol.gov/ebsa/pdf/faq-aca27.pdf31
JUNE
Published on June 9, 2015
Guidance Issued on Coverage for
Preventive Items and Services
Frequently asked questions (FAQs), prepared
jointly by the Departments of Labor (DOL),
Health and Human Services (HHS), and the
Treasury were issued on May 12, 2015 with
respect to the Affordable Care Act (ACA)
requirement for a non-grandfathered group
health plan to provide coverage for in-network
preventive items and services (including
contraception) without any cost-sharing
requirements, as summarized below.
Contraception
Plans must cover without cost sharing at least
one form of contraception in each method that
is identifed by the FDA. FAQs provide that,
therefore:
1. Because a plan covers some forms of oral
contraceptives, some types of IUDs, and
some types of diaphragms without cost
sharing does not mean that it can exclude
completely other forms of contraception.
2. If multiple services and FDA-approved
items within a contraceptive method are
medically appropriate for an individual
patient, the plan may use reasonable
medical management techniques to
determine which specifc products
to cover without cost sharing with
respect to that individual. However, if
the individual’s attending a particular
service or FDAapproved item based on a
determination of medical necessity with
respect to that individual, the plan must
cover that service or item without cost
sharing.
3. For hormonal contraceptive methods,
coverage must include all 3 oral
contraceptive methods (combined,
progestin-only, and extended/continuous
use), injectables, implants, the vaginal
contraceptive ring, the on (Plan B/Plan B
One Step/Next Choice, Ella), and IUDs
with progestin.
This clarifying guidance applies to plan years
beginning on or after August 1, 2015.
Well-woman Preventive Care for
Dependents
If a plan covers dependent children, the plan
is required to cover without cost sharing
recommended women’s preventive care
services for dependent children, including
recommended preventive services related
to pregnancy, such as preconception and
prenatal care.
Colonoscopies
It is not permissible for a plan to impose cost
sharing with respect to anesthesia services
performed in connection with the preventive
colonoscopy if the attending provider
determines that anesthesia is medically
appropriate for the individual.
BRCA Genetic Testing
Plans must cover without cost sharing
recommended genetic counseling and breast
cancer (“BRCA”) genetic testing for a woman
who has not been diagnosed with BRCArelated cancer but who previously had breast
cancer, ovarian cancer, or other cancer as
long as the woman has not been diagnosed
with BRCA-related cancer.
Sex-specifc Recommended Preventive
Services
Plans cannot limit sex-specifc recommended
preventive services based on an individual’s
sex assigned at birth, gender identity, or
recorded gender. Whether a sex-specifc
recommended preventive service that is
required to be covered without cost sharing
is medically appropriate for a particular
individual is determined by the individual’s
attending provider such as, for example,
providing a mammogram or pap smear for
a transgender man who has residual breast
tissue or an intact cervix.
For the FAQs, visit:
http://www.dol.gov/ebsa/pdf/faq-aca26.pdf32
Published on June 9, 2015
Protections for LGBT Workers
The EEOC has explained on its website
that lesbian, gay, bisexual, and transgender
(“LGBT”) individuals may bring valid sex
discrimination claims against employers. A
memorandum lists insurance issues involving
benefts for same-sex couples as an issue of
particular interest to the EEOC.
Background
Title VII, in part, requires that employers
may not discriminate as to employment or
benefts based on sex. There is no official
statutory extension of Title VII’s protections
to LGBT employees. Older court decisions
have concluded that Title VII does not provide
a cause of action for sexual orientation
discrimination (as opposed to discrimination
against women), although recent case law is
evolving.
EEOC Post
A recent EEOC post explains that, based on
recent rulings and lawsuits, the EEOC has
instructed its investigators and attorneys to
counsel individuals who believe they have
been discriminated against because of their
sexual orientation or transgender status that
they may fle a complaint of sex discrimination
under Title VII. The instructions are derived
from a number of actions, including a 2012
EEOC ruling that employment discrimination
because of an employee’s gender identity is
prohibited discrimination based on sex, as
well as a 2012 EEOC strategic enforcement
plan designating this as an emerging and
developing issue. The EEOC position is
not binding on courts, although it can carry
signifcant weight.
Other Developments
In related news:
• The EEOC and other federal Government
agencies released a guide on the rights
and processes available to applicants and
employees of federal agencies who allege
sexual orientation or gender identity
discrimination.
• OSHA published a Guide to Restroom
Access for Transgender Workers,
providing guidance to employers on best
practices regarding restroom access for
transgender workers.
Employer Action
In light of these developments, employers
may want to revisit their anti-discrimination
policies to ensure that they extend to LGBT
employees. With respect to group plans,
employers may want to begin to review:
• Current plan eligibility and coverage rules;
and
• Plan documentation and communications.
Employers should look for further guidance.
JUNE33
JUNE
Published on June 11, 2015
PCOR Fee Filing Reminder
for Self-Insured Plans
The PCOR fling deadline is July 31, 2015 for
all self-funded medical plans and HRAs.
This is the third fling for plans with the
following plan years. The amount for these
plan years is $2.08 per covered life.
• November 1, 2013 – October 31, 2014
• December 1, 2013 – November 30, 2014
• January 1, 2014 – December 31, 2014
This is the second fling for plans with the
following plan years. The amount for these
plan years is $2 per covered life.
• February 1, 2013 – January 31, 2014
• March 1, 2013 – February 28, 2014
• April 1, 2013 – March 31, 2014
• May 1, 2013 – April 30, 2014
• June 1, 2013 – May 31, 2014
• July 1, 2013 – June 30, 2014
• August 1, 2013 – July 31, 2014
• September 1, 2013 – August 31, 2014
• October 1, 2013 – September 30, 2014
For the Form 720 and Instructions, visit:
http://www.irs.gov/uac/Form-720,-QuarterlyFederal-Excise-Tax-Return
The information is reported in Part II.
Please note that Form 720 is a tax form
(not an informational return form such as
Form 5500). As such, the employer or an
accountant would need to prepare it. Parties
other than the plan sponsor, such as third
party administrators and My Beneft Advisor,
cannot report or pay the fee.
Short Plan Years
Recently, the IRS issued FAQs that address
how the PCOR fee works with a self-insured
health plan on a short plan year.
Does the PCOR fee apply to an applicable
self-insured health plan that has a short
plan year?
Yes, the PCOR fee applies to a short plan
year of an applicable self-insured health plan.
A short plan year is a plan year that spans
fewer than 12 months and may occur for a
number of reasons. For example, a newly
established applicable self-insured health
plan that operates using a calendar year
has a short plan year as its frst year if it was
established and began operating beginning on
a day other than Jan. 1. Similarly, a plan that
operates with a fscal plan year experiences a
short plan year when its plan year is changed
to a calendar year plan year.
What is the PCOR fee for the short plan
year?
The PCOR fee for the short plan year of an
applicable selfnsured health plan is equal to
the average number of lives covered during
that plan year multiplied by the applicable
dollar amount for that plan year.
Thus, for example, the PCOR fee for an
applicable selfnsured health plan that has a
short plan year that starts on April 1, 2013,
and ends on Dec. 31, 2013, is equal to the
average number of lives covered for April
through Dec. 31, 2013, multiplied by $2 (the
applicable dollar amount for plan years ending
on or after Oct. 1, 2013, but before Oct. 1,
2014).
See FAQ 12 & 13:
http://www.irs.gov/uac/Patient-CenteredOutcomes-Research-Trust-Fund-Fee:-
Questions-and-Answers34
Published on June 15, 2015
For calendar year-end plans, the 2014 Form
5500 is due to be fled electronically on
EFAST2 no later than July 31, 2015.
ERISA requires that Form 5500 be fled with
the Department of Labor for most health and
welfare plans (for example, medical, dental,
and life insurance plans) by the last day of the
seventh month following the end of plan year
unless an extension (Form 5558) is completed
and mailed to the IRS.
A plan with fewer than 100 covered employees
as of the frst day of the plan year that
is unfunded (no trust) or fully insured is
exempt from this requirement. Certain other
exceptions apply such as for church plans and
governmental plans.
Form 5500 also applies to retirement plans,
regardless of employee count.
Should you have any questions, please
contact your Account Executive.
Form 5500 Filing Reminder
Published on June 25, 2015
Supreme Court Upholds Subsidies
On June 25, 2015, the Supreme Court
confrmed in a 6-3 decision that premium tax
credits and cost-sharing subsidies (referred
to as “subsidies”) are available in the federal
Health Insurance Marketplaces (also referred
to as the “Exchange”).
This ruling effectively removes any challenges
to the ability of Exchanges to offer subsidies to
qualifed individuals.
What was the Issue?
The Affordable Care Act (“ACA”) established
Exchanges as a means of offering health
insurance coverage. A state is permitted
to establish its own Exchange (known as
a staterun Exchange), rely on the federal
government to establish an Exchange (known
as a federally-run Exchange), or enter into a
state/federal partnership Exchange.
JUNE35
JUNE
The issue in this case was whether the IRS
set forth rules consistent with the statutory
language (as is within its authority) or
overstepped its bounds.
Under the text of the ACA (creating Code §
36B), subsidies are available in “an Exchange
established by the State under § 1311 of the
ACA.”
Subsequent IRS regulations interpreted §
36B to permit eligible individuals enrolled in
qualifed health plans in either a state-based
or a federally-facilitated Exchanges to access
these subsidies.
As described, any such assessment is
predicated on an FTE receiving a subsidy
in a Marketplace. If subsidies were ruled
unavailable to FTEs because coverage is
accessed through a federal marketplace, there
may have been nothing to trigger a penalty.
However, this did not happen.
Employer Action
As subsidies are available in the 50 states
and District of Columbia, employers should do
nothing different. Employers should continue
to monitor their employer penalty exposure
and prepare for future requirements such as
the requirement to complete Forms 1094-C
and 1095-C and the 2018 “Cadillac Plan” Tax.
Published on June 26, 2015
IRS Releases Draft 2015
Forms 1094-C and 1095-C
Last week, the IRS issued draft 2015 Forms
1094-C and 1095-C.
The forms are substantially the same as the
2014 forms, except for a couple of changes:
• Form 1094-C
• Line 19 (designating the authoritative
transmittal) moves from Part II to Part I
• Form 1095-C
• A new “Plan Start Month” feld is
added (optional for 2015, required for
2016 & beyond)
• Two new codes will be available
to indicate if the employer’s offer
to a spouse is a conditional offer;
the codes will be announced
later, presumably when the draft
instructions are released
Further guidance will be welcome, and we
are watching for the draft instructions to
be released. However, it is encouraging to
see that the regulators did not contemplate
signifcant changes from the 2014 forms. Once
fnalized, these are the forms that will be used
for calendar year 2015 reporting, due in early
2016.
For more information, see the draft forms,
here:
• Form 1094-C:
http://www.irs.gov/pub/irs-dft/f1094c–dft.pdf
• Form 1095-C:
http://www.irs.gov/pub/irs-dft/f1095c–dft.pdf
More information on the large employer
reporting requirement is also available here:
http://www.irs.gov/Affordable-Care-Act/
Employers/Information-Reporting-byApplicable-Large-Employers.36
JULY
On June 26, 2015, in an historic 5-4 decision
in Obergefell v. Hodges, the Supreme Court
held that the Fourteenth Amendment requires
a state to:
• license a marriage between two people of
the same sex; and
• recognize a marriage between two people
of the same sex when the marriage was
lawfully licensed and performed out-ofstate.
Before the decision, 13 states banned samesex marriage, mostly in the Midwest and
South.
What was the Issue?
Per the 2013 Supreme Court case decision
in U.S. v. Windsor and subsequent guidance,
same-sex spouses were recognized for all
federal purposes, including federal taxation,
COBRA, HIPAA, and FMLA, based on
the validity of the marriage in the state of
celebration and not on the married couple’s
residence. However, Windsor did not address
whether state bans on same-sex marriage (or
a refusal to recognize a same-sex marriage
validly performed in another state) were valid.
The plaintiffs fled lawsuits in their respective
states claiming that state officials violated their
Fourteenth Amendment rights by refusing to
issue marriage licenses denying them the
right to marry and/or by failing to recognize
their marriages that were legally performed
in a state which fully recognized the right for
same-sex couples to legally marry.
The Court held that the Fourteenth
Amendment requires a state to license a
marriage between any two adults, including
a couple of the same sex, and to recognize
marriages of same-sex couples lawfully
performed in other states.
Similar Concepts
There are various related beneft eligibility
concepts.
Published on July 1, 2015
Supreme Court Ends State Bans on
Same-Sex Marriage
Domestic Partners
There are domestic partner registries in some
states.Domestic partner status does not
necessarily affect medical insurance eligibility,
but it might. Employers can voluntarily
extend benefts to domestic partners, using
a defnition created by the employer (and
approved by any carrier). This may (or may
not) include opposite-sex couples. Employers
who voluntarily extend benefts to same-sex
domestic partners because same-sex couples
could not get married may want to amend
their plans to remove this eligibility class.
Civil Unions
Some states recognize civil unions which is
marriage-like status for same-sex couples.
Employees’ civil union partners must be
treated in the identical manner as employees’
opposite-sex spouses with respect to any
insurance policy issued in Colorado, for
example. We may see states eliminate this
concept in the future, but it remains for now.
Neither of the above concepts is altered by the
recent Supreme Court decision.
Common Law Marriage
Common law marriage is a valid marriage
that is entered into informally in certain states.
Now, states will have to extend this concept
to same-sex couples. Self-funded plans may
exclude common law spouses when refected
in plan documentation. Insured plans may not.
Coverage for any of the above classifcations
is not required as to self-funded plans.
Coverage for the above classifcations is
generally required under insured plans.
California, for example, requires eligibility for
domestic partners, regardless of where the
policy is written.
How does this Impact Employee
Beneft Plans?
Obergefell prohibits a state from banning
same-sex marriage. However, it does not37
directly address what employers must do as
a result of this ruling. Because many states
already recognized same-sex marriages as
legal, the impact of the Court’s decision may
mostly affect employer-sponsored fullyinsured
health and welfare plans in states that
currently ban same-sex marriage, as well as
employer-sponsored self-funded plans that
exclude same-sex spouses from eligibility.
Although state law does not generally apply
to self-funded plans, there may be increased
risk under federal and state discrimination
laws for plans that have a defnition of spouse
that is not consistent with the Supreme Court
ruling since the Court held that marriage is a
fundamental right under the Constitution
Employer Action
• Employers already extending benefts
to same-sex spouses are not affected.
Review existing plan documents and
SPDs to ensure eligibility terms align with
practices.
• Sponsors of insured plans in states
that have banned same-sex marriage
are required to include lawfully married
samesex spouses, even if the marriage
was conducted in another state.
• Public employers such as state and local
governments are required to treat samesex spouses like opposite-sex spouses for
benefts purposes.
• For private employers, the ERISA
preemption generally thought to be
available to self-funded plans that defne
“spouse” as being only a opposite-sex
spouse will likely be weakened by this
decision.
• Employers should expect related guidance
to be issued.
For tax treatment of premium payments at
the federal level, all legal spouses should be
treated the same. As a result of this decision,
it is expected that state tax rules should
align with the federal rules; however, further
guidance is expected. Payroll systems may
need to be adjusted.
JULY
As background, the Affordable Care Act (“ACA”)
requires a summary of benefts and coverage
(“SBC”) and uniform glossary to be provided
to plan participants at time of enrollment.
Signifcant penalties (up to $1,000) may be
imposed for each individual who does not
receive this summary. If any material changes
are made to the document outside of renewal,
the participant must be notifed 60 days prior
to the effective date of the change.
On December 22, 2014, the Departments of
Labor (“DOL”), the Internal Revenue Service
(“IRS”), and Health and Human Services
(“HHS”) (collectively, “the Departments”)
issued proposed rules and supporting
documents addressing the SBC requirement.
On June 12, 2015, fnal rules were issued.
These fnal rules largely follow the proposed
rules.
The regulations provide new information
and also incorporate several FAQs that have
been issued since the fnal SBC regulations
Published on July 2, 2015
Final SBC Rules Issued
were issued in 2012. The rules clarify when
and how a plan administrator or insurer must
provide an SBC and shorten its length.
The new requirements are effective for plan
years and open enrollment periods beginning
on or after September 1, 2015. The updated
SBC templates and related documents will
apply to coverage that begins on or after
January 1, 2017.
Additional information follows.
SBC from the Issuer to the Employer
The regulations:
• Clarify that when a health insurance
issuer offering group health insurance
coverage provides the SBC to the
employer before application for coverage,
the requirement to provide an SBC upon
application is deemed satisfed unless
there is a change to the information38
required to be in the SBC. If there has
been a change in the information required,
a new SBC that includes the correct
information would have to be provided on
application.
• Clarify how to satisfy the requirement
to provide an SBC when the terms of
coverage are not fnalized. If the plan
sponsor is negotiating coverage terms
after an application has been fled and
the information required to be in the SBC
changes, the issuer would not be required
to provide an updated SBC (unless an
updated SBC is requested) until the frst
day of coverage. The updated SBC would
have to refect the fnal coverage terms
under the contract, certifcate, or policy of
insurance that was purchased.
SBC from the Employer to Employees
The regulations:
• Clarify when a plan must provide the SBC
to employees again if the plan already
provided the SBC prior to application.
If the plan provides the SBC prior to
application for coverage, the plan is not
required to automatically provide another
SBC upon application, if there is no
change to the information required to
be in the SBC. However, if there is any
change to the information required to be
in the SBC by the time the application is
fled, the plan must update and provide
a current SBC as soon as practicable
following receipt of the application, but
in no event later than 7 business days
following receipt of the application.
• Clarify how to satisfy the requirement to
provide an SBC to employees when the
terms of coverage are not fnalized. If
the plan sponsor is negotiating coverage
terms after an application has been fled
and the information required to be in the
SBC changes, the plan is not required
to provide an updated SBC (unless an
updated SBC is requested) until the frst
day of coverage. The updated SBC should
refect the fnal coverage terms under the
contract, certifcate, or policy of insurance
that was purchased.
Online Posting by Insurers
Insurers must include an Internet address
where a copy of the actual certifcate of
coverage is “easily available” to individuals
shopping for coverage. Because the actual
certifcate will not be available until the plan
sponsor has negotiated the terms of coverage,
insurers should post a sample group
certifcate of coverage for each product and
make the actual certifcate (once executed)
available to the plan sponsor, participants, and
benefciaries via an Internet address.
Elimination of Duplication
The regulations:
• Add a provision to prevent unnecessary
duplication with respect to a group health
plan that uses 2 or more insurance
products provided by separate issuers
to insure benefts under the plan. The
regulations place responsibility for
providing complete SBCs with respect
to the plan in such a case on the group
health plan administrator. Under the rule,
the group health plan administrator may
contract with one of its issuers (or other
service providers) to provide the SBC;
however, absent a contract to perform the
function, an issuer has no obligation to
provide an SBC containing information for
benefts that it does not insure.
• State that, under circumstances where
an entity required to provide an SBC with
respect to an individual has entered into
a binding contract with another party to
provide the SBC to the individual, that
the entity would be considered to satisfy
the requirement to provide the SBC
with respect to the individual if specifed
conditions are met:
• The entity monitors performance
under the contract;
• If the entity has knowledge that the
SBC is not being provided in a manner
that satisfes the requirements of
this section and the entity has all
information necessary to correct the
noncompliance, the entity corrects
the noncompliance as soon as
practicable; and
• If the entity has knowledge the SBC
is not being provided in a manner
that satisfes the requirements of
this section and the entity does not
have all information necessary to
correct the noncompliance, the entity
JULY39
communicates with participants
and benefciaries who are affected
by the noncompliance regarding
the noncompliance, and begins
taking signifcant steps as soon as
practicable to avoid future violations.
New SBC Template
Revisions to the SBC, coverage examples,
and uniform glossary are anticipated to
be fnalized by January 2016 after the
Departments utilize consumer testing and
receive additional input from the public. The
SBC will be shorter in length and clearer and
will apply to coverage that would renew or
begin on the frst day of the frst plan year that
begins on or after January 1, 2017 (including
open enrollment periods that occur in 2016
for coverage beginning on or after January 1,
2017).
Effective Date
The changes apply for disclosures with
respect to participants and benefciaries
who enroll or re-enroll in group health
coverage through an open enrollment
period beginning on the frst day of the frst
open enrollment period that begins on or
after September 1, 2015. For disclosures to
participants and benefciaries who enroll in
group health coverage other than through
an open enrollment period (including those
newly eligible for coverage), the revised
requirements would apply beginning on the
frst day of the frst plan year that begins on or
after September 1, 2015.
Employer Action
Employers should be ready to comply with the
new rules for the 2016 plan year and be ready
for the revised template to be used for 2017
plan year.
JULY
Published on July 15, 2015
Is Your Company Ready for the
New Reporting Requirements?
In early 2016, employers with at least 50 fulltime employees (FTEs) must provide Forms
1095-C to their employees and to the IRS.
This new requirement applies to both insured
and self-insured medical plans. The forms
require, in part, tracking per each month in
2015 per each FTE:
• the tier of health plan coverage
offered (e.g., employee-only,
employee+spouse, or no coverage
offered);
• the self-only premium an employee
must pay for the lowest-cost plan that
provides minimum value; and
• the reason why an employer would not
be subject to a penalty for a particular
month (e.g., employee is in a waiting
period or the affordability safe harbor
applies).
This individualized tracking generally requires
the assistance of an outside vendor. There
are payroll vendors, beneft administration
vendors, and independent vendors providing
this service. Employers with payroll vendors
and/or beneft administration vendors currently
in place may still need to purchase this
service in addition to what they already have.
Implementation can take up to 3 months.
Some vendors are no longer accepting new
clients. Therefore, Emerson Reid recommends
that employers prepare ASAP if they have not
already. Waiting until the last quarter of 2015
may make compliance impracticable.
Penalties for failure to fle were recently
increased. They can range from $50 per form
(with a $500,000 annual maximum) to $250
per form (with a $3M annual maximum).
Attached please fnd additional information.40
JULY
Published on July 29, 2015
Should an Employer with 51-100
Full-time Employees Change Its
Policy Year to Delay Compliance
with Certain ACA Provisions?
Representatives from several insurance
carriers are encouraging employers with 51-
100 full-time employees to move their policy
years to October 1 – September 30, effective
October 1, 2015, to delay certain Affordable
Care Act (“ACA”) design requirements
applicable to non-grandfathered group health
plans for plan years beginning on or after
January 1, 2016, summarized as follows:
• Small, insured group health plans must
offer essential benefts and provide a
bronze level of coverage.
• Insurance carriers will be subject to
new underwriting rules with respect to
small, insured groups. Instead of using
experience rating, carriers will use
community rating. Rating variations will be
restricted to (a) beneft coverage elected
(plan and tier), (b) geographic area, (c)
age, limited to a ratio of 3 to 1 for adults,
and (d) tobacco use, limited to a ratio of
1.5 to 1.
The defnition of “small employer” will increase
from an employer with up to 50 employees
to an employer with up to 100 employees,
beginning with the 2016 plan year.
The compliance issues associated with this
proposal are outlined below.
Notably:
• there is transition relief available in some
states by some carriers which allows
employers to keep their current products
through September 30, 2017; and
• changing the plan year to later in the
calendar year will expose a mid-sized
employer to the employer penalty as of
January 1, 2015 rather than the frst day of
the 2016 plan year.
CMS Transitional Policy
Under a transitional policy, non-grandfathered
health insurance coverage in the 51 – 100
market that is renewed for a policy year
starting between January 1, 2016 and
October 1, 2016 (even if the employer did not
previously have health insurance coverage)
will not be considered to be out of compliance
with newly effective market reforms if
permitted by the state and offered by the
health insurance issuer.
An employer who employs 51-100 employees
is not required to remain with the same insurer
between 2013 and 2016 in order to be eligible
for transitional relief in 2016.41
2015 Transition Relief for Employers
with 50-99 Full-time Employees
Beginning in 2015, large employers can
be subject to penalty when not offering
affordable, minimum value coverage to all
full-time employees. Final rules provide relief
for mid-sized employers to delay the Employer
Penalty until 2016.
The transition relief applies to all calendar
months of 2015 plus any calendar months of
2016 that fall within the employer’s 2015 plan
year so will cover non calendar-year plans,
but only if the employer did not modify the
plan year after February 9, 2014 to begin on a
later calendar date (for example, changing the
start date of the plan year from January 1 to
December 1).
The other conditions are as follows:
1. Limited Workforce Size.
The employer employs on average at least
50 FTEs (including full-time equivalent
employees) but fewer than 100 FTEs
(including full-time equivalent employees)
on business days during 2014.
2. Maintenance of Workforce and
Aggregate Hours of Service.
During the period beginning on February
9, 2014 and ending on December 31,
2014, the employer does not reduce the
size of its workforce or the overall hours of
service of its employees in order to satisfy
the workforce size condition described in
(1) above. Bona fde business reasons for
a reduction in workforce size or overall
hours of service will not be considered
to violate this provision. For example,
reductions of workforce size or overall
hours of service because of business
activity such as the sale of a division,
changes in the economic marketplace in
which the employer operates, terminations
of employment for poor performance,
or other similar changes unrelated to
eligibility for this transition relief are for
bona fde business reasons and will not
affect eligibility for the transition relief.
3. Maintenance of Previously Offered
Health Coverage.
During the coverage maintenance period,
the employer does not eliminate or
materially reduce the health coverage,
if any, it offered as of February 9, 2014.
For purposes of this paragraph, the term
“coverage maintenance period” means for
an employer with a calendar year plan,
the period beginning on February 9, 2014
and ending on December 31, 2015; and
for an employer with a non-calendar year
plan, the period beginning on February
9, 2014 and ending on the last day of
the plan year that begins in 2015. An
employer is not treated as eliminating or
materially reducing health coverage if:
• it continues to offer each employee
who is eligible for coverage during
the coverage maintenance period an
employer contribution toward the cost
of employee-only coverage that either:
• is at least 95% of the dollar amount
of the contribution toward such
coverage that the employer was
offering on February 9, 2014, or
• is the same (or a higher)
percentage of the cost of coverage
that the employer was offering to
contribute toward coverage on
February 9, 2014;
• when there is a change in benefts
under the employee-only coverage
offered, that coverage provides
minimum value (“MV”) after the
change; and
• it does not alter the terms of its group
health plans to narrow or reduce the
class or classes of employees (or the
employees’ dependents) to whom
coverage under those plans was
offered on February 9, 2014.
4. Certifcation of Eligibility for Transition
Relief.
The large employer certifes on Form
1094-C that it meets the (1) – (3) above.
Plan Year v. Policy Year
The policy year is relevant for transition
rule purposes. The plan year is relevant for
employer penalty purposes. A plan year is an
accounting period. It is usually the same as
the policy year (the period for which rates are
locked in), but not always.
To confrm the plan year, employers can
examine the summary plan description and/or
Form 5500.
Employers relying on transition relief for the
employer penalty until 2016 will no longer
qualify if they change their plan years along
JULY42
with their policy years.
If employees pay premiums on a pre-tax
basis, there should be a plan year change
for the cafeteria plan. Any plan year change
would have to be properly documented.
It may be desirable to change other policy
years (e.g., for the disability and life insurance
plans) as well to maintain a consistent
program.
Bottom Line
Employers with 51-100 full-time employees
can move their policy years to October 1 –
September 30, effective October 1, 2015, to
delay certain design requirements applicable
to non-grandfathered group health plans. In
addition to changing a policy year, employers
should change the plan years of their cafeteria
plans to allow employees to make pre-tax
elections for the new period of coverage. Also,
if desired, employers should change the policy
years of their other underlying beneft plans.
Employers with 50-99 full-time employees
relying on transition relief for the employer
penalty until 2016 should not change their
plan years along with their policy years.
JULY
Published on July 31, 2015
Interim Guidance Addresses
Expatriate Health Coverage
The Department of the Treasury, Department
of Labor, and Department of Health
and Human Services (collectively, the
“Departments”) recognize that insurers and
plan sponsors may need additional time to
modify their current expatriate health plans to
comply with the Affordable Care Act (“ACA”)
and thus provide relief by allowing application
of a reasonable good faith interpretation of
the standards in place. Future regulations are
expected.
Background
The Departments issued Frequently Asked
Questions (“FAQs”) providing relief from the
ACA market reform requirements for certain
expatriate group health insurance coverage in
2013.
On December 16, 2014, the Expatriate Health
Coverage Clarifcation Act of 2014 (“EHCCA”)
made further changes, applicable to plans
issued or renewed on or after July 1, 2015.
Notice 2015-43 and Recap of Previous
Guidance
Notice 2015-43 provides that, until the
issuance of further guidance, taxpayers can
apply this previously-issued guidance using a
reasonable good faith interpretation except as
to the PCOR Fee or the Health Insurer Fee.
So where are we now? The following
summarizes the changes as to expatriate
health plans issued or renewed after July 1,
2015:
Expatriate plans are defned as self-funded
and fully insured plans that offer coverage to
qualifed expatriates and their dependents.
Qualifed expatriates are: (1) certain foreign
employees transferred or assigned to the
U.S. for a specifc and temporary employment
purpose or assignment, (2) individuals
working outside the U.S. for at least 180
days in a 12-month period, and (3) “similarly
situated individuals.”
Guidance:
• Exempts fully insured and self-funded
expatriate health plans from most of the
ACA’s market reforms (though not the
adult dependent/age 26 requirement).
• Deems expatriate health plans to
be “minimum essential coverage”
for expatriate employees and their
dependents, regardless of where they are
located in the world.
• Deems expatriate health plans to be
“minimum essential coverage under an
eligible employer-sponsored plan” for
purposes of the employer mandate with
respect to certain foreign employees
working in the U.S. and certain U.S.43
expatriates working abroad.
• Exempts expatriate plans from the
Reinsurance Fee.
• Exempts expatriate plans from the PCOR
Fee.
• Exempts expatriate plans from the Health
Insurer Fee after 2015 and reduces the fee
for 2014 and 2015.
• Exempts employer-sponsored coverage
of most categories of expatriates from the
Cadillac Plan tax.
• Exempts expatriate health plans from a
change in the defnition of a “small group,”
which could have prevented the sale of
expatriate coverage to employers with 50
to 99 lives.
• Exempts insurers of expatriate health
plans and expatriate health plans
from the so-called “administrative
simplifcation” requirements, including
SBC requirements.
The Employer Penalty and reporting
requirements of Code Sections 6055 and
6056 (Forms 1095-C and 1094-C) still
apply. However, for expatriate health plans,
statements to individuals reporting minimum
essential coverage may be furnished in
electronic format unless the recipient refuses
consent.
Plan sponsors of expatriate plans should
review their plan design carefully to ensure
they are in compliance with certain provisions
of the ACA still applicable to such plans.
For the Notice, visit:
http://www.irs.gov/pub/irs-drop/n-15-43.pdf
Published on July 31, 2015
Reduction in Hours
Subject to Lawsuit in New York
The frst complaint was fled challenging the
permissibility of reducing hours below 30 per
week in order to avoid the Employer Penalty.
The complaint was fled in a New York district
federal court on behalf of 10,000 workers at
Dave and Buster’s. The plaintiffs allege that
their hours were cut so that Dave and Buster’s
could avoid health care costs associated
with expanding eligibility in order to avoid
the Employer Penalty. Under the Employer
Penalty, large employers can be penalized if
they do not offer affordable, minimum value
coverage to all full-time employees (“FTEs”).
FTEs are defned as employees working on
average 30 hours per week.
Many other employers have implemented the
same strategy.
The plaintiffs are suing under ERISA Section
510 which makes it unlawful for any person
to discriminate against a plan participant or
benefciary for the purpose of interfering with
any right the he or she may become entitled
to under ERISA or under an employee beneft
plan.
We will continue to monitor this case.
JULY44
AUGUST
Published on August 24, 2015
Additional Guidance Issued on the
Cadillac Plan Tax
Beginning January 1, 2018, a 40% excise
tax will apply on the cost of applicable
coverage that exceeds prescribed thresholds.
Commonly, this is referred to as the “Cadillac
Plan Tax.” The 2018 thresholds are $10,200 for
self-only coverage and $27,500 for coverage
other than self-only. These thresholds
are annualized and adjusted in certain
circumstances.
The IRS issued Notice 2015-16 to begin the
process of developing regulatory guidance
regarding the excise tax on high cost
employer-sponsored health coverage.
On July 30, 2015, the IRS issued additional
guidance in the form of Notice 2015-52.
Rather than providing instruction, the notice
identifes issues and describes potential
approaches which could be incorporated
in future proposed regulations and invites
comments. After considering the comments
on both notices, Treasury and IRS intend to
issue proposed regulations. The proposed
regulations will provide further opportunity
for comment, including an opportunity to
comment on the issues addressed in the
preceding notices. Proposed regulations are
not expected before 2016.
Specifcally this notice addresses:
• The effective date
• Identifcation of who is liable to pay the tax
• Determining the cost of applicable
coverage
• Adjustments to the $10,200/$27,500
thresholds based on age and gender
• Allocation of the tax among multiple
coverage providers
• Employer aggregation rules
• Payment of the tax
• Below you will fnd additional information.
Effective Date
The Cadillac Plan Tax is effective for “taxable
years beginning after December 31, 2017.”
The Notice confrms that a taxable year is
anticipated to mean a calendar year, not a
plan year so that the effective date is January
1, 2018 for all plans. If a non-calendar year
plan needs to make changes in order to avoid
the tax, such changes must be done either
with the 2017 plan year renewal or through a
mid-year plan change on or before January 1,
2018.
Identifcation of the Payer
Under the ACA, the employer is required to
determine the amount of the Cadillac Plan
Tax on a monthly basis and then allocate that
tax among “coverage providers.” So, while the
employer is the party required to calculate
the tax, the coverage provider is the entity
responsible for paying the tax. The “coverage
provider” is the insurer for an insured plan
and the employer for an HSA. For self-funded
plans, the coverage provider is the “person
that administers the plan benefts” which is
not further defned. The IRS proposes two
approaches for consideration:
• Under the frst approach, the coverage
provider would be the person or entity
responsible for performing day-to-day
functions related to administration of the
plan (e.g., processing claims or handling
participant inquiries). This would be a
third party administrator (“TPA”). This
would likely be challenging in the case of
multiple TPAs (e.g., one for the medical
plan, one for the prescription drug beneft,
and one for the health FSA).
• Under the second approach, the coverage
provider would be the person or entity that
has the ultimate authority or responsibility
with respect to administration. Generally,
this would be the employer.
Calculation of the Cost of Applicable
Coverage
Determination period45
To determine excise tax liability, an employer
must determine the extent, if any, to which
the cost of apOn July 31, 2015, President
Obama signed into law H.S. 3236, Surface
Transportation and Veterans Health Care
Choice Improvement Act of 2015. Notably, the
law makes changes affecting the employer
mandate and HSA eligibility as to individuals
who are (or were formerly) service members.
• Employees with TRICARE or Veterans
Benefts are not counted when
determining ALE status. When counting
employees in a prior calendar year to
determine whether an employer is an
applicable large employer (“ALE”), thus
subject to the employer mandate under
4980H, any employee who has coverage
under the TRICARE program or Veterans
Coverage is not counted. However, if
the employer is an ALE, employees with
TRICARE or Veterans Benefts need to
be analyzed for full-time employee status.
This is effective as of January 1, 2014
(retroactive application).
• Certain Veterans Benefts do not disqualify
an individual from HSA eligibility. Effective
for months beginning after December 31,
2015, an individual with Veterans Benefts
for a service-connected disability will not
fail to be eligible to open or make contributions to an HSA. Otherwise, under an
existing rule, an individual who receives
Veterans Benefts is not HSA eligible for 3
months after receipt of such benefts.
overage provided to an employee during
any month of the calendar year exceeds the
prescribed dollar limit. As the amount of the
tax is calculated per employee per month
over the calendar year, the IRS sees potential
timing issues to calculate these amounts. In
addition, some arrangements create additional
complexity to determine the amount over the
threshold in any month (e.g., experienced
rated contracts or plans with a premium
discount or holiday). The IRS seeks further
comments on these issues.
Excluding income tax reimbursements
from the cost of applicable coverage
If an entity other than the employer is
responsible for paying the excise tax,
that entity will likely pass the cost of the
tax through to the employer in the form
of increased service fees. The cost of
applicable coverage does not include these
amounts. However, there could be income
taxes incurred due to the additional service
fees. The IRS has requested comments
on methods for excluding income tax
reimbursements, including what tax rate to
use.
Annual contributions to account-based
plans
The full annual contributions to account-based
plans such as HSAs may be made as of the
frst day of the plan year or otherwise not on
a monthly basis (e.g., on a quarterly basis).
This could trigger the excise tax in the months
of contribution because the cost of applicable
coverage is determined on a monthly basis.
To avoid this result, the IRS indicated that it
is considering an approach that would allow
employers to apply annual contributions on
a pro rata basis over the course of the year,
regardless of the actual timing of contributions
during that period.
Flex credits and carry-overs under health
FSAs
The IRS stated that when an employer
contributes nonelective fex credits to an
FSA on behalf of an employee, the cost of
applicable coverage includes:
• the employee’s contributions; and
• the amount of non-elective fex credits
actually used for reimbursements (i.e.,
unused nonelective fex credits are
not included in the cost of applicable
coverage).
In addition, under a safe harbor, amounts
carried over from previous years will not be
included in the cost of applicable coverage.
The IRS plans to restrict the availability of
this safe harbor if non-elective fex credits are
available.
Age and Gender Adjustments to the
Applicable Dollar Limit
The $10,200/$27,500 (as indexed) statutory
thresholds can be increased based on the
age and gender characteristics of all the
employees of the employer in comparison to
the national workforce. The IRS is considering
rules allowing employers to determine these
characteristics based on a “snapshot” on
the frst day of the plan year. The IRS also
indicated that it is developing age and gender
adjustment tables to assist employers in
applying the adjustment.
AUGUST46
Published on August 25, 2015
New Law Clarifes Employer Mandate
and HSA Eligibility for Veterans
On July 31, 2015, President Obama signed
into law H.S. 3236, Surface Transportation and
Veterans Health Care Choice Improvement
Act of 2015. Notably, the law makes changes
affecting the employer mandate and HSA
eligibility as to individuals who are (or were
formerly) service members.
• Employees with TRICARE or Veterans
Benefts are not counted when
determining ALE status. When counting
employees in a prior calendar year to
determine whether an employer is an
applicable large employer (“ALE”), thus
subject to the employer mandate under
4980H, any employee who has coverage
under the TRICARE program or Veterans
Coverage is not counted. However, if
the employer is an ALE, employees with
TRICARE or Veterans Benefts need to
be analyzed for full-time employee status.
This is effective as of January 1, 2014
(retroactive application).
• Certain Veterans Benefts do not disqualify
an individual from HSA eligibility. Effective
for months beginning after December
31, 2015, an individual with Veterans
Benefts for a service-connected disability
will not fail to be eligible to open or make
contributions to an HSA. Otherwise,
under an existing rule, an individual who
receives Veterans Benefts is not HSA
eligible for 3 months after receipt of such
benefts.
Employer Aggregation
For purposes of the excise tax generally, all
employers that are part of a controlled group
are treated as a single employer. The notice
asks for comments on the challenges this
statutory requirement presents in identifying
applicable coverage, determination of the age
and gender adjustment, employees taken into
account for adjustment for employees in high
risk professions or who repair and install electrical or telecommunications lines, identifcation of the taxpayer responsible for calculating
and reporting the excess beneft, and employer liability for any penalty in the case of failure
to properly calculate the tax
Timing and Manner of Payment
The agencies are considering using the same
manner of payment for the Cadillac Plan Tax
applicable to the PCOR fee – using Form
7202 for payment of the tax.
AUGUST47
Published on August 25, 2015
Draft 2015 Form 1095-C and
Instructions, Increased Penalties,
and Electronic Filing Steps Issued
As background, beginning with calendar year
2015, an applicable large employer (“ALE”)
must use Forms 1094-C and 1095-C to
report the information required under Internal
Revenue Code sections 6055 and 6056 about
offers of health coverage. The information
reported allows the IRS to manage the
requirements of both the individual and
employer mandates and subsidy eligibility
under the Affordable Care Act (“ACA”).
Draft 2015 Forms 1094-C and 1095-C
and Instructions
On August 7, 2015, the IRS issued revised
draft 2015 Form 1095-C with instructions. The
forms and instructions are substantially the
same as those applicable to the 2014 year, but
include the following changes:
• Add a frst month of the plan year indicator
(plan start month) in Part II and a Part III
Covered Individuals Continuation Sheet.
Completing this new box is optional for
the 2015 form. This change was in the
previously-issued draft form issued in
June 2015.
• Indicate in the Forms 1095-B and 1095-
C instructions that ALEs may use Form
1095-B instead of Form 1095-C to report
coverage of individuals who are not fulltime employees (“FTEs”) for any month
during the year. However, an ALE must
still report any employee (full- or parttime) enrolled in self-insured coverage on
Form 1095-C.
• Appear to require insured plans to
now report offers of COBRA to former
FTEs that actually enroll in the COBRA
coverage and to employees offered
COBRA based on a reduction in hours.
• Expand the order of priority for line 16
code selection.
• Provide that an automatic 30-day
extension is granted by submitting a Form
8809 by the due date of the forms.
• Provide that a waiver from the required
fling of information returns electronically
by submitting Form 8508 at least 45 days
before the due date of the returns.
AUGUST48
• Provide information regarding when and
how a corrected form is fled.
• Clarify that Form 1095-C may be hand
delivered to individuals.
• Indicate that for Line 14 of the Form
1095-C for the 2015 tax year, an employer
using the multiemployer arrangement
interim guidance can use code 1H (no
offer) for any month for which it enters
code 2E (multiemployer plan relief) on
line 16 without regard to whether the
employee was actually eligible to enroll in
coverage under the multiemployer plan.
The 2014 instructions required that the
employer report the code for the actual
coverage offered to the employee where
the employer qualifed for the relief.
• Include important clarifcations on how to
report for COBRA participants, refective
of previously-issued Q&As. Those Q&As
provide that when an offer of COBRA
coverage is made to a former employee
as the result of a termination from
employment, the employer should indicate
on Form 1095-C that an offer of coverage
was made only if the former employee
actually elects to enroll in the coverage.
The reason for this is that the IRS does
not want to disqualify a terminated
employee from a premium subsidy based
on an offer of COBRA coverage that was
not accepted. However, when an offer of
COBRA coverage is made to an employee
due to a reduction in hours, the employer
should indicate on Form 1095-C that an
offer of coverage was made, whether or
not the employee elects to enroll in the
coverage. In this situation, the cost used
to determine affordability should be the
employee’s self-only COBRA premium or
contribution.
Also, per previously-issued draft Form 1094-C,
line 19 (Is this the Authoritative Transmittal for
this ALE Member?) was moved from Part II
into Part I of the form and to allow for an entry
in the “All 12 Months feld” in Part III, Line 23,
column (b) Full-Time Employee Count for ALE
Member.
As stated above, the forms and instructions
are only in draft form at present and are
subject to further changes prior to being made
fnal. Once fnalized, these are the forms that
will be used for calendar year 2015 reporting,
due in early 2016.
For more information, see the draft forms and
instructions here:
Form 1094-C: http://www.irs.gov/pub/irs-dft/
f1094c–dft.pdf
Form 1095-C: http://www.irs.gov/pub/irs-dft/
f1095c–dft.pdf
Instructions: http://www.irs.gov/pub/irs-dft/
i109495c–dft.pdf
Also note that the IRS indicated that for 2016
reporting, due in early 2017, new indicator
codes will be established to require employers
to report conditional offers to spouses. A
conditional offer is one that is subject to
a reasonable, objective condition such as
offering coverage upon certifcation that the
spouse does not have group health coverage
available from another employer. Currently,
the instructions to Form 1095-C provide that
a conditional offer such as this should be
treated as an offer for reporting purposes only.
However, the new indicator codes are needed
so that the IRS can determine whether the
spouse should be eligible for a premium tax
credit.
Increased Penalties
Penalties for fling failures have been
increased via the Trade Preferences Extension
Act of 2015 (the “Act”), effective with this frst
year as follows:
AUGUST49
Penalty Previous
Amount
Revised
Amount
Failure to file/furnish an annual IRS
return or provide individual statements
to all full-time employees
$100 $250
Annual cap on penalties $1,500,000 $3,000,000
Failure to file/furnish when corrected
within 30 days of the required filing date $30 $50
Annual cap on penalties when corrected
within 30 days of required filing date $250,000 $500,000
Failure to file/furnish when corrected
by August 1 of the year in which the
required filing date occurs
$60 $100
Cap on penalties when corrected by August 1 of the year in which the required
filing date occurs
$500,000 $1,500,000
Lesser cap for entities with gross receipts of not more than $5,000,000 $500,000 $1,000,000
Lesser cap for entities with gross
receipts of not more than $5,000,000
when corrected within 30 days of
required filing date
$75,000 $175,000
Lesser cap for entities with gross
receipts of not more than $5,000,000
when corrected by August 1 of the year
in which the required filing date occurs
$200,000 $500,000
Penalty per filing in case of intentional
disregard. No cap applies in this case. $250 $500
To access the Act, visit: https://www.congress.gov/114/bills/hr1295/
BILLS-114hr1295enr.pdf?elqTrackId=3d8f383c69614727a760124
4c2f57972&elq=f15626ced81d4b068dc139147d4d8c33&elqCampaignId=&elqaid=9563&elqat=1
For additional information, see: http://www.irs.gov/Affordable-Care-Act/
Employers/Information-Reporting-by-Providers-of-Minimum-Essential-Coverage
Electronic Filing Steps
Filers of 250 or more information returns must fle the returns electronically, subject to waiver via Form 8508. Filers of less than 250 information returns may fle the returns electronically.
Employers (and vendors on behalf of employers) are required to use
the ACA Information Return (“AIR”) system and complete the following
steps prior to being able to electronically submit any forms:
1. Register with the IRS’s e-services website, including submission
of personal information about the person registering for the
Submitting Entity;50
2. Obtain an AIR Transmitter Control Code
(“TCC”), a unique identifer authorizing
each Submitting Entity to submit the
Reporting Forms; and
3. Pass a series of technical/system tests
to ensure that Reporting Forms will be
properly submitted when due.
The frst two steps can be completed now. The
third step is anticipated to become available in
the fall.
For more information on the AIR program,
visit: http://www.irs.gov/for-Tax-Pros/Software-Developers/Information-Returns/Affordable-Care-Act-Information-Returns-AIR-Program-Did-You-Know%3F?elqTrackId=f29970dbb4384383a49cc85c0c3afc53&elq=f15626ced81d4b068dc139147d4d8c33&elqCampaignId=&elqaid=9563&elqat=1
For the reference guide, visit: http://www.irs.
gov/PUP/for_taxpros/software_developers/information_returns/AIR_Composition_and_Reference_Guide.pdf
For the updated draft of IRS Publication
5164, Test Package for Electronic Filers of
ACA Information Returns, visit: http://www.irs.
gov/PUP/for_taxpros/software_developers/
information_returns/Pub%2
Published on August 28, 2015
Final Rules Address
the Contraceptives Mandate
AUGUST
The Affordable Care Act (“ACA”) requires nongrandfathered group health plans to cover
certain mandated preventive care services,
including contraception, at no cost. This
requirement does not apply to grandfathered
plans.
On July 14, 2015, the Departments of Labor,
the Treasury, and Health & Human Services
(jointly, “the Departments”) issued fnal
regulations. Briefy the guidance:
• Defnes a closely held for-proft employer.
• Describes how a closely held for-proft
employer may claim an accommodation
and avoid providing contraceptive services
that violate religious beliefs.
• Describes an alternative notice process
for entities that object to completing
the EBSA Form 700 to claim an
accommodation.
• Outlines the process for third party
administrators (TPAs) to provide
contraceptives when a health plan claims
an accommodation.
These regulations are effective for plan
years beginning on or after October 1, 2015.
Background
Beginning in 2012, the requirement to provide
certain preventive care services included
coverage of all FDA-approved contraceptive
methods, sterilization procedures, and patient
education and counseling for all women with
reproductive capacity, as prescribed by a
health care provider (collectively, contraceptive
services). Religious employers are exempt
from the contraceptives requirement.
Additionally, non-proft religious organizations
that oppose providing some or all of the
required contraceptive services based on
religious beliefs (eligible organizations)
could qualify for an accommodation by selfcertifying their objections using EBSA Form
700. This removed the burden from the nonproft and imposed the requirement to provide
free contraceptives on the carriers and TPAs
without cost to the individual or the plan.
Before the Hobby Lobby decision no
accommodation was available to a for-proft
company. Hobby Lobby, a closely held forproft entity, challenged the contraceptive51
services portion of the preventive care
mandate, as the organization felt the
requirement interfered with religious beliefs.
The case made its way to the U.S. Supreme
Court and on June 30, 2014, the Court found
the contraceptives mandate violated Hobby
Lobby’s rights under the Religious Freedom
Restoration Act of 1993 (RFRA). Over a year
after this ruling, the Departments issued
fnal regulations that incorporate for-proft
companies into the accommodation process.
Eligible Organizations
The regulations fnalize the defnition
of an eligible organization for purposes
of qualifying for an accommodation. An
eligible organization is an organization that
opposes providing coverage for some or all
contraceptive items and services on account
of religious objections and is either:
• organized and operated as a non-proft
entity and holds itself out as a religious
organization; or
• organized and operated as a closely held
for-proft entity and the highest governing
body (e.g., board of directors, board of
trustees, or owners if managed directly
by its owners) has adopted a resolution
or other similar action establishing
that it objects to covering some or all
contraceptive services on account of the
owner’s sincerely held religious beliefs.
Closely Held For-Proft Entity
A closely held for-proft entity, not previously
defned, is defned as an entity that:
• is not a non-proft entity;
• has no publically traded ownership
interests; and
• has more than 50% of the value of its
ownership interest owned directly or
indirectly by fve or fewer individuals4 (or
an ownership structure that is substantially
similar to these requirements) as of the
date of the entity’s self-certifcation or
notice.
For purposes of the 50% threshold (or
substantially similar ownership interest),
the Departments lay out specifc ownership
interest considerations that are consistent with
other areas of tax law.
Additionally, a for-proft entity may seek
clarifcation from HHS as to whether it
qualifes as a closely held entity. The forproft entity may send a letter describing the
ownership structure to HHS. If no response is
received by HHS within 60 calendar
days, the requirement is deemed to be
satisfed so long as the entity maintains that
structure.
Process for Eligible
Organizations
To qualify for the accommodation, the
organization (non-proft or closely held forproft) must self-certify status consistent with
HHS rules.
1. EBSA Form 700. A person authorized
to make a certifcation on behalf of an
employer must execute the Form 700
and provide it to the TPA or carriers. The
certifcation must be made available for
examination upon request by the frst
day of the frst plan year to which the
accommodation applies. It should be
maintained consistent with the record
retention requirements under ERISA
(generally 8 years from the start of the
plan year for which the certifcation
relates).
For a copy for EBSA Form 700, visit: http://
www.dol.gov/ebsa/preventiveserviceseligibleorganizationcertifcationform.doc
2. Other Notice. Alternatively, the authorized person may provide notice to HHS
that it is an eligible organization and of its
religious objection to coverage of all or
a subset of contraceptive services. The
notice must contain specifc information
requested by HHS, including names and
contact information for any carriers or
TPAs. This is outlined in greater detail in
the Model Notice at: http://www.dol.gov/
ebsa/modelnoticetosecretaryofhhs.doc
Under this option, HHS will send a separate
notifcation to each of the plan’s TPAs informing them of receipt of this notice and their
obligations with respect to providing contraceptives coverage at no cost to the employee
or the plan. In the case of a self-insured group
health plan, the DOL will coordinate with HHS
to notify the TPAs.
AUGUST52
Process for Carriers and TPAs
Insured Health Plans
When the certifcation is provided by the
eligible organization to the carrier or notice
is provided by HHS to the carrier, the carrier
has the sole responsibility for providing the
contraceptive coverage. This must be provided without cost-sharing or a premium, fee or
other charge to the eligible organization, the
health plan, or participants or benefciaries.
Self-Insured Health Plans
When the certifcation is provided by the
eligible organization to the TPA or notice is
provided by the DOL to the TPA and the TPA
agrees to enter into or remain in a contractual
relationship with the eligible organization, the
TPA will provide or arrange payments for contraceptive services under one of the following
methods:
1. Provide payment for contraceptive
services for plan participants and
benefciaries; or
2. Arrange for a carrier to provide payments
for the contraceptive services for plan
participants and benefciaries to the TPA.
In either case, the TPA may not impose any
cost-sharing or a premium, fee, or other
charge on the eligible organization, the health
plan, or participants or benefciaries. Both the
TPA and carrier may be reimbursed for the
cost of arranging such payments though an
adjustment to the federally-facilitated Exchange user fee for a participating issuer.
What’s Next?
The preventive care requirements remain an
area of litigation as ongoing challenges refect
objection to the completion of the Form 700
based on religious beliefs. It may revisit the
Court in an upcoming session. Keep in mind
that just because a non-proft or closely held
for-proft may be excused from the contraceptive requirement under these regulations,
there may be other laws that are not as
forgiving. For example, following the Hobby
Lobby decision, the EEOC came out with
guidance stating the Pregnancy Discrimination
Act (“PDA”) requires an employer providing
prescription drugs, devices, or services for the
prevention of medical conditions other than
pregnancy must cover prescription contraceptives on the same basis. At this point, it is
unclear if an entity can successfully apply the
same logic of RFRA to the PDA. If employers
intend to rely on this accommodation, they
should consult with counsel. Interested employers should determine eligibility for an accommodation under the standards described
above and review potential qualifcation for
relief. Advice of counsel is recommended.
Published on August 28, 2015
Final Rules Clarify Required
Coverage of Preventive Items and
Services
The Affordable Care Act requires nongrandfathered group health plans to cover
certain mandated preventive care services at
no cost. On July 14, 2015, the Departments
of Labor, the Treasury and Health & Human
Services (the “Departments”) issued fnal
regulations. These regulations are effective for
plan years beginning on or after October 1,
2015.
Notably, the guidance:
• Clarifes that if a plan that does not have
in its network a provider who can provide
a particular recommended preventive
service, the plan is required to cover the
service when performed by an out-ofnetwork provider without cost sharing
(i.e., at 100%).
• Indicates the effective date for changing
required preventive services when new
guidelines are issued.
If there is a change in the guidelines that
occurs during a plan year, the group health
AUGUST53
plan must provide coverage for that item
or service until the end of the plan year,
except to the extent the change constitutes
a downgrade to a “D” rating or the item
was part of a safety recall or otherwise
poses a signifcant safety concern. In such
circumstances, the Departments will issue
guidance addressing the change during
the plan year. Note that any such change
that occurs outside of renewal and affects
the Summary of Benefts and Coverage will
require 60 days advance notice before the
change can be made.
Employer Action
Employers should:
• Review existing preventive care practices
and, in the event network providers do not
perform certain required services, ensure
the plan provides them at 100% out-ofnetwork; and
Published on August 25, 2015
Medicare Part D
Reminder to Distribute Creditable
Coverage Notice
Employers who sponsor a group health plan
with prescription drug benefts are required to
notify their Medicare-eligible participants and
benefciaries as to whether the drug coverage
provided under the plan is “creditable” or “noncreditable.” This notifcation must be provided
prior to October 15th each year.
Below you will fnd detailed information
regarding these requirements.
Background
Medicare Part D, the Medicare prescription
drug program, imposes a higher premium
on benefciaries who delay enrollment in
Part D after initial eligibility unless they have
employer-provided coverage that is creditable
(meaning equal to or better than coverage
provided under Part D).
Employers that provide prescription drug
benefts are required to notify Medicareeligible individuals annually as to whether the
employer-provided beneft is creditable or noncreditable so that these individuals can decide
whether or not to delay Part D enrollment.
Notice to Participants
CMS has issued participant disclosure model
notices for both creditable and non-creditable
coverage, which can be found at:
http://www.cms.gov/Medicare/PrescriptionDrug-Coverage/CreditableCoverage/ModelNotice-Letters.html
(notices were last updated by CMS for use on
or after April 1, 2011).
Spanish notices are also provided at the
above link.
Who must receive the Participant Notice?
Notice should be sent to all Part D-eligible
participants. This includes active employees,
COBRA qualifed benefciaries, retirees,
spouses, and other dependents of the
employee covered by the plan. In many cases,
the employer will not know whether
SEPTEMBER
• Be aware that changes to mandated
preventive care services will generally
take effect with the following plan year,
except when downgraded to “D” or are
subject to a safety review. The DOL will
provide further comment in the event this
occurs.54
an individual is Medicare eligible or not.
Therefore, employers may wish to provide
the notice to all plan participants (including
COBRA qualifed benefciaries) to ensure
compliance with the notifcation requirements.
When Should the Participant Notice be
Sent?
Participant disclosure notices should be sent
at the following times:
• Prior to 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 under the
plan;
• Whenever prescription drug coverage
ends or changes so that it is no longer
creditable or it becomes creditable; and
• Upon a benefciary’s request.
If the disclosure notice is provided to all plan
participants annually, prior to the October
15th, CMS will consider the frst two bullet
points satisfed. Many employers provide the
notice either during or immediately following
the annual group plan enrollment period.
In order to satisfy the third bullet point,
employers should provide the participant
notice to new hires and newly eligible
individuals under the group health plan.
How Should the Participant Notice be
Sent?
The employer may provide a single disclosure
notice to a participant and his or her family
members covered under the plan. However,
the employer is required to provide a separate
disclosure notice if it is known that a spouse
or dependent resides at an address different
from the address where the participant’s
materials were provided.
Mail
Mail is the recommended method of delivery,
and the method CMS initially had in mind
when issuing its guidance.
Electronic Delivery
The employer may provide the notice
electronically to plan participants who have
the ability to access the employer’s electronic
information system on a daily basis as part
of their work duties (consistent with the DOL
electronic delivery requirements 29 CFR §
2520.104b-4(c)(1)).
If this electronic method of disclosure is
chosen, the plan sponsor must inform
the plan participant that the participant
is responsible for providing a copy of the
electronic disclosure to their Medicare eligible
dependents covered under the group health
plan.
In addition to having the disclosure notice sent
electronically, the notice must be posted on
the entity’s Web site, if applicable, with a link
to the creditable coverage disclosure notice.
Sending notices electronically will not always
work for COBRA qualifed benefciaries
who may not have access to the employer’s
electronic information system on a daily basis.
Mail is generally the recommended method of
delivery in such instances.
Open Enrollment Materials
If an employer chooses to incorporate the
Part D disclosure with other plan participant
information, the disclosure must be prominent
AUGUST55
and conspicuous. This means that the
disclosure portion of the document (or a
reference to the section in the document
being provided to the individual that contains
the required statement) must be prominently
referenced in at least 14-point font in a
separate box, bolded or offset on the frst
page of the provided information.
CMS provides sample language for
referencing the creditable or non-creditable
coverage status of the plan per the
requirements:
If you (and/or your dependents) have
Medicare or will become eligible for
Medicare in the next 12 months, a Federal
law gives you more choices about your
prescription drug coverage.
Please see page xx for more details.
How is Creditable Coverage
Determined?
Most insurance carriers and TPAs will disclose
whether or not the prescription drug coverage
under the plan is creditable for purposes of
Medicare Part D.
CMS’s guidance provides two ways to make
this determination, actuarially or through a
simplifed determination.
Actuarial Determination
Prescription drug coverage is creditable if
the actuarial value of the coverage equals
or exceeds the actuarial value of standard
Medicare Part D prescription drug coverage.
In general this is determined by measuring
whether the expected amount of paid claims
under the employer’s drug program is at
least as much as what is expected under
the standard Part D program. This can be
determined through an actuarial equivalency
test, which generally requires the hiring of an
actuary to perform.
Simplifed Determination
Most entities will be permitted to use the
simplifed determination of creditable coverage
status to annually determine whether
coverage is creditable or not.
A prescription drug plan is deemed to be
creditable if:
• It provides coverage for brand and generic
prescriptions;
• It provides reasonable access to retail
providers;
• The plan is designed to pay on average
at least 60% of participants’ prescription
drug expenses; and
• It satisfes at least one of the following:
• The prescription drug coverage has
no annual beneft maximum beneft or
a maximum annual beneft payable by
the plan of at least $25,000;
• The prescription drug coverage has
an actuarial expectation that the
amount payable by the plan will be at
least $2,000 annually per Medicare
eligible individual; or
• For entities that have integrated health
coverage, the integrated health plan
has no more than a $250 deductible
per year, has no annual beneft
maximum or a maximum annual
beneft payable by the plan of at least
$25,000, and has no less than a
$1,000,000 lifetime combined beneft
maximum.
An integrated plan is any plan of benefts
where the prescription drug beneft is
combined with other coverage offered by
the entity (i.e., medical, dental, vision, etc.)
and the plan has all of the following plan
provisions:
a combined plan year deductible for all
benefts under the plan,
a combined annual beneft maximum for all
benefts under the plan, and/or
a combined lifetime beneft maximum for all
benefts under the plan.
SEPTEMBER56
Published on October 2, 2015
Employees on Leave May be
Full-time Employees for Employer
Penalty Purposes
OCTOBER
Informal guidance indicates that an employee
who has attained full-time employee (“FTE”)
status in the prior measurement period
remains an FTE while on leave at any time
during the stability period.
Background
Large employers not offering affordable,
minimum value coverage to their FTEs may
be penalized. In general, under the look
back measurement method, FTE status
in a stability period is based on hours of
service in the prior applicable measurement
period, regardless of whether the employee
experiences a change in employment status
during the stability period. If the change in
employment status results in a change in
hours of service, that change is captured in a
subsequent stability period.
It is clear that employees not working for a
long period can be asked to complete the
waiting period again upon return to service
with no employer penalty exposure. It is clear
that an employee whose employment was
terminated during the break in service is not
an FTE during that time. However, what is not
clear is the status of the employee while on
leave when employment is not terminated.
Employees on Leave Treated as
FTEs
In the American Bar Association’s annual Q&A
session this year with the IRS, the Committee
on Employee Benefts posed a question to
better clarify this issue. Specifcally, it asked
whether an FTE who is on non-FMLA leave
for over 21 weeks continues FTE status
during the stability period (here, the plan year)
even though the employee has no hours of
service during this time.
The IRS representative concluded that the
individual would be treated as a new hire upon
return so that he could be asked to complete
the waiting period again; however, the official
went on to state that while he was on leave,
so as long as he remained an employee of
the employer during the stability period, he
retained FTE status.
This result seems inconsistent with the fact
that there is an exception available allowing
employers to discontinue FTE status for
employees who switched to part-time status
with no penalty exposure. It is unclear in this
situation whether the leave would qualify as
a “change in employment status,” potentially
making this exception available. If not, some
employees still working for the employer on a
part-time basis (e.g., 20 hours per week) are
not FTEs while employees working 0 hours
are FTEs.
Employer Action
No action is required. These are informal,
non-binding comments. However, employers
should be aware of this comment. In addition,
employers should understand that there are
two distinct issues here:
• Plan language
Plan language is legally binding from
an ERISA and contractual perspective.
Employees and other individuals should
not be enrolled in a plan unless eligible
according to plan terms and employees
and other individuals should have their
coverage terminated according to plan
terms. Most plans do not allow for
continuation of coverage outside being
actively at work or at least for a very
limited time following the employee’s
change to inactive status (or under FMLA,
USERRA, or COBRA/state continuation).
• Employer Penalty
Under the Employer Penalty, employers
do not need to extend coverage to
any particular employee or even offer
coverage at all. However, penalties
may be assessed for failure to do so.
For example, an employer with plan
language that triggers an offer of COBRA
continuation of coverage to the FTE when
hours drop to 0 due to the leave could
be penalized under the “Offer Coverage”
Penalty if that coverage is not “affordable.”
Employers can try to bring these two issues57
together. Taking into account the IRS
representative’s informal comments, this could
entail:
• Amending plan document language to
be consistent with the ACA’s full-time
employee defnition, if necessary. Such
a change may not be an option for an
insured plan.
• Subsidizing an employee’s COBRA while
on leave to make coverage “affordable.”
• Terminating the employee. Outside laws
such as the ADA should be considered
before terminating employment.
• Accepting the potential penalty risk in
these situations. For failure to offer an
affordable plan to an FTE, the penalty
is $250 per month for which the FTE
received a subsidy under the Exchange.
Published on October 8, 2015
The PACE Act Halts
Small Group Expansion
Under the Affordable Care Act (“ACA”), the
defnition of a small group for purposes of
non-grandfathered insured coverage was set
to change from an employer with 50 or fewer
employees to an employer with 100 or fewer
employees, effective for plan years beginning
on or after January 1, 2016.
On October 7, 2015, the President signed
into law bipartisan legislation, the Protecting
Affordable Coverage for Employees (“PACE”)
Act, which maintains the “50 or fewer” defnition
of a small employer. The PACE Act contains
language that permits a state to use the
expanded small group defnition (employers
with 100 or fewer employees). At this point,
it is unclear whether states will retain the “50
or fewer” defnition or opt to expand the small
group market.
What does this mean?
If a state follows the federal government and
retains the existing small group defnition (50 or
fewer employees), employers with insured nongrandfathered plans in the 51-100 employee
market will not be subject to the following:
• The requirement that all of the essential
health benefts are provided under the
group health plan and the actuarial value
of coverage cannot fall below a Bronze
level plan (60% actuarial value); and
• New underwriting requirements that limit
rating variations to:
• The beneft level and tier of coverage (e.g.,
single vs. family);
• Geographic area;
• Age (shall not vary by more than a 3 to 1
for adults); and
• Tobacco use (shall not vary by more than
1.5 to 1).
This change has no effect on other aspects
the ACA, including the Employer Penalty and
reporting on Forms 1094-C and 1095-C.
We will continue to keep you apprised of any
new developments.h maintains the “50 or The58
Internal Revenue Service (IRS) recently released Notice 2015-60, which
provides the adjusted applicable dollar amount for the fourth fling of the
PCOR fee. The adjusted dollar amount for plan years ending on or after
October 1, 2015 and before October 1, 2016 is $2.17.
For self-insured plans and HRAs, the PCOR fee is due by July 31st of
the calendar year following the end of the applicable plan year. The fee
is paid using the 2nd quarter Form 720. The next payment and fling
deadline is July 31, 2016.
Plan Year Amount of PCOR
Fee
Payment and
Filing Date
February 1, 2014 –
January 31, 2015
$2.08/covered life/
year
July 31, 2016
March 1, 2014 –
February 28, 2015
$2.08/covered life/
year
July 31, 2016
April 1, 2014 –
March 31, 2015
$2.08/covered life/
year
July 31, 2016
May 1, 2014 –
April 30, 2015
$2.08/covered life/
year
July 31, 2016
June 1, 2014 –
May 31, 2015
$2.08/covered life/
year
July 31, 2016
July 1, 2014 –
June 30, 2015
$2.08/covered life/
year
July 31, 2016
August 1, 2014 –
July 31, 2015
$2.08/covered life/
year
July 31, 2016
September 1, 2014 –
August 31, 2015
$2.08/covered life/
year
July 31, 2016
October 1, 2014 –
September 30, 2015
$2.08/covered life/
year
July 31, 2016
November 1, 2014 –
October 31, 2015
$2.17/covered life/
year
July 31, 2016
December 1, 2014 –
November 30, 2015
$2.17/covered life/
year
July 31, 2016
January 1, 2015 –
December 31, 2015
$2.17/covered life/
year
July 31, 2016
February 1, 2015 –
January 31, 2016
$2.17/covered life/
year
July 31, 2017
March 1, 2015 –
February 28, 2016
$2.17/covered life/
year
July 31, 2017
April 1, 2015 –
March 31, 2016
$2.17/covered life/
year
July 31, 2017
May 1, 2015 –
April 30, 2016
$2.17/covered life/
year
July 31, 2017
Published on October 13, 2015
Adjusted PCOR Fee for
Fourth Filing Year Released59
June 1, 2015 –
May 31, 2016
$2.17/covered life/
year
July 31, 2017
July 1, 2015 –
June 30, 2016
$2.17/covered life/
year
July 31, 2017
August 1, 2015 –
July 31, 2016
$2.17/covered life/
year
July 31, 2017
September 1, 2015 –
August 31, 2016
$2.17/covered life/
year
July 31, 2017
October 1, 2015 –
September 30, 2016
$2.17/covered life/
year
July 31, 2017
For plan years that are less than 12 months long, look to the plan year
ending date to determine the applicable fee and due date.
OCTOBER
Published on October 15, 2015
Employer Reporting: Final 2015
Instructions and Forms Issued
Employers with at least 50 full-time employees
(“FTEs”) (including full-time equivalent
employees) in the prior calendar year (referred
to as Applicable Large Employers (“ALEs”))
must comply with new reporting requirements
under the Affordable Care Act (“ACA”) beginning
with calendar year 2015.
Recently, the fnal Forms 1094-C and 1095-
C were issued along with instructions. While
the fnal Forms are substantially similar to the
draft versions issued earlier this year, the fnal
instructions provide some helpful clarifcations.
Notable changes include:
• Reporting on HRAs (Form 1095-C Part
III). The fnal instructions make it clear that
an ALE with an insured group health plan
and a self-insured HRA is not required
to report the HRA coverage on Part III of
Form 1095-C as long as the individual
with the HRA coverage is also enrolled
in the employer’s insured group health
plan. The same is true with a self-insured
group health plan with an HRA. However,
reporting on the HRA is required in Part
III if the individual with the HRA coverage
is not enrolled in the employer’s group
health plan (because, for example, he or
she is enrolled in the group health plan of
a spouse). Also, reporting on a retiree-only
HRA that does not include other major
medical coverage would be required.
Employers may use either the Form 1095-
C or Forms 1094-B and 1095-B to report
this information.
• Reporting COBRA offers (Form 1095-C
Line 14). The instructions clarify that:
• An offer of COBRA made to a former
employee upon termination of
employment should not be reported
as an offer of coverage on Line 14 of
Form 1095-C. Instead, Code 1H (no
offer of coverage) in Line 14 should be
used for any month in which the offer
of COBRA coverage applies.
• An offer of COBRA made to an active
employee as a result of a reduction in
hours that resulted in a loss of health
plan eligibility is reported using the
same code in Line 14 as an offer of
that type of coverage to any other
active employee.
• Determine monthly employee
contribution (Form 1095-C Line 15). An
employer may, but is not required to, divide
the total employee share of the premium
for the plan year by the number of months
in the plan year to determine the monthly
employee contribution for the plan year.
This monthly employee contribution would
then be reported for any months of that
plan year that fall in the 2015 calendar
year.
For example:60
Published on October 16, 2015
Employer Reporting: Aggregated
ALE Group and Form 1094-C
Many employers are asking how entities under
common control report information to their
employees and the IRS on Forms 1094-C and
1095-C. In a recent webinar, the IRS provided
an example to better illustrate this process.
Example
Company A is the parent of Company B and
Company C. Together the combined group
(A, B, and C) has 55 full-time employees
(FTEs) and is an Aggregated Applicable Large
Employer (ALE) group. An Aggregated ALE is
determined under the controlled group rules
(Internal Revenue Code section 414(b), (c),
(m) and (o)).
The employer mandate and the annual
reporting requirements (Forms 1094-C and
1095-C) apply to this Aggregated ALE group
and each ALE member as follows:
• Each separate employer (Company
A, Company B, and Company C) in an
Aggregated ALE group is subject to the
employer shared responsibility provisions
as collectively they employee at least 50
FTEs in the preceding calendar year.
• Each separate employer is subject to
the associated information reporting
requirements (Forms 1094-C and 1095-
C) and must fle its own Form 1094-C
Authoritative Transmittal, using its own EIN.
• Company A should not fle one
Authoritative Transmittal reporting
information about Companies A, B, and C
combined. Instead, each entity must fle
as an Authoritative Transmittal with respect
to each company’s FTEs, as illustrated
below:
• Company A completes its Form 1094-
• If the plan year begins January 1, the
employer may determine the amount
to report for each month by taking the
total annual employee contribution for
all 12 months and dividing by 12.
• If the plan year begins April 1, the
employer may determine the amount
to report for January through March,
2015 by taking the total annual
employee contribution for the plan year
ending March 31, 2015, and dividing
by 12, and may determine the amount
to report for April through December,
2015 by taking the total annual
employee contribution for the plan year
ending March 31, 2016, and dividing
by 12.
• Plan Year Information Requested on
Form 1095-C. In Part II there is a place
for an employer to indicate the plan year
start date by entering a two digit start
month (01 through 12). For calendar year
2015 this is optional. Employers that do
not offer group health plan coverage may
use “00”. An employer that changes the
plan year during the calendar year (i.e.,
runs a short plan year) will use the earliest
applicable month. For CY 2016 reporting, it
is anticipated that the IRS will require ALEs
to complete this plan year information.
• Multiemployer interim rule relief (Form
1095-C Line 16). If the employer qualifes
for the multiemployer interim relief (Code
2E), then 2E will trump any other code,
including 2C.
As a reminder, the Forms 1095-C for CY 2015
must be provided to all FTEs (if self-insured, to
any covered individual) no later than February
1, 2016. Employers who fle electronically have
until March 31, 2016 to submit Form 1094-C
and all Forms 1095-C to the IRS. Otherwise,
the due date for paper delivery to the IRS is
February 29, 2016.
For the fnal Forms and Instructions visit:
Form 1094-C:http://www.irs.gov/pub/irs-pdf/
f1094c.pdf
Form 1095-C:http://www.irs.gov/pub/irs-pdf/
f1095c.pdf
Instructions:http://www.irs.gov/pub/irs-pdf/
i109495c.pdf
OCTOBER61
Published on October 16, 2015
2015 Transitional Reinsurance Fee
Annual Enrollment & Contribution Submission
Form Now Available
By November 16, 2015, employers with selfinsured medical plans must report annual
enrollment counts to Health and Human
Services (“HHS”) in order to pay the 2015
Transitional Reinsurance Fee. The fee for 2015
is $44 per covered life per year. Payment is
due by January 15, 2016 (and November 15,
2016 if paying in two-installments).
The 2015 Transitional Reinsurance Program
Annual Enrollment and Contributions
Submission Form (“2015 Form”) is NOW
AVAILABLE at https://www.pay.gov/public/
form/start/70746962. If you go directly to www.
pay.gov, search for ‘2015 ACA Transitional
Reinsurance’ to access the 2015 Form.
In addition, HHS posted a series of FAQs on
September 18, 2015 that provide some helpful
guidance. Briefy:
• Contributing Entity. For purposes of the
reinsurance fee, a contributing entity is a:
• Health insurance carrier; or
• For 2015 and 2016 beneft years, a
self-insured group health plan that
uses a third party administrator
(“TPA”) in connection with claims
processing, adjudication (including
management of internal appeals),
or plan enrollment for services
other than for pharmacy benefts
or excepted benefts. This defnition
includes most employer-sponsored
self-insured medical plans that use
TPAs to process and/or adjudicate
claims.
• Supporting Documentation Relief.
Contributing entities that submit
information on behalf of three (3) or fewer
contributing entities are not required
to include supporting documentation
of annual enrollment counts. This is
welcome relief for most plan sponsors
of self-insured plans as it eliminates
a burdensome step in this reporting
process. A plan sponsor who reports on
behalf of a single contributing entity will
not attach supporting documentation.
Instead, the plan sponsor may directly
input all required information into the 2015
Form.
• An entity that is submitting
information on behalf of four (4) or
more contributing entities will be
required to complete the supporting
documentation fles via Job Aid.
Examples of such entities include
a health insurance carrier or a TPA
who is submitting the information and
payment on behalf of four or more
self-insured health plans.
• Errors for 2015 and 2016. The Centers
for Medicare & Medicaid Services (CMS)
is aware that some contributing entities
may misreport their annual enrollment
counts due to misapplying an allowable
counting method or including individuals
in their annual enrollment counts who are
exempt from consideration for purposes
of reinsurance contributions potentially
resulting in an overpayment. For the 2015
and 2016 beneft years, refund requests
OCTOBER
C as the Authoritative Transmittal as
follows:
• Part I: Include Company A’s
identifying information and check
the box in Line 19 indicating this is
the Authoritative Transmittal.
• Part II: Report information about
Company A as an employer. In
Line 21 – “is the ALE member a
member of an Aggregated
ALE Group” – check the
“Yes” box.62
On October 21, 2015, the IRS released cost
of living adjustments for 2016 under various
provisions of the Internal Revenue Code (the
Code). Some of these adjustments may affect
your employee beneft plans.
Cafeteria Plans
The Affordable Care Act (ACA) amended
Section 125 to place a $2,500 limitation under
Section 125(i) on voluntary employee salary
reductions for contributions to health fexible
spending arrangements, subject to infation
for plan years beginning after December 31,
2013.
For plan years beginning in 2016, the dollar
limitation under Section 125 for voluntary
employee salary reductions for contributions
to health fexible spending arrangements is
$2,550.
Qualifed Transportation Fringe
Benefts
For calendar year 2016, the monthly exclusion
limitation for transportation in a commuter
highway vehicle (vanpool) and any transit
pass (under Code Section 132(f)(2)(A))
remained unchanged at $130; the monthly
exclusion limitation for qualifed parking
expenses (under Section 132(f)(2)(B))
increased to $255.
Non-grandfathered Plan
Cost-Sharing Limits
The 2016 maximum annual out-of-pocket
limits for all non-grandfathered plans are
$6,850 for individual coverage and $13,700 for
family coverage.
These limits generally apply with respect
to any essential health benefts (EHBs)
offered under the group health plan. The fnal
regulations established that starting in the
2016 plan year, the self-only annual limitation
on cost sharing applies to each individual,
regardless of whether the individual is enrolled
in other than self-only coverage, including in a
family HDHP.
Highly Compensated
The compensation threshold for a highly
Published on October 27, 2015
2016 Cost of Living Adjustments
OCTOBER
• resulting from annual enrollment count
misreporting must be submitted 90
days from the date of form submission.
These requests and other inquiries
regarding the reinsurance contribution
submission process should be sent to
reinsurancecontributions@cms.hhs.gov.
You may also visit https://www.regtap.info/ for
upcoming educational opportunities related to
the 2015 reinsurance contributions submission
process. In addition, all FAQs regarding
Reinsurance Contributions, including the
September 18th additions, are available on
REGTAP under the FAQ Search > Program
Area > Reinsurance Contributions.63
NOVEMBER
compensated individual or participant (as
defned by Code Section 414(q)(1)(B) for
purposes of Section 125 nondiscrimination
testing) remains unchanged at $120,000 for
2016.
Under the cafeteria plan rules, the term
highly compensated means any individual or
participant who for the preceding plan year
(or the current plan year in the case of the
frst year of employment) had compensation
in excess of the compensation amount as
specifed in Code Section 414(q)(1)(B). Prop.
Treas. Reg. 1.125-7(a)(9).
Key Employee
The dollar limitation under Code Section
416(i)(1)(A)(i) concerning the defnition of a
key employee for calendar year 2016 again
remains unchanged at $170,000.
For purposes of cafeteria plan
nondiscrimination testing, a key employee is a
participant who is a key employee within the
meaning of Code Section 416(i)(1) at any time
during the preceding plan year. Prop. Treas.
Reg. 1.125-7(a)(10).
Health Savings Accounts
As announced in May 2015, the infation
adjustments for health savings accounts
(HSAs) for 2016 were provided by the IRS in
Rev. Proc. 2015-30.
Annual contribution limitation
For calendar year 2016, the limitation on
deductions for an individual with self-only
coverage under a high deductible health
plan is $3,350. For calendar year 2016, the
limitation on deductions for an individual
with family coverage under a high deductible
health plan is $6,750.
High deductible health plan
For calendar year 2016, a “high deductible
health plan” is defned as a health plan with
an annual deductible that is not less than
$1,300 for self-only coverage or $2,600
for family coverage, and the annual out-ofpocket expenses (deductibles, co-payments,
and other amounts, but not premiums) do
not exceed $6,550 for self-only coverage or
$13,100 for family coverage.
Non-calendar year plans: In cases where the
HDHP renewal date is after the beginning of
the calendar year, any required changes to the
annual deductible or out-of-pocket maximum
may be implemented as of the next renewal
date. See IRS Notice 2004-50, 2004-33 I.R.B.
196, Q/A-86 (Aug.16, 2004).
Catch-up contribution
Individuals who are age 55 or older and
covered by a qualifed high deductible
health plan may make additional catch-up
contributions each year until they enroll in
Medicare. The additional contribution, as
outlined in Code 223(b)(3)(B), is $1,000 for
2009 and thereafter.
Published on November 3, 2015
ACA Automatic Enrollment
Provision Repealed
The Affordable Care Act requires employers
with more than 200 full-time employees to
automatically enroll new full-time employees in
one of the employer’s health beneft options,
subject to an opt out. Originally scheduled
to take effect in 2014, this requirement was
delayed while regulators developed guidance
(which, to date, has not been issued).
On November 2, 2015, the President signed
into law the “Bipartisan Budget Act of 2015”
(H.R. 1314). Among other things, the Act
repeals the automatic enrollment provision.
This relief is appreciated by many employers
who have been struggling to implement the
various compliance requirements under the
ACA.
For a copy of the legislation, visit:
https://www.congress.gov/bill/114th-congress/
house-bill/1314/text#toc-H6C5145772D8F42B
6A29F59E88ED1FF2264
Published on November 9 2015
2016 New Plan Design
Requirements Checklist
The following are important new employer-provided health and welfare
plan design issues to consider for 2016.
Cost-sharing Limits
Affected Plans/Employers:
Non-grandfathered medical plans
Description:
Group health plans must limit in-network out-of-pocket cost sharing to $6,850
self-only/$13,700 family in 2016. But see the lower limit for HDHPs below.1
Starting with the 2016 plan year, the self-only annual limitation on cost sharing
applies to each individual, regardless of whether the individual is enrolled in
other than self-only coverage, including in a family HDHP.
Limits and Requirements
Affected Plans/Employers:
HSAs and HSA-compatible HDHPs
Description:
The 2016 HSA contribution limits and HSA-compatible HDHP requirements are
as follows:
• Maximum contributions of $3,350 self-only/$6,750 family
• Catch-up contribution (for those 55 or older) of $1,000
• Minimum deductibles of $1,300 self-only/$2,600 family
• Maximum out-of-pocket expenses of $6,550 self-only/$13,100 family
In cases where the HDHP renewal date is after the beginning of the calendar
year, any required changes to the annual deductible or out-of-pocket maximum
may be implemented as of the next renewal date.
Thresholds
Affected Plans/Employers:
Health FSAs
Description:
There is a $2,550 limitation on employee salary reductions to health FSAs for
plan years beginning in 2016.
Done
N/A
Done
N/A
Done
N/A
NOVEMBER65
Thresholds
Affected Plans/Employers:
Employers offering qualified transportation fringe benefits
Description:
For calendar year 2016:
• the monthly exclusion limitation for transportation in a commuter highway
vehicle (vanpool) and any transit pass is $130;
• the monthly exclusion limitation for qualified parking expenses is $255.
Done
N/A
EEOC’s Proposed Wellness Program Rules
Affected Plans/Employers:
Employers with wellness programs
Description:
Under new proposed ADA regulations, the 30% premium differential cap applies
to:
• Participatory only (not just health-contingent) wellness programs;
• The cost of employee-only coverage (not family coverage when family
members participate); and
• Tobacco-related wellness programs if there is a medical exam (such as a
biometric screening that tests for the presence of nicotine).
There are also notice and confidentiality provisions.
Employers may want to consider compliance now rather than awaiting final
regulations.
Done
N/A
Employer Penalty
Affected Plans/Employers:
Large Employers
Description:
Review plans for offers of affordable, minimum value coverage.
Done
N/A
Employer Penalty
Affected Plans/Employers:
Large Employers
Description:
For the federal poverty line affordability safe harbor, the employee’s monthly
contribution amount for the self-only premium of the employer’s lowest cost is
$93.18 or less for plan years beginning on and after March 1, 2015.
Done
N/A
NOVEMBER66
Published on December 15 2015
The Departments Issue 29th
Set of ACA FAQs
The Departments of Labor, Treasury, and
Health and Human Services (collectively,
the Departments) have issued the 29th set
of Affordable Care Act (“ACA”) frequently
asked questions (“FAQs”). This time, the
Departments tackle various questions on the
preventive care mandate, wellness programs,
and medical necessity determinations under
the Mental Health Parity and Addiction Equity
Act of 2008.
Unless otherwise noted, this guidance is
effective as of October 23, 2015.
Preventive Care
A non-grandfathered group health plan must
provide coverage for in-network preventive
items and services and may not impose
any cost-sharing requirements (such as a
copayment, coinsurance, or deductible) with
respect to those items or services. The FAQs
address some of those preventive items and
services.
Lactation counseling
Comprehensive prenatal and postnatal
lactation support, counseling, and equipment
rental are part of the ACA’s mandated
preventive care requirements. This includes
lactation counseling. FAQs 1-4 address
a number of issues related to lactation
counseling:
• Plans are required to provide a list of
lactation counseling providers within a
network. This requirement is generally
met through providing the SBC, which
includes an Internet address for obtaining
a list of the network providers. Further,
ERISA requires a group health plan to
provide an SPD that, among other things,
provides information on providers including
a description of any provider networks and
how to obtain a provider list without charge.
• If a plan does not have in its network
a provider who can provide lactation
counseling services, the plan must cover
the item or service when performed by
an out-of-network provider without cost
sharing.
• If a state does not license lactation
counseling providers, then, subject to
reasonable medical management, lactation
counseling must be covered without cost
sharing by the plan when it is performed
by any provider acting within the scope
of his or her license or certifcation under
applicable state law (e.g., a registered
nurse).
• It is not a reasonable medical
management technique to limit coverage
for lactation counseling to services
provided on an in-patient basis (e.g., in a
hospital setting). Moreover, coverage for
lactation support services without cost
sharing must extend for the duration of the
breastfeeding.
Breastfeeding equipment
Under the preventive care mandate, the rental
or purchase of breastfeeding equipment must
be covered without cost-sharing. A plan may
not require individuals to obtain breastfeeding
equipment within a specifed time period (e.g.,
6 months from the date of delivery) in order
for the equipment to be covered without cost
sharing. Additionally, the coverage extends
for the duration of breastfeeding, provided the
individual remains continuously enrolled in the
plan or coverage.
Weight management exclusions
Screening for obesity in adults is a preventive
service. Additionally, the guidelines currently
recommend, for adult patients with a body
mass index (“BMI”) of 30 kg/m2 or higher,
intensive, multi-component behavioral
interventions for weight management. While
plans and issuers may use reasonable
medical management techniques to determine
the frequency, method, treatment, or setting
for a recommended preventive service, to the
extent not specifed in the recommendation or
guideline, plans are not permitted to impose
general exclusions that would encompass
recommended preventive services.
Colonoscopies
FAQs 8-9 clarify that if the colonoscopy is
scheduled and performed as a preventive
screening procedure, it is not permissible for
the plan to impose cost-sharing on a required
DECEMBER67
specialist consultation or any pathology exam
or biopsy in connection with a preventive
colonoscopy. This clarifying guidance is
effective for plan years that begin on or after
January 1, 2016.
Eligible organizations and contraceptive
services
FAQ 9 outlines the two methods a qualifying
non-proft or closely held for-proft employer
with a self-insured group health plan can use
to claim an accommodation:
• Complete EBSA Form 700 and provide
the form to the third party administrator
(TPA):http://www.dol.gov/ebsa/pdf/preventiveserviceseligibleorganizationcertifcationform.pdf; or
• Provide notice of the objection to HHS:
https://www.cms.gov/CCIIO/Resources/
Regulations-and-Guidance/Downloads/
Model-Notice-8-22-14.pdf.
The accommodation generally relieves the
employer from any obligation to contract, arrange, or pay for the objectionable contraceptive and that has the legal effect of designating
the third party administrator (“TPA”) as the
ERISA plan administrator responsible for separately providing payments for those services.
Note, the Supreme Court granted review of 7
cases contesting the contraceptives services
mandate under the ACA, mainly centered on
this accommodation process. The Court is
expected to hear oral arguments in late March
of 2016 with a decision likely in June.
BCRA Testing
FAQ 10 states that women found to be at
increased risk, using a screening tool designed to identify a family history that may be
associated with an increased risk of having
a potentially harmful gene mutation, must
receive coverage without cost sharing for
genetic counseling and, if indicated, testing for
harmful BRCA mutations. This is true regardless of whether the woman has previously
been diagnosed with cancer, as long as she
is not currently symptomatic of or receiving
active treatment for breast, ovarian, tubal, or
peritoneal cancer.
Wellness Programs
Non-fnancial rewards
FAQ 11 provides that if a group health plan
offers non-fnancial (or in-kind) incentives
(e.g., gift cards, thermoses, sports gear) to
participants who adhere to a health-contingent
wellness program, the program must comply
with HIPAA’s 5-factor test.
Mental Health Parity and Addiction Equity Act (“MHPAEA”)
The fnal two FAQs (12 and 13) address
issues under the MHPAEA. In general, MHPAEA requires that the fnancial requirements
(such as coinsurance and copays) and treatment limitations (such as visit limits) imposed
on mental health and substance use disorder
(“MH/SUD”) benefts cannot be more restrictive than the predominant fnancial requirements and treatment limitations that apply to
substantially all medical/surgical benefts.
Medical necessity
Notably, the FAQ clarifes:
• If a participant requests from the plan administrator a copy of its medical necessity
criteria for both medical/surgical and MH/
SUD, including any information regarding
the processes, strategies, evidentiary
standards, or other factors used in developing the medical necessity criteria and
in applying them, the plan administrator
may not refuse to provide this information
based on the assertion that such information is “proprietary” and/or “has commercial value.” Such information needs
to be disclosed upon request, even if the
source of the information is a commercial
third-party vendor.
• While not required to do so, a plan may
provide a document written in layperson’s
terms that provides a description of the
medical necessity criteria. Providing
this information is not a substitute for
supplying the actual underlying medical
necessity criteria, if those documents are
requested.
DECEMBER68
Published on December 17, 2015
Published on December 18, 2015
House Proposes Two-Year
DELAY of the Cadillac Plan Tax
Regulations Address
Mandated Benefts
The Cadillac Plan tax is a 40% non-deductible
excise tax on the value of health insurance
coverage that exceeds $10,200 for self-only
coverage and $27,500 for coverage other than
self-only (e.g., family coverage).
Yesterday, the House introduced bipartisan
legislation for a year-end spending and tax
package. The legislation includes a two-year
delay of the Cadillac Plan tax. If enacted in
its current form, the tax would go into effect
after December 31, 2019 (and not after
December 31, 2017 as currently scheduled).
This is welcomed news for employers who are
currently looking at mechanisms to mitigate
this potential tax burden.
Additionally, the legislation:
• Permits a tax deduction of any Cadillac
Plan tax assessment.
• Authorizes a study of the age and gender
adjustment benchmarks related to the
Cadillac Plan tax.
On November 18, 2015, the Departments of
Treasury, Labor, and Health and Human Services (“Departments”) issued fnal regulations
regarding certain mandated benefts under the
Affordable Care Act (“ACA”). The regulations
largely incorporate various FAQs and remove
outdated provisions (e.g., annual limitations
on essential health benefts, now phased out).
However, there are a few items worthy of note.
Lifetime and Annual Limits
Background: There can be no lifetime or annual dollar limits on “essential health benefts”
(“EHBs”).
Rules: The regulations provide that:
• Suspends the medical device excise tax
for two years and the annual fee on health
insurance providers (the Health Insurer
Tax) for one year.
• Extends parity between mass transit and
parking benefts under Code section 132(f).
The House is expected to vote on the bill
Friday. If approved, the bill will be sent to the
Senate where it will also need to be approved
before it can be presented to the President
for signature. While there appears to be some
bipartisan support for these changes, it is
unclear whether the President will approve
such legislation.
We will continue to monitor and update you
with the latest information.
• a reasonable interpretation of EHBs for
self-funded plans includes choosing
from among any of the 51 EHB basebenchmark plans; and
• lifetime and annual dollar limits on EHBs
are generally prohibited, regardless of
whether such benefts are provided on an
in-network or out-of-network basis.
Health Reimbursement
Arrangements
Background: Health reimbursement arrangements (“HRAs”), in part, must allow the
employee (or former employee) to permanently opt out of and waive future reimbursements
from the HRA at least annually and, upon
DECEMBER69
termination of employment, either the remaining amounts in the HRA are forfeited or the
employee is permitted to permanently opt out
of and waive future reimbursements from the
HRA.
Rule: The Departments clarify that, for purposes of the HRA integration rules, forfeiture
or waiver occurs even if the forfeited amounts
or waived reimbursements may be reinstated
upon a fxed date, a participant’s death, or the
earlier of the two events (the reinstatement
event). For this purpose, an HRA is considered forfeited or waived prior to a reinstatement event only if the participant’s election to
forfeit or waive is irrevocable (i.e., beginning
on the effective date of the election, the participant and participant’s benefciaries have no
access to amounts credited to the HRA until
the reinstatement event).
Account-based Products
The Departments state that it has come to
their attention that there are a wide variety
of account-based products being marketed,
often with subtle but insubstantial differences,
in an attempt to circumvent the guidance set
forth by the Departments on the application
of the annual dollar limit prohibition and the
preventive services requirements to accountbased plans. The Departments intend to
continue to address these specifc instances
of noncompliance.
Rescissions
Background: A group health plan must not
rescind coverage under the plan with respect
to an individual once the individual is covered
under the plan, unless the individual performs
an act, practice, or omission that constitutes fraud, or unless the individual makes
an intentional misrepresentation of material
fact, as prohibited by the terms of the plan. A
rescission is a cancellation or discontinuance
of coverage that has retroactive effect.
Rules: The regulations state:
that a retroactive cancellation is not a
rescission if it is initiated by an individual
and the plan, issuer, employer, or sponsor
does not take any actions to infuence such
individual’s decision or to retaliate against
such individual;
that rescissions are subject to internal claims
and appeals and external review; and
with respect to an individual who is found to
have reported false or inaccurate information
about their tobacco use, the individual may be
charged the appropriate premium that should
have been paid retroactive to the beginning of
the plan year; however, coverage cannot be
rescinded on such basis.
Dependent Coverage
Background: Any group health plan or health
insurance carrier that provides coverage of
dependent children must continue to make dependent coverage available until the children
turn 26 years of age. There is no defnition of
dependent. A previously-issued FAQ indicated
that a plan can limit eligible children to the
following:
• natural children;
• children adopted or placed for adoption;
• stepchildren; and
• eligible foster children (individuals placed
with the employee by an authorized
placement agency or by judgment, decree,
or other order of any court of competent
jurisdiction).
It has been unclear whether this is a minimum
required defnition, safe harbor, or example.
Rule: The regulations incorporate the FAQ
without further clarifcation so the answer
remains unclear.
In addition, the rule indicates that eligibility
restrictions requiring individuals to work, live,
or reside in a service area cannot be applied
to dependent children up to age 26. However,
plans and issuers can continue to provide
coverage only within a certain service area.
Grandfathered Plans
Background: Grandfathered status is lost
when, among other things, the employer or
employee organization decreases its contribution rate based on cost of coverage towards
the cost of any tier of coverage for any class
of similarly situated individuals by more than
5% below the contribution rate for the coverage period that includes March 23, 2010.
There was some question as to what
percentage increase could be allowed when
the employee contribution was $0 on March
23, 2010. While 5% of $0 = $0, should there
be allowed some small increase?
Rule: The Departments confrmed that no
increase is allowed.
DECEMBER70
The Departments also confrmed that once
grandfathered status is lost, there is no opportunity to cure the loss of grandfather status; a
reversal of a change that causes the loss of
grandfathered status (e.g., an elimination of
benefts) after the effective date will not allow
the plan to regain grandfather status.
Patient Protections
Background: If a non-grandfathered group
health plan requires or provides for designation by a participant or benefciary of an
in-network primary care provider, then the
plan must permit each participant or benefciary to designate any participating primary
care provider who is available to accept the
participant or benefciary.
Rule: Plans and issuers may apply reasonable and appropriate geographic limitations
with respect which participating primary care
providers are considered available to be designated as primary care providers.
Emergency Care
Background: Non-grandfathered plans must
cover emergency services without prior authorization and even if out-of-network.
Rule: A plan or issuer must provide coverage
for emergency services that meet the defnition of emergency services, without any time
limit within which treatment must be sought.
For example, emergency care is not limited to
treatment within 24 hours of the onset of an
emergency.
Claims and Appeals
Background: A non-grandfathered group
health plan and a health insurance carrier
must implement an effective appeals process
for appeals of coverage determinations and
claims under which the plan or carrier must:
• have in effect an internal claims appeal
process;
• allow an enrollee to review his fle, to
present evidence and testimony as part
of the appeals process, and to receive
continued coverage pending the outcome
of the appeals process; and
• provide an external review process
for such plans and carriers that, at
a minimum, includes the consumer
protections set forth in the Uniform
External Review Model Act promulgated
by the National Association of Insurance
Commissioners (“NAIC”) and is binding on
such plans.
Rules:
1. Plans and issuers must provide the
claimant, free of charge, with new or
additional evidence considered, relied
upon, or generated by the plan or issuer
in connection with the claim, as well as
any new or additional rationale as soon
as possible and in advance of the notice
of fnal adverse beneft determination. The
fnal rule clarifes that this information must
be provided automatically. Merely providing
a notice informing participants of the
availability of such information or rationale
is not sufficient.
2. If the new or additional evidence is
received so late that it would be impossible
to provide it to the claimant in time for the
claimant to have a reasonable opportunity
to respond, the period for providing a
notice of fnal internal adverse beneft
determination is tolled until such time as
the claimant has a reasonable opportunity
to respond.
3. The NAIC-similar external review process
transition period is extended through
December 31, 2017. Through this date,
State external review processes may be
considered to meet minimum standards if
they meet the temporary standards for a
process similar to the NAIC Uniform Model
Act.
4. While the general rule is that plans and
coverage must pay for the full cost of an
independent review organization (“IRO”)
for an external review, state external review
processes with a nominal fling fee that
does not exceed $25 remain valid.
5. A plan’s or issuer’s determination of
whether a participant or benefciary
is entitled to a reasonable alternative
standard for a reward under a wellness
program is subject to the claims and
appeals procedures.
6. A plan’s or issuer’s determination of
whether a plan is complying with the
nonquantitative treatment limitation
provisions of the Mental Health Parity
and Addiction Equity Act and its
implementing regulations, which generally
require, among other things, parity in
the application of medical management
techniques, is subject to the claims and
appeals procedures.
DECEMBER71
DECEMBER
Published on December 29, 2015
Extension of Deadlines for Forms
1095-C and 1094-C
On December 28, 2015, the IRS issued Notice
2016-4 which provides an extension of the
deadlines to provide Forms 1095-C to individuals and Forms 1095-C and 1094-C to the
IRS and provides other related guidance. The
following Q&As summarize the Notice.
Q 1: What are the new deadlines?
A 1:
• 2015 Forms 1095-C must be furnished to
individuals by March 31, 2016 (rather than
February 1, 2016).
• 2015 Forms 1095-C and Form 1094-C
must be furnished to the IRS by:
• May 31, 2016 (rather than February
29, 2016) if not fling electronically; and
• June 30, 2016 (rather than March 31,
2016) if fling electronically.
The deadlines have likewise been extended
for carriers providing Forms 1095-B to individuals (and the IRS) for insured plans.
Q 2: Do I need to fle for the extension?
A 2: No. The extension is automatic.
Q 3: Can I comply early?
A 3: Yes.
Employers are encouraged to furnish statements to individuals as soon as they are
ready.
The IRS is prepared to accept flings of the
information returns beginning in January 2016.
Q 4: What if the submissions are still late?
A 4: Employers that do not comply with these
extended due dates are subject to penalties. However, employers should still furnish
and fle the forms and the IRS will take such
furnishing and fling into consideration when
determining whether to abate penalties. The
IRS will also take into account whether an
employer made reasonable efforts to prepare
for reporting such as gathering and transmitting the necessary data to an agent to prepare
the data for submission to the IRS or testing
its ability to transmit information to the IRS.
In addition, the IRS will take into account the
extent to which the employer is taking steps to
ensure that it is able to comply with the reporting requirements for 2016.
Q 5: What if employees do not have Forms
1095-C (or Forms 1095-B from the carrier)
before they fle their tax returns?
A 5: For 2015 only, individuals who rely upon
other information received from employers or
carriers about their coverage need not amend
their returns once they receive their Forms
1095-C or any corrected Forms 1095-C. Individuals need not send this information to the
IRS when fling their returns but should keep it
with their tax records.
For the Notice, visit: http://www.irs.gov/pub/irsdrop/n-16-4.pdf72
APPENDIXEmployer Reporting Guide
for Large Employers
6055 and 6056 Reporting for Large Employers
Terry Denesha
(661) 873-2200
CA Insurance License 0449318Table of Contents
Overview of Employer Responsibilities 3
Background 5
What Information To Collect 6
Form 1094-C 7
Form 1095-C 12
Filing and Distributing the Forms 16
Appendix A 18
This summary is intended to convey general information and is not an exhaustive
analysis. This information is subject to change as guidance develops. Emerson Reid
does not provide legal or tax advice. For advice specific to your situation, please
consult an attorney or other professional. ©2015 Emerson Reid LLC. All Rights
Reserved. CA Insurance License #0C94240.This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 3
1 Minimum essential coverage (MEC) is the technical term for most types of health insurance coverage under the ACA. It includes, but is not limited to, employer sponsored group
health plan coverage, Medicare, Medicaid, and individual health insurance coverage. MEC does not include excepted benefits (e.g., most dental and vision plans, health FSAs,
on-site clinics and some EAPs). For this purpose, it means eligible employer-sponsored group health plan.
2 The health insurance carrier will be responsible for providing information to the IRS and covered employees regarding MEC (using Form 1095-B).
Beginning with calendar year (CY) 2015, an applicable large employer (ALE or “large employer,” as referenced in this
summary) must use Forms 1094-C and 1095-C to report the information required under Internal Revenue Code (Code)
sections 6055 and 6056 about offers of health coverage to full-time employees’ (FTEs) and individuals’ enrollment in health
coverage.
Briefly:
„ Form 1094-C is used to report to the IRS summary information of each employer and to transmit all Forms 1095-C
to the IRS.
„ Form 1095-C is used to report information about each FTE (and in the case of a self-insured plan, each
covered individual).
These forms are used by the IRS to determine whether:
„ a large employer owes a (shared responsibility) penalty payment under the employer mandate,
„ an employee is eligible for subsidies to purchase health insurance coverage in the Marketplace, and
„ an individual has MEC in order to avoid potential tax penalties under the individual mandate.
As the following chart illustrates, an ALE must complete, distribute, and file these forms in the calendar year immediately
following the year to which the reporting relates. The first required filing is due in early 2016 for CY 2015.
What to complete? When?
Large employer with an
insured health plan
All applicable parts of
Form 1094-C
Parts I and II of Form
1095-C
A Form 1095-C must be furnished to each FTE by Feb. 1, 2016 for CY 2015
Form 1094-C and all Forms 1095-C must be furnished to the IRS by Feb.
29, 2016 (unless filing electronically, then Mar. 31, 2016)
Large employer with a
self-insured health plan
All applicable parts of
Form 1094-C
All parts of Form 1095-C
A Form 1095-C must be furnished to each FTE and each covered
employee/individual by Feb. 1, 2016
Form 1094-C and all Forms 1095-C must be furnished to the IRS by Feb.
29, 2016 (unless filing electronically, then Mar. 31, 2016)
Overview of Employer ResponsibilitiesThis summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 4
Final forms and instructions for 2014 were recently issued. While no reporting is required for 2014, this information provides
helpful insight on what data will be collected for CY 2015, the first year of applicability.
„ Instructions: http://www.irs.gov/pub/irs-pdf/i109495c.pdf
„ Form 1094-C: http://www.irs.gov/pub/irs-pdf/f1094c.pdf
„ Form 1095-C: http://www.irs.gov/pub/irs-pdf/f1095c.pdf
While payroll vendors and other third parties will likely help employers through this process, it is important that an employer
begins to identify the information that must be collected during the CY to satisfy this requirement.
This guide is intended to provide you with a comprehensive overview of the reporting requirements under Code
sections 6055 and 6056 as it pertains to a large employer with more than 50 full time employees and equivalents. These
requirements are effective for CY 2015, forms due in early 2016.
This guide will:
„ outline the various pieces of information and data needed during the CY to complete year-end reporting;
„ provide a step-by-step guide to completing the Forms; and
„ identify additional requirements for a large employer with self-insured health plan coverage.
Some rules to follow when using this guide:
„ While the 2014 Forms and Instructions were recently finalized, the final versions for 2015 have not been issued. Thus,
information requested for 2015 may differ from what is outlined in this summary. We will keep you updated with any
changes.
„ Regardless of an employer’s plan year, reporting is done based on the CY (January–December). Notably, non-CY
plans and other changes that occur mid-year will need to be reflected for the applicable month(s). This may include
changes in affordability, plan changes from insured to self-insured (or vice versa) or mid-year enrollment changes in a
self-insured health plan.
„ Much of this data is reported for each month of the calendar year, with some opportunities to report on a 12-month
basis. Prepare to track data and pull reports for each month of the CY.
The information contained in this guide is general in nature and is subject to change as guidance develops. The
information contained herein is not intended to be construed as legal advice or opinion and does not take into account any
particular facts and circumstances of a specific situation. Advice of counsel or tax professionals is recommended.This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 5
Beginning in 2015, large employers may be subject to an assessable payment (referred to as a “penalty”) if any FTE
receives a premium tax-credit or cost-sharing subsidy (collectively a “subsidy” or “subsidies”) to purchase health insurance
through the Marketplace. There are two possible penalties (“No Coverage” and “Offer Coverage”). The penalty that may
apply will depend on the particular circumstances of the employer.
For this purpose, an FTE means an employee with at least 30 hours of service per week or 130 hours of service per
month as determined under the applicable measurement method (look-back or monthly).
Only applicable large employers must complete the Forms 1094-C and 1095-C. Generally, this means an employer that
had 50 or more FTEs (including full-time equivalent employees) on business days in the preceding calendar year. Large
employer status is determined on an annual basis and requires aggregating all employees within a controlled group3. For
2015 only, medium-sized employers (50-99 FTEs) may qualify for relief from the employer mandate, subject to certain
rules4. However, these employers are still required to comply with reporting requirements for 2015 and certify eligibility for
the relief on Form 1094-C.
Background
3 For purposes of determining whether an employer is a large employer, all persons treated as a single employer under Code §414(b), (c), (m), or (o) are considered to be
employed by a single employer. Consult with counsel or tax advisors on questions of common ownership or controlled group participation.
4 Medium Sized Employer Relief. Certain medium sized employers may delay the application of the employer mandate until the first plan year that begins in 2016 (e.g., January 1,
2016 for a calendar year plan). This relief is available only if the employer did not modify the plan year after February 9, 2014 to begin on a later calendar date and if the employer
satisfies all of the following conditions:
a. Limited Workforce Size The employer employs on average at least 50 but fewer than 100 FTEs (including full-time equivalent employees) on business days during 2014.
b. Maintenance of Workforce and Aggregate Hours of Service. Between February 9, 2014 and ending on December 31, 2014, the employer does not reduce the size of its
workforce or employees’ hours of service to satisfy the workforce size condition.
c. Maintenance of Previously Offered Health Coverage The employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014.
d. Certifies eligibility for relief on Form 1094-C..
5 Coverage is affordable if the cost for self-only coverage does not exceed 9.5% of household income for the lowest cost minimum value plan. The regulations provide three safe
harbors (W-2, FPL and rate of pay) that may be used to determine affordability.
6 Minimum value (MV) means a plan that covers at least 60% of the total allowed cost of benefits that are expected to be incurred by the plan. Guidance provides four ways to
satisfy this threshold (MV calculator, safe harbor plan designs, actuarial certification and any metal coverage purchased in a Marketplace).
“No Coverage” Penalty “Offer Coverage” Penalty
This penalty applies when an ALE does not offer at
least 95% of FTEs and their dependent children a
group health plan (i.e., MEC) and at least one FTE
receives a subsidy in the Marketplace to purchase
qualified health plan coverage.
The penalty is $166.67/month (or $2,000/year)
multiplied by the total number of FTEs – 30.
This penalty applies when an ALE offers at least 95% of FTEs and their
dependent children a group health plan (i.e., MEC) but the coverage is not
affordable5, does not provide minimum value6, or excludes 5% or fewer FTEs
and one (or more) of those FTEs receive a subsidy in the Marketplace.
The penalty is the lesser of:
„ $250/month (or $3,000 annually) multiplied by each FTE who receives
a subsidy in the Marketplace to purchase health insurance coverage; or
„ the “No Coverage” penalty.
For 2015 only, an ALE may use 70% (as opposed to 95%) and 80 (as opposed to 30) to determine liability under the “No Coverage” penalty.
However, this relief is not available if the employer changed a non-CY plan after February 9, 2014 to begin at a later date. Employers eligible for
transition relief may use 30% (as opposed to 5%) to determine its “Offer Coverage” penalty exposure in 2015.
The penalty amounts may be adjusted for inflation – no adjustment has been announced for 2015. Penalties are assessed monthly, but paid
annually.This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 6
What Information To Collect
Basic Information (1094-C and 1095-C)
† Name, EIN, address, contact person and phone number for the employer.
† If part of a controlled group, name and EIN of other employer members.
† If health plan coverage is offered, funding status during the calendar year (insured or self-insured).
† Calendar year (CY) reported (e.g., 2015).
† Name, address, tax identification number (usually the social security number) for each FTE.
Employer Information Reported on a Monthly Basis
† Was MEC offered to at least 95% of FTEs and children to age 26 for each month of CY?
† Total number of FTEs for each month of the CY.
† Total number of all employees (this includes all FTEs and non FTEs and employees in a limited non-assessment period7)
for each month of the CY.
† 2015 transition relief eligibility: medium sized employer relief or 70%/80 relief.
Full-Time Employee Information Reported on a Monthly Basis
† Each FTE for the CY – this means any employee who is considered full-time for at least one month during the CY
† The health plan coverage, if any, offered to the FTE (and any family members) each month of the CY (e.g., self only, self+ family, no
coverage offered)
† The self-only premium an employee must pay for the lowest-cost plan that provides minimum value.
† The reason why an employer would not be subject to a penalty for a particular month (e.g., employee in waiting period, employee in
initial measurement period, affordability safe harbor applies).
† The months for which the employer relied on non-CY relief with respect to FTEs.
If Self-Insured, Covered Employee/Individual Information Reported on a Monthly Basis
† Names, SSN (or tax identification number of non-employees), and months of coverage for any covered employee/individual
(e.g., retiree or COBRA qualified beneficiary) and family members during the CYThe months for which the employer relied on
non-CY relief with respect to FTEs.
7 A limited non-assessment period includes: an Initial Measurement Period and associated Initial Administrative Period, the first calendar month of employment if the employee is
not hired on the first day of the month, the period following change in status to FT during IMP, and/or the waiting period.This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 7
8 A Governmental Unit is the government of the United States, any state or political subdivision thereof, or any Indian tribal government (as defined in section 7701(a)(40))
or subdivision of an Indian tribal government (as defined in section 7871(d)). For purposes of these instructions, references to a Governmental Unit include an Agency or
Instrumentality of a Governmental Unit. Until guidance is issued that defines the term Agency or Instrumentality of a Governmental Unit for purposes of section 6056, an entity
may determine whether it is an Agency or Instrumentality of a Governmental Unit based on a reasonable and good faith interpretation of existing rules relating to agency or
instrumentality determinations for other federal tax purposes.
Form 1094-C
Overview
Form 1094-C is the summary form used to transmit all Forms 1095-C to the IRS. It provides specific employer-level data.
How to Complete Form 1094-C
PART I
Lines 1-7. Complete the name of the large employer, the employer’s tax identification number (EIN), address, and the
name and phone number of a contact person responsible for answering any questions.
Lines 9-16. Complete these lines only if a Designated Governmental Entity (DGE) filing on behalf of an employer.
Otherwise skip these lines. Non-governmental employers will always skip Lines 9-16. For more information
refer to the instructions.
What’s a DGE? DGE is a person or persons that are part of or related to the Governmental Unit8 that is the
ALE Member and that is appropriately designated for purposes of these reporting requirements. In the case
of a Governmental Unit that has delegated some or all of its reporting responsibilities to a DGE with respect
to some or all of its employees, one Authoritative Transmittal must still be filed for that Governmental Unit
reporting aggregate employer-level data for all employees of the Governmental Unit (including those for whom
the Governmental Unit has delegated its reporting responsibilities). Note, special rules apply if there is selfinsured health plan coverage and the employer delegates responsibilities to the DGE. Review the instructions.
Line 17. Reserved for future use, do not complete.This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 8
Line 18. Enter the total number of Forms 1095-C that are submitted with this Form 1094-C. For example, if the employer
generates 200 Forms 1095-C, 200 will go in Line 18.
PART II
Line 19. Mark this box if the Form 1094-C serves as the Authoritative Transmittal that reports aggregate employer-level
data for the employer. Check this box in Line 19 if this Form 1094-C is the only Form 1094-C being filed for the
employer.
However, if multiple Forms 1094-C are being filed for the employer so that Forms 1095-C for all FTEs of the
employer are not attached to a single Form 1094-C transmittal (because some of the Forms 1095-C are being
transmitted separately), one of the Forms 1094-C associated with the employer must be designated as the
Authoritative Transmittal and report aggregate data.
When might an employer have multiple Forms 1094-C? A single employer may have two divisions
(e.g., Washington and California) and decide instead of using a single 1094-C to transmit all of the Forms
1095-C to the IRS, the employer will file separate Forms 1094-C for each of its two divisions to transmit
the Forms 1095-C for their respective FTEs in each division. In this case, one of the Forms 1094-C must
be designated as the Authoritative Transmittal and report aggregate employer data for both divisions in
Parts II, III and IV, as applicable.9
Note, in the case of a controlled group (an aggregated ALE), each member of the controlled group (each ALE member)
must file its own authoritative transmittal. The various employers under common control may not submit one Authoritative
Transmittal.
These rules also apply to DGE.10
9 Likely, most employers will not have multiple Forms 1094-C. However, if an employer takes that approach, consider the following example:
ABC company is a single employer (not part of controlled group). It has two divisions, Washington and California. The Washington division has 200 Forms 1095-C and the
California division has 100 Forms 1095-C. Each division will submit its own 1094-C and applicable Forms 1095-C. The Washington division acts as the authoritative transmittal
for the employer. Therefore:
The 1094-C for the California division will reflect 100 as the number of Forms 1095-C submitted with this transmittal (Line 18). California will not check Line 19 and will not
complete Lines 20-22 or Part III or IV (if applicable).
The 1094-C for Washington will reflect 200 as the number of Forms 1095-C submitted with this transmittal (Line 18). Washington will check Line 19 on Form 1094-C and
complete Lines 20-22. Line 20 will reflect 300, the total number of Forms filed on behalf of the employer (the two divisions combined). Washington will sign the 1094-C and
complete Parts III and Part IV (if applicable).
10Example. County is an ALE made up of ALE Members School District, Police District, and County General Office. School District designates the state to report on behalf of the
teachers and reports for itself for its remaining FTEs. In this case, either the School District or the state must file an Authoritative Transmittal reporting aggregate employer-level
data for all FTEs of the School District.This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 9
If Line 19 is checked, complete the rest of Part II (Lines 20-22 and signature) and Parts III and IV, as applicable. If Line 19
is not checked, sign the Form, but do not complete Lines 20-22 or Parts III and IV.
Line 20. Enter the total number of Forms 1095-C that will be filed by, or on behalf of, the employer. This includes all
Forms 1095-C filed with respect to this transmittal, including any individuals covered by a self-insured health
plan. This number should match the number reflected in Line 18, unless the employer is required to aggregate
employer data as the Authoritative Transmittal for multiple Forms 1094-C.
Line 21. If, during any month of the CY the employer was a member of a controlled group (also referred to as an
Aggregated ALE Group) check the box in Line 21. You will also need to complete Part III, column (d) and Part
IV to list the other members of the controlled group. If the employer was not a member of a controlled group
during the calendar year, do not check this box and do not complete Part III, column (d) and Part IV.
Line 22. If the employer meets the eligibility requirements and is using one of the Offer Methods, the employer must
check either box “A”, “B”, or “D”. See appendix for further discussion. If the employer qualifies for and uses the
medium-sized employer transition relief or the 70%/80 transition relief, the employer must check box “C” on
Line 22 and complete Part III column (e).
PART III — Do not complete any of Part III if the 1094-C is not the authoritative transmittalThis summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 10
Column (a). If an employer offers MEC to at least 95% of FTEs and their children to age 26 for the entire CY, mark the
“Yes” box in Line 23. If such coverage was not offered for the entire CY, mark “No” on Line 23 to reflect all
12 months.
If an offer of coverage to at least 95% of FTEs and their children was made for some, but not all, months of
the CY mark either “Yes” or “No” in the appropriate check box for each month (Lines 24-35).
2015 70%/80 Relief. If an employer did not offer MEC to at least 95% of FTEs and their children to age 26
but is eligible for the 70%/80 transition relief, mark “Yes” in column (a) for each applicable month (or for the
entire CY). Use code “B” in column (e).
Employees in a limited non-assessment period. For purposes of determining the 95% threshold (or
70% threshold for 2015) do not count employees in a limited non-assessment period.
4980H Transition Relief for Dependent Coverage. An employer may check “Yes” in column (a) if taking
advantage of limited relief available when an offer of coverage to children was not made. For the 2014 and
2015 plan years, for an employee who was not offered dependent health coverage during the 2013 or 2014
plan years, an employer may treat, solely for purposes of section 4980H, an offer of health coverage to an
FTE but not his or her dependents, as an offer of health coverage to the FTE and his or her dependents,
if the employer takes steps during the 2014 or 2015 plan year (or both) to extend coverage under the
plan to dependents not offered coverage during the 2013 or 2014 plan year (or both). An employer using
this transition relief for a calendar year is not eligible to report using the Qualifying Offer Method (or the
Qualifying Offer Transition Relief Method) for that CY (see appendix).
Column (b). Enter the number of FTEs for each month. Note this must be reported on a monthly basis (Lines 24-35).
Do no count any employee who is in a limited non-assessment period. Do not use a single count for a
12-month period.
Column (c). Enter the total number of employees, including FTEs, non-FTEs and employees in a limited non-assessment
period for each calendar month. An employer may choose one of the following days to determine this count
per month and must use the same day for all months of the year:
„ The first day of each month,
„ The last day of each month,
„ The first day of the first payroll period that starts during each month, or
„ The last day of the first payroll period that starts during each month provided that for each month that last
day falls within the calendar month in which the payroll period starts.
While unlikely, if the total number of employees was the same for every month of the entire CY, enter that
number in column (c), Line 23. Otherwise reflect the count for each month in column (c), Lines 24-35.
Column (d). If the employer is part of a controlled group (Line 21, Part II should be checked), then reflect each month the
employer was a member of the controlled group in column (d). If part of a controlled group for all 12 months
of the calendar year, use the box in Line 23. The employer will also need to complete Part IV. If the employer
is not a part of a controlled group, leave column (d) blank.
Column (e). If the employer marked Line 22, box “C”, the employer must certify eligibility for the medium sized employer
relief by entering code “A” in column (e). If the employer is eligible for the 70%/80, then use code “B” in column (e).This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 11
Do not complete any of Part III if the 1094-C is not the authoritative transmittal.
PART VI — Do not complete any of Part IV if the 1094-C is not the authoritative transmittal
Lines 36-65.If part of a controlled group (aggregated ALE) list the name and EIN of other employers in the controlled
group (aggregated ALE).
Do not complete Part IV if the employer is not part of a controlled group (aggregated ALE).
Do not complete any of Part IV if the 1094-C is not the authoritative transmittal.This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 12
Form 1095-C
Overview
All ALEs must complete one Form 1095-C for each FTE. This means that each FTE who was an FTE for at least one
month of the calendar year must receive a Form 1095-C with respect to the calendar year. Form 1095-C is used to report
information about each FTE for purposes of the employer mandate. It is also used to determine an employee’s eligibility for
a premium tax credit in the Marketplace.
Employers that offer self-insured health plan coverage will also use Form 1095-C to report information regarding MEC
to the IRS and to covered individuals under the employer-sponsored self-insured plan. This demonstrates that a covered
individual is not liable for a shared responsibility payment under the individual mandate for the months the individual (and/
or a spouse and dependants) are covered by the self-insured health plan.
As described earlier, Forms 1095-C are transmitted to the IRS by the employer using Form 1094-C. In addition, the
employer must provide a copy to each FTE and any covered employee/individual in a self-insured health plan. Alternative
statements to issuing the Form 1095-C to the employee are permitted, subject to specific rules described in the appendix.
Generally, most employers will furnish the Form 1095-C as opposed to an alternative statement.
How to Complete Form 1095-C
PART I
Lines 1-7. Lines 1-6. Enter the name of the employee, the employee’s social security number (SSN), and complete
address.
Lines 7-13. Enter the employer’s name, EIN, address, a contact person’s phone number (who to call about the information
reported on the form). This information should be the same as what is reported in Part I of Form 1094-C.
PART I
Line 14. Offer of Coverage. This line reflects the employer’s offer of coverage, if any, for each month of the CY through
the use of the Series 1 Codes. If the same Code applies for all 12 months, enter the applicable Code in theThis summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 13
“All 12 Months” section. A Series 1 Code must be entered for each month of the CY (January – December), even if the
employee was not an FTE for one or more calendar months. Enter the Code identifying the type of health coverage
actually offered by the employer to the employee, if any. A list of codes follows.
Series 1 Codes – Offer of Coverage and Line 15
1A Qualifying Offer. MEC providing minimum value
(MV) offered to FTE with employee contribution
for self-only coverage equal to or less than 9.5%
mainland single federal poverty line ($93.18 for
2015) and at least MEC offered to spouse and
dependent(s).
„ This code may be used to report for specific months for which a Qualifying
Offer was made, even if the employee did not receive a Qualifying Offer for
all 12 months of the CY.
„ Leave Line 15 blank.
1B MEC providing MV offered to employee only. „ Enter the amount of the lowest cost, self-only coverage in Line 15.
1C MEC providing MV offered to employee and at
least MEC offered to dependent(s) (not spouse).
„ Enter the amount of the lowest cost, self-only coverage in Line 15.
1D MEC providing MV offered to employee and at
least MEC offered to spouse (not dependent(s)).
„ Enter the amount of the lowest cost, self-only coverage in Line 15.
1E MEC providing MV offered to employee and at
least MEC offered to dependent(s) and spouse.
„ This is likely a commonly used Code.
„ Enter the amount of the lowest cost, self-only coverage in
Line 15.
1F MEC NOT providing MV offered to employee,
or employee and spouse or dependent(s), or
employee, spouse and dependents.
„ This is likely a commonly used Code.
„ Enter the amount of the lowest cost, self-only coverage in
Line 15.
1G MEC NOT providing MV offered to employee,
or employee and spouse or dependent(s), or
employee, spouse and dependents.
„ Applicable for part time employees enrolled in self-insured plans.
„ Use this Code to report covered employees who are NOT full-time and/or
non-employees offered coverage under the self-insured plan (e.g., retiree,
COBRA qualified beneficiary)
„ Leave Line 15 blank
1H No offer of coverage (employee not offered any
health coverage or employee offered coverage
that is not MEC).
„ Employers that do not offer health insurance coverage or offer coverage
that is not MEC (e.g., only a dental plan).
„ Leave Line 15 blank.
1I Qualifying Offer Transition Relief 2015. Employee
(and spouse or dependents) received either: (1)
no offer of coverage, (2) an offer that is not a
qualifying offer, or (3) a qualifying offer for less
than 12 months.
„ See Appendix.
„ Leave Line 15 blank.
Line 15. Affordability. Line 15 must be completed if Codes 1B, 1C, 1D or 1E are used in Line 14. Otherwise, leave
blank. Enter the amount of the employee’s share of the lowest cost premium for self-only, minimum value
coverage. If no employee contribution is required for the lowest cost MV plan (i.e., it’s 100% employer paid),
enter “0.00”. If the employee’s share is the same for all 12 months of the CY, use the “all 12 Months” box. The
amount reflected in Line 15 may not necessarily be the amount the employee is actually paying for coverage.
For example, the employer offers two health plans. The employee’s share of the lowest cost premium for
self-only, minimum value coverage is $100/month. This FTE elects a benefit option that is $200/month. For
this FTE, the amount reflected in Line 15 is $100, even though the FTE is paying $200/month for coverage.This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 14
Line 16. Safe Harbor. The Series 2 Codes are used to report one or more months during the calendar year where the
employer may not be subject to a penalty under the employer mandate either due to the employee’s actual
enrollment in MEC or certain relief. For each FTE (and any covered employee/individual in a self-insured plan),
the employer will need to identify any Series 2 Code that may be applicable. In some cases multiple Series
2 Codes may be applicable, and an ordering rule applies (illustrated below). If no Series 2 Codes apply for a
month, leave the box blank.
Series 2 Codes – Offer of Coverage and Line 16
2A Employee not employed during the month.
Enter code 2A if the employee was not employed
on any day of the calendar month.
„ Do not use code 2A for a month if the individual was an employee of
the employer on any day of the calendar month.
„ Do not use code 2A for the month during which an employee
terminates employment with the employer.
2B Employee not an FTE. Enter code 2B if the
employee is not an FTE for the month AND did
not enroll in MEC, if offered for the month.11
„ Also use this code for January 2015 if the employee was offered health
coverage no later than the first day of the first payroll period that begins
in January 2015 and the coverage offered was affordable and provided
minimum value.
2C Employee enrolled in coverage offered. Enter
code 2C for any month in which the employee
enrolled in health coverage offered by the
employer for each day of the month, regardless
of whether any other code in Code Series 2
might also apply.
„ Code 2C trumps any other Series 2 Code that may be relevant.
„ This is also used for any covered employee/individual in a self-insured
health plan.
2D Employee in a limited non-assessment
period. Enter code 2D for any month during
which an employee is in a Limited NonAssessment Period. This includes an Initial
Measurement Period (IMP) and associated Initial
Administrative Period, the first calendar month
of employment if the employee is not hired on
the first day of the month, the period following
change in status from non-FTE to FTE during an
IMP and/or the waiting period.
„ Do not use 2B (not an FTE).
2E Multiemployer interim rule relief. Enter code
2E for any month for which the multiemployer
interim guidance applies for that employee.
„ Do not use 2D if the employer can use Code 2E.
2F Form W-2 safe harbor. Enter code 2F if the
employer used the Form W-2 safe harbor to
determine affordability for this employee for the
year.
„ Do not use if employee enrolled in the coverage offered (2C).
„ If an employer uses this safe harbor for an employee, it must be used
for all months of the calendar year for which the employee is offered
health coverage.
„ Do not use if 2E can be used (multiemployer relief).
11 Use code 2B if the employee is an FTE for the month and whose offer of coverage (or coverage if the employee was enrolled) ended before the last day of the month
solely because the employee terminated employment during the month (so that the offer of coverage or coverage would have continued if the employee had not terminated
employment during the month).This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 15
2G FPL Safe Harbor. Enter code 2G if the
employer used the FPL safe harbor to determine
affordability for this employee for any month of
the CY.
„ Do not use if employee enrolled in the coverage offered (2C).
„ Do not use if 2E can be used (multiemployer relief).
2H Rate of pay safe harbor. Enter code 2H if the
employer used the rate of pay safe harbor to
determine affordability for this employee for any
month of the CY.
„ Do not use if employee enrolled in the coverage offered (2C).
„ Do not use if 2E can be used (multiemployer relief).
2I Non-calendar year transition relief applies to
this employee.
„ Applies only for non-calendar year plans that qualify for this relief.
„ Applies only with respect to the months during the CY prior to the start
of the plan year (e.g., June 1 plan year, 2I may be used to report relief
for January – May).
PART III
Complete Part III ONLY if the employer offers a self-insured group health plan in which the employee or other individual
is enrolled. If the employer completes Part III it must indicate self-insured coverage by checking the box at the top of the
section. Employers sponsoring an insured arrangement will leave this section blank as the carrier is responsible.
This part must be completed by an employer offering self-insured health plan coverage for any individual who was an
employee for one (or more) calendar month(s) of the year and who enrolled in the coverage regardless of full-time status.
In addition, if non-employees are covered by the self-insured plan, an employer may use Form 1095-C (as opposed to
Forms 1094-B and 1095-B) to report MEC for these individuals. This may include certain retirees or COBRA qualified
beneficiaries or non-employee members of the board of directors who have coverage under the self-insured health plan.12
Note, the employer must still complete Parts I and II with respect to these individuals. Use Code 1G in Line 14 to reflect
the offer of coverage for a non-employee or a part-time employee.
12If self-insured coverage is offered to these non-employees, there are additional compliance considerations that should be reviewed, including potential MEWA and tax
implications of offering coverage to non-employee board of director members, potential for uncovered claims if not appropriately contracted for in the stop loss agreement,
assurance that the plan terms permit such coverage and potential for 105(h) discrimination violations in the event that such coverage is extended only to former highly
compensated employees.This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 16
Lines 17-22. Complete the name and social security number of each covered individual (e.g., employee, spouse and
children). For individuals other than the employee listed in Part I, a tax identification number may be
provided. If SSN is not available, a date of birth (DOB) may be used if a reasonable effort to collect the
SSN is made.13 Check the applicable boxes to reflect the months the individuals are enrolled in the selfinsured health plan during the CY.
13 To demonstrate a reasonable effort, the employer must satisfy the following steps:
• Initial solicitation at the time the relationship with the covered individual(s) is established (e.g., upon hire or initial enrollment);
• If unsuccessful, an annual solicitation must be made by Dec. 31 of the same year;
• If still unsuccessful, a second solicitation is required by Dec. 31 of the following year;
• If still unsuccessful, no penalties applied if a DOB is used in lieu of a SSN.
Use of a truncated SSN is permitted for Forms 1095-C that are provided to covered individuals. However, truncated SSNs are not permitted on Forms 1095-C submitted to the
IRS.
Filing and Distributing the Forms
FORM 1094-C
Forms 1094-C and all Forms 1095-C are filed with the IRS by February 28 if filing on paper (or March 31 if filing
electronically) of the year following the calendar year to which the return relates. If the regular due date falls on a Saturday,
Sunday, or legal holiday, file by the next business day. A business day is any day that is not a Saturday, Sunday, or legal
holiday.
For CY 2015, these Forms are due to the IRS by February 29, 2016 (as the 28th is a Sunday), or March 31, 2016 if
filing electronically.
Form 1094-C and Form 1095-C are subject to the requirements to file returns electronically. Filers of 250 or more
information returns must file the returns electronically. The 250-or-more requirement applies separately to each type of
return and separately to each type of corrected return.
FORM 1095-C
The requirement to furnish Form 1095-C to an employee is satisfied if the form is properly addressed and mailed on or
before the due date. If the regular due date falls on a Saturday, Sunday, or legal holiday, file by the next business day. A
business day is any day that is not a Saturday, Sunday, or legal holiday.
Generally, Forms 1095-C are due to employees by January 31 of the year following the calendar year to which the return
relates.
For CY 2015, the 1095-C is due to employees by February 1, 2016 (as January 31 is a Sunday).
Unless an alternative furnishing method is available (see Appendix), the employer will provide a copy of the Form 1095-C
to each FTE (i.e., an FTE for at least one month during the calendar year). In addition, if the health plan is self-insured, the
employer must provide a copy to each individual who had coverage for at least one month during the calendar year.
Statements must be furnished on paper by mail, unless the recipient affirmatively consents to receive the statement in
an electronic format. If mailed, the statement must be sent to the employee’s last known permanent address, or if no
permanent address is known, to the employee’s temporary address.
Consent to furnish statement electronically. An employer is required to obtain affirmative consent to furnish a statement
electronically. This requirement ensures that statements are furnished electronically only to individuals who are able to
access them. An individual may consent on paper or electronically, such as by email. If consent is on paper, the individual
must confirm the consent electronically. A statement may be furnished electronically by email or by informing the individual
how to access the statement on the employer’s website. Consent to receive a Form W-2 electronically does not transfer to
Form 1095-C delivery. A separate consent identifying the Form 1095-C is needed.This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 17
PENALTIES FOR NONCOMPLIANCE WITH THESE INFORMATION REPORTING REQUIREMENTS
Generally, if Forms 1094-C and/or Forms 1095-C are incorrect and incomplete, a penalty may apply if not corrected by
the due date and the employer cannot show reasonable cause. The penalties are the same as under the rules for Forms
W-2. Briefly, the amount of penalties can range from $30/form with a $250,000 maximum penalty/year to $100/form with a
maximum penalty of $1.5M/year (these are referred to as the 6721 and 6722 penalties).
Limited Relief for CY 2015
„ The IRS will not impose penalties on large employers that can show that they have made good faith efforts
to comply with the information reporting requirements. Specifically, relief is provided from penalties described
above for returns and statements filed and furnished in 2016 to report offers of coverage in 2015 for incorrect or
incomplete information reported on the return or statement. However, no relief is provided if the large employer
cannot show a good faith effort to comply with the information reporting requirements or that fail to timely file an
information return or furnish a statement.
„ However, consistent with existing information reporting rules, ALE members that fail to timely meet the
requirements still may be eligible for penalty relief if the IRS determines that the standards for reasonable cause
under section 6724 are satisfied.
CY 2016 and Thereafter
The penalty under section 6721 may apply to an ALE member that fails to file timely information returns, fails to include
all the required information, or includes incorrect information on the return. The penalty under section 6722 may apply to
an ALE member that fails to furnish timely the statement, fails to include all the required information, or includes incorrect
information on the statement. The waiver of penalty and special rules under section 6724 and the applicable regulations,
including abatement of information return penalties for reasonable cause, may apply to certain failures under section 6721
or 6722. Discuss penalties with tax advisors.
ADDITIONAL INFORMATION
Third party assistance.
Reporting arrangements between a large employer and carriers or other parties (e.g., TPA, payroll provider) are not
prohibited. However, entering into a reporting arrangement does not transfer a large employer’s potential liability under
section 4980H and does not transfer the potential liability for failure of the employer to file returns and furnish statements
under section 6056. If a person who prepares returns or statements required under section 6056 is a tax return preparer,
that person will be subject to the requirements generally applicable to tax return preparers.
Employers under Common Control (multiple ALE members)
Each large employer under a controlled group is responsible for reporting under section 6056. Generally, each large
employer must file separate section 6056 returns providing that employer’s EIN. If more than one third party is facilitating
reporting for an large employer in the controlled group, there must be only one Authoritative Transmittal (noted on Form
1094-C) reporting aggregate employer-level data for all FTEs of that large employer. Additionally, there must be only one
section Form 1095-C for each FTE with respect to employment with that ALE member.
14 In addition, large employers that fail to timely meet the requirements still may be eligible for penalty relief if the IRS determines that the standards for reasonable cause.This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 18
Appendix A
Form 1094-C Part II, Line 22 (A), (B) and (D)
The guidance provides three methods that will slightly reduce these reporting requirements and, in some cases,
provide an alternative to furnishing the Form 1095-C to the employee. These options DO NOT eliminate the employer’s
responsibility to complete and file Forms 1094-C and 1095-C with the IRS.
QUALIFYING OFFER METHOD – BOX A
An employer may use this method when a qualifying offer if made to one or more FTEs for all months during the CY
(January – December). An offer is considered a qualifying offer if:
„ The offer is made for all 12 months of the CY,
„ The employee contribution for self-only coverage that meets MV does not exceed$93.18/month, and
„ There is an offer of MEC to a spouse and dependents, if applicable.
The furnishing method described below only applies to FTEs who received the qualifying offer for all 12 months of the CY.
What relief does this method actually provide?
„ Do not report the self-only employee premium cost for the lowest cost MV plan on Line 15 of 1095-C. Instead use
Code 1A in Line 14 of 1095-C.
„ Instead of providing participants the 1095-C, an employer may furnish a “qualifying offer statement” that includes:
„ Employer name, address, EIN,
„ A contact name, and phone number at which the employee may receive more information about the offer of
coverage and the information on the Form 1095-C filed with the IRS for that employees.
„ A statement indicating that, for all 12 months of the CY, the employee and his/her spouse, and dependents,
if any, received a qualifying offer and therefore are not eligible for premium tax credit.
„ A statement directing the employee to see Pub. 974, Premium Tax Credit (PTC), for more information on
eligibility for the premium tax credit.
Important note for employers with self-insured health plans. If the employer sponsors a self-insured plan, the
alternative “qualifying offer statement” described above CANNOT be used for any employee who is covered by the selfinsured health plan. These employees must receive a Form 1095-C.This summary is intended to convey general information and is not an exhaustive analysis. This information is subject to change as guidance
develops. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. 19
QUALIFYING OFFER METHOD TRANSITION RELIEF – BOX B
Qualifying Offer Method Transition Relief is available for CY 2015 only. To use this method, an employer must certify that a
qualifying offer of coverage (as described above) was made to at least 95% of FTEs.
What relief does this method actually provide?
„ Do not report the self-only employee premium cost for the lowest cost MV plan on Line 15 of 1095-C. Instead, in
Line 14 of Form 1095-C, use Code 1A for any months for which the employee received a qualifying offer or 1I for
any month for which the employee did not receive the qualifying offer.
„ Provide each FTE who received the qualifying offer for all 12 months of the CY with either a copy of their 1095-C,
or the “qualifying offer statement” previously described.
„ Solely for 2015, for any employee of an employer eligible for the Qualifying Offer Method Transition Relief who
does not receive a qualifying offer for all 12 calendar months, including employees who receive no offer, the
employer may, in lieu of providing the employee with a copy of Form 1095-C, furnish a statement containing the
following information.
„ Employer name, address, EIN,
„ A contact name and phone number at which the employee may receive more information about the offer of
coverage and the information on the Form 1095-C filed with the IRS for that employees.
„ A statement indicating that the employee, his or her spouse and dependents, if any, may be eligible for a
premium tax credit for one or more months of 2015.
„ A statement directing the employee to see Pub. 974, Premium Tax Credit (PTC), for more information on
eligibility for the premium tax credit.
Important note for employers with self-insured health plans. If the employer sponsors a self-insured plan, the alternative
“qualifying offer statement” described above CANNOT be used for any employee who is covered by the self-insured health
plan. These employees must receive a Form 1095-C.
98% METHOD – BOX D
To use this method, an employer must certify that it offered, for all months of the CY, affordable coverage providing
minimum value to at least 98% of its employees for whom it is filing a 1095-C and offered MEC to those employees’
dependents. The employer is not required to identify which of the employees for whom it is filing were FTEs, but the
employer is still required to file Forms 1095-C on behalf of all of its FTEs (and any employees/individuals covered by a selfinsured plan). Health coverage is deemed affordable if the employer meets one of the available safe harbors (W-2, FPL,
rate of pay).
What relief does this method actually provide?
„ No need to complete the FTE count on 1094-C, Part III, column (b).
Compliance Compilation

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