Individual Health Insurance 101 Guide

Health insurance is a crucial but often complicated part of the healthcare system, and it is not always as easy to understand as straightforward medical bills or even other forms of insurance. However, health insurance is much more than just an added hassle to the doctor-patient relationship. It is a key safeguard that can enhance your quality of life for decades to come.

This guide is intended to provide you with the basics about health insurance benefits so you are able to more easily understand what your options are when choosing a health insurance plan.

2017: Fourth Quarter Compliance Bulletins Released October-December

2017: Fourth Quarter
Compliance Bulletins Released October-December
Compliance Digest
October
New Executive Order and Insight on the Employer Mandate
10/13/2017 4
Trump Halts Cost-Sharing Reductions
10/13/2017 7
New Exemptions Affect Contraceptive Services
10/18/2017 9
2018 Cost of Living Adjustments
10/23/2017 13
New York Stop-Loss Legislation Passed
10/31/2017 16
November
IRS FAQs on 2015 Employer Penalty Payments
11/08/2017 18
Guidance Issued on QSEHRAs
11/21/2017 22
December
Received Letter 226J: Now What?
12/19/2017 25
Extension of Deadline for 2017 Forms 1095-C
12/28/2017 37
Congress Passes Tax Reform Bill
12/28/2017 39
2017 Compliance Bulletins
2 | 2017 Compliance Digest: Fourth Quarter
This document is designed to highlight various employee benefit matters of general
interest to our readers. It is not intended to interpret laws or regulations, or to address
specific client situations. You should not act or rely on any information contained
herein without seeking the advice of an attorney or tax professional.
© Emerson Reid, LLC. All Rights Reserved.
CA Insurance License 0C94240
New Executive Order
and Insight on the
Employer Mandate
President Trump signed an Executive Order (“EO”) on October 12, 2017, directing
various federal agencies to take regulatory action that will “increase health care
choices for millions of Americans.”
Along with the EO, the Administration issued a press release and some internal
talking points that provide helpful insight into what the agencies are directed to
review.
As it affects employer-sponsored plans:
• The Department of Labor (“DOL”) is directed to consider expanding access
to Association Health Plans (“AHPs”) which could allow employers to form
groups across state lines. Specifically, by taking a broader interpretation of
ERISA, employers in the same line of business anywhere in the country
could join together to offer healthcare coverage to their employees through
the large group insurance market or through self-insurance, potentially
accessing more coverage options at a lower cost. Such arrangements
could be formed for the “express purpose” of offering group insurance
(under current regulations, the sole purpose of any association plan cannot
be the purchase of group insurance).
• Within 60 days, the DOL shall consider proposing regulations or revising
guidance consistent with the law, to expand access to health coverage
by allowing more employers to form AHPs. The EO directs the agency
to consider expanding the conditions that satisfy the “commonality-ofinterest”
requirements under the existing definition of an “employer”
under ERISA 3(5).
• The EO continues to support popular ACA mandates, including offering
coverage to children to age 26, no annual or lifetime dollar limits, no
cost-sharing for certain preventive care, and a general prohibition on
preexisting condition exclusions and health status rating.
Published: October 13, 2017
2017 Compliance Digest: Fourth Quarter | 5
New Executive Order and Insight on the Employer Mandate October 13, 2017
• The EO specifically references using
self-insurance as an option of AHPs. Because the
current federal law permits association coverage
to be governed under both state and federal rules,
the EO raises issues in those states that either (1)
prohibit creation of new self-insured association
plans or (2) heavily regulate the ability to use
self-insurance as an option under multiple
employer welfare arrangement (“MEWA”) rules.
• The Departments of the Treasury, Labor, and Health
and Human Services (“the Departments”) are to,
within 60 days of the EO, consider proposing rules
to expand coverage through low-cost short-term
limited duration insurance (“STLDI”). It appears this
coverage would be available in the individual market,
primarily targeting individuals who are between jobs
(as a lower cost alternative to COBRA), individuals
in counties with only a single carrier option in the
Marketplace, people with limited networks and those
who missed annual Marketplace open enrollment but
still want to purchase coverage. STLDI would not be
subject to many of the insurance mandates under the
ACA but would feature broad provider networks and
high coverage limits.
• Within 120 days of the EO, the Departments
are to consider additional changes that support
more flexibility and increased usability of Health
Reimbursement Arrangements (“HRAs”), including
use with nongroup health insurance coverage.
What’s Next?
An EO is a statement issued by the President to the federal
agencies directing priorities and action on specific matters.
Such policies generally do not have the effect of creating a
new law or regulations.
The agencies will review the EO in context with the existing
statutory and regulatory framework to determine how they
can enact regulations or issue other guidance within the
constraints of existing law. The Departments are likely to
initially issue proposed regulations as the starting point for
addressing the goals of the EO. However, the regulatory
process is slow and its unlikely any final rules will be issued
before 2018.
Specifically, with respect to AHPs, these arrangements
are unique under ERISA as there is joint federal and state
authority for governance. Creating a more flexible AHP
marketplace, including crossing state lines, will bump up
against various state insurance laws that may prohibit these
types of transactions. Many states’ insurance commissions
and state governments have already announced their intent
to challenge any federal overreach into a long-established
tradition of state regulation of the insurance market.
In Other News: The Individual and Employer Mandates
6 | 2017 Compliance Digest: Fourth Quarter
The talking points contain a number of Q&As. Notably,
when asked whether the Administration intends to enforce
the Individual and Employer Mandate, the Administration
responded as follows:
“The administration believes Congress should repeal the
individual and employer mandates, and respective penalties
enforced by the IRS on people who fail to purchase
Washington-approved coverage and employers with at least
50 workers that fail to offer Washington-approved coverage.
While HHS has the ability to define a hardship exception for
the purpose of the individual mandate, the tax penalties are
contained in the Internal Revenue Code and only Congress
can change the law.”
Therefore, it is notable to employers that, absent
Congressional action, the Trump administration appears
(at least based on these informal statements) willing to
enforce the Employer Mandate.
Employer Action
Employers should:
• Be aware that we are likely to see new regulations
addressing AHPs, HRAs, and STLDIs in the coming
months. While changes to existing AHP and HRA
rules are unlikely to affect 2018 plan years, such
guidance may create challenges for 2019 and
beyond.
• As the Administration signaled its intent to enforce the
Employer Mandate:
• Plan for compliance with the 2017 ACA reporting.
The final Form 1094-C, Form 1095-C and
Instructions are available.
• Prepare to address any notices issued by the IRS
regarding Employer Mandate assessments for the
2015 and 2016 calendar year.
Trump Halts
Cost-Sharing Reductions
Overview
On Thursday, October 12, 2017, the White House indicated that President Trump will
end ACA cost-sharing reduction (“CSR”) payments to insurance companies effective
immediately. This was followed up by a White House statement indicating that the
payments had lacked appropriations and therefore the government could not lawfully
continue making them. While the impact to insurance companies and individuals who
obtain subsidized coverage in the Marketplace is expected to be significant, the direct
impact to employers and employer sponsored health plans is expected to be minimal.
CSR Payments Explained
Under the ACA, Congress authorized two types of subsidy payments to help
Americans pay for and utilize health coverage in the Marketplace.
The first is premium subsidy assistance, which allows those with household incomes
between 100% and 400% of the Federal Poverty Level (FPL) to obtain subsidies that
reduce premiums costs for health coverage purchased in the Marketplace.
The second, and at issue here, is CSR payments, available to those who qualify
for premium subsidy assistance and who have incomes between 100% and
250% of the FPL. CSR payments reduce the cost of deductibles, co-pays,
and other means of cost sharing by directly reimbursing insurers for those costs.
Roughly 7 million people are currently receiving CSR payments.
CSR Controversy
In 2014, House Republicans filed a lawsuit against then-HHS Secretary Burwell
claiming that federal laws require every government expenditure to be tied to an
annual or permanent funding source. This is known as appropriations. The lawsuit
claimed that ACA legislation failed to include permanent appropriations for CSR
payments. In May 2016, the US District Court for the District of Columbia agreed,
and so absent annual approval, such payments are unlawful beginning in 2014.
The judge ordered that such payments be immediately halted (enjoined),
but stayed its decision (in effect, made it not applicable) pending appeal.
Published: October 13, 2017
2017 Compliance Digest: Fourth Quarter | 7
8 | 2017 Compliance Digest: Fourth Quarter
The government had been issuing CSR payments until
today’s announcement.
President Trump’s Decision
The President announced that the government will no
longer issue CSR payments and that such payments
would be halted immediately (the Marketplace plan year
runs through December 31). The immediate impact of this
decision will affect insurance companies in the Marketplace,
as presumably they will not be reimbursed for CSR
payments for November and December 2017. Under the
terms of Marketplace agreements, insurance companies
can withdraw immediately if government payments or
subsidies are halted. If this happens, many individuals
could suddenly find themselves without coverage.
Additionally, for the 2018 calendar year, carriers will not
receive CSR payments from the government. This will
lead to higher costs and individuals choosing to forgo
Marketplace coverage as it has become too expensive.
In fact, many carriers filed their 2018 rates assuming the
Government would pull funding for the CSR payments,
leading to significant rate increases in the individual market.
Implications for Employers
The direct impact of this decision is minimal.
Applicable large employers (“ALE”) – those with 50 or
more full time equivalent employees – are subject to ACA
employer shared responsibility “A” or “B” penalties for failure
to offer affordable and/or minimal value coverage to full-time
employees, if one or more of those employees obtain a
subsidy or CSR in the exchange.
Even if CSRs are eliminated, since a prerequisite to an
individual obtaining a CSR subsidy is to qualify for a
premium reduction subsidy, there should be no change
to an ALE’s “A” or “B” penalty exposure since premium
reduction subsidies are not impacted by this White House
decision.
Further, since an ALE must make an offer of affordable
and minimum value coverage in order to avoid “A” or “B”
penalties, we do not anticipate a significant increase in
employees forgoing coverage in the Marketplace and
enrolling in employer sponsored plans (since those
individuals would generally have been ineligible for
Marketplace subsidies due to the employer’s offer of
affordable and MV coverage in the first place).
Additionally, if carriers exit the Marketplace or otherwise
cancel plans in light of this change in policy, employers
may see an increase in requests for special enrollment
in their group health plans due to the loss of eligibility for
Marketplace coverage.
The indirect implications are less clear. Stopping CSR
payment will make individual insurance more expensive in
the Marketplace. This may lead to carriers dropping out of
the Marketplace, or if they remain, pricing plans beyond the
reach of those individuals who previously benefited from
CSR payments. This will likely result in an increase in the
uninsured population. All payers in the health care system
are affected by higher costs when there is a high uninsured
population receiving uncompensated care.
Next Steps
The White House has indicated a desire to work with
Congressional leaders to find a bipartisan fix for health
reform. Since the collapse of health reform legislation late
last month, there does not appear to be much appetite or
political will to find a permanent solution. However, with the
termination of CSR payments, it is possible a temporary or
permanent fix could yet again be considered.
New Exemptions Affect
Contraceptive Services
On October 6, 2017, the U.S. Departments of Health and Human Services,
Labor, and the Treasury (the Departments) released final, interim regulations
allowing non-governmental employers, institutions of higher education, and
individuals with religious or moral objections to cease coverage for some, or all,
contraceptive services.
Background
All non-grandfathered health plans must cover certain preventive items and
services without cost-sharing, including contraceptive services.
Religious employers and grandfathered medical plans are exempt from the
contraceptive services mandate.
An accommodation (which is different from the blanket exemption) is available for
certain non-profits with religious objections to providing contraceptive services
and a certain closely held for-profit entities.
For this purpose, contraceptive services are defined to include contraception and
contraceptive counseling, including all FDA-approved contraceptive methods,
sterilization procedures and patient education and counseling.
New Regulations
As described below, the new regulations, effective October 6, 2017, largely
expand exemptions to include more employers and extend to individuals.
The regulations also revise the existing accommodations process making it
optional, but still available.
Expanded exemptions – Employers
Non-governmental employers sponsoring a group health plan and objecting
to providing some (or all) of the mandated contraceptive services based on
seriously held religious beliefs or moral convictions may claim an exemption.
The rules do not specifically define what constitutes a “sincerely held religious
Published: October 18, 2017
2017 Compliance Digest: Fourth Quarter | 9
10 | 2017 Compliance Digest: Fourth Quarter
belief” or “moral convictions.” Instead, the Departments will
look to such beliefs, principles or views that would have
been adopted and documented in accordance with the laws
of the state in which they are incorporated or organized.
The regulations provide the following non-exhaustive
list of employers who may claim an exemption because
they object to the provision of some, or all, contraceptive
services based on sincerely held religious beliefs:
• A church, an integrated auxiliary of a church,
a convention or association or churches or a religious
order.
• A nonprofit organization.
• A closely-held for profit entity.
• A for-profit entity that is not closely held
(this may include a publicly traded company).
• Any other non-governmental employer.
• An institution of higher education in its arrangement
of student health insurance coverage.
With respect to the moral convictions exemption, the
following are permissible objecting entities:
• A nonprofit organization.
• A for-profit entity that has no publicly traded
ownership interest.
• An institution of higher education in its arrangement
of student health insurance coverage.
• A health insurance issuer offering group or individual
insurance coverage.
Exempt entities:
• May object to covering some, or all, mandated
contraceptives services. For example, an entity may
object to sterilization but not contraceptives. In that
case the entity is exempt with respect to the items to
which they object (sterilization), but not exempt with
respect to the items for which there is no objection
(contraceptives).
• Are not required to comply with the self-certification
process (e.g., do not need to file notices or
certifications of their exemption). Plan documents will
need to be updated to reflect changes in coverage or
design.
• May have previously claimed an accommodation and
are now eligible for an exemption under these new
rules.
• May, instead, choose to certify as an eligible
organization which would remove the employer and
the plan from responsibility and cost of contraceptive
services while still providing participants and
beneficiaries access to these services at no cost.
Expanded exemptions – Individuals
The individual exemption permits (but does not
require) plan sponsors that do not specifically object
to contraceptive coverage to offer coverage to their
participants or beneficiaries who do object based on
religious belief or moral conviction, while offering coverage
that includes contraception to participants or subscribers
who do not object. This exemption can apply with respect
to individuals with coverage through a private employer or
government sponsored group health plan.
The individual exemption cannot be used to force a plan
(or its sponsor) or a carrier to provide coverage omitting
contraception, or, with respect to health insurance
coverage, to prevent the application of state law that
requires coverage of such contraceptives or sterilization.
Practical Application
• Effect on participants. As exempt entities will
exclude contraceptive services from their group
health plan, female participants and beneficiaries will
not be able to access these services from the group
health plan and will either need to pay out-of-pocket
or seek access through other resources.
2017 Compliance Digest: Fourth Quarter | 11
New Exemptions Affect Contraceptive Services October 18, 2017
• Accommodations remain available. The regulations
leave intact the accommodations process for certain
objecting employers to claim an accommodation
versus an exemption. Under this process, the
objecting employer can self-certify eligible employer
status which documents their objection to providing
some, or all, contraceptive services. The eligible
organization provides this certification to the
applicable carrier or TPA who then arranges access
to the contraceptive services for participants and
beneficiaries without cost sharing and at no additional
cost to the employer or plan.
• Plan documentation. While entities claiming an
exemption are not required to provide a special
notice or certification, general ERISA rules apply with
respect to material changes to coverage.
This is further discussed in “Employer Action”.
• Moral conviction of health insurance carriers.
While expected to be unusual, an insurance carrier
providing group health insurance coverage may be
exempt due to the carrier’s moral conviction.
The plan remains subject to any requirement to
provide coverage for contraceptive services unless
the plan is otherwise exempt (due to religious belief
or moral conviction). This can create coordination
and compliance issues for non-exempt employer plan
sponsors if group health plan coverage is purchased
from an exempt insurer.
Employer Action
Employers wanting to avail themselves of this exception will
need to:
• Amend their summary plan descriptions and
any other plan documents, as necessary, for a
prospective effective date:
• A best practice would be to make a plan
amendment in connection with annual enrollment
(and not mid-year).
• Immediate plan changes must be approved by
carriers and likely will only be available to
self-funded plans.
• For insured plans:
• Insurers may offer an exclusion of
contraception to requesting employers.
• Insurers can also claim exemption and not offer
contraception to any employer in which case
employers purchasing their plans will be out of
compliance unless they too claim exemption.
12 | 2017 Compliance Digest: Fourth Quarter
• State insurance law requiring coverage
for certain contraceptive services are not
preempted by this guidance and remain
enforceable.
• Provide proper notice under existing rules. Under
ERISA:
• For health plans, a summary of material reduction
should be distributed automatically to participants
within 60 days of adoption of material reduction in
services or benefits or at regular intervals of not
more than 90 days. Although somewhat of a gray
area, this should mean that employees hear about
the change at least 60 days in advance. Although
inadequate notice can result in penalties, it will
rarely invalidate the change.
• Review your SBC to determine if information
on this document changes as a result of the
exemption. If so, and if implemented mid-year
60-day prior notice is required and will satisfy the
other requirements under ERISA.
• For any ERISA-covered plan, it may be advisable
to give written notice early under regular fiduciary
duty principles.
• Any description of exceptions, limitations,
reductions, and other restrictions of plan benefits
must be apparent in the SPD.
• Consider HR and PR challenges when revoking a
benefit that has been available to female employees
for free for a number of years. A thoughtful
communication strategy will be important when
making this type of change.
• Non-exempt entities should consider whether to
make alternative coverage without contraceptive
services available to participants and beneficiaries
who qualify for an individual exemption. This will be
administratively burdensome and may not necessarily
be an available option from the carrier.
These rules are subject to change following the comment
period which closes on December 5, 2017 but any
significant changes appear to be unlikely.
Already, several states and interest groups have, or have
expressed their intent to, initiated a lawsuit against the
government challenging these rules. Employers claiming
these exemptions should watch the legal developments as
they may affect coverage.
2018 Cost of Living
Adjustments
On October 19, 2017, the IRS released cost of living adjustments for 2018 under
various provisions of the Internal Revenue Code (the Code). Some of these
adjustments may affect your employee benefit plans.
Cafeteria Plans
For plan years beginning in 2018, the dollar limitation under Section 125 for
voluntary employee salary reductions for contributions to health flexible spending
arrangements increases to $2,650.
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 flexible spending arrangements, subject to inflation for plan years
beginning after December 31, 2013.
Qualified Transportation Fringe Benefits
For calendar year 2018, the monthly exclusion limitation for transportation in a
commuter highway vehicle (vanpool) and any transit pass (under Code Section
132(f)(2)(A)) and the monthly exclusion limitation for qualified parking expenses
(under Section 132(f)(2)(B)) increases to $260.
The Consolidated Appropriations Act of 2016 permanently changed the pre-tax
transit and vanpool benefits to be at parity with parking benefits.
Requirement to Maintain Minimum Essential Coverage
For calendar year 2018, the applicable dollar amount used to determine the
penalty under Section 5000A(c), for failure to maintain minimum essential
coverage remains $695.
Published: October 23, 2017
2017 Compliance Digest: Fourth Quarter | 13
14 | 2017 Compliance Digest: Fourth Quarter
This is also referred to as the individual mandate under the
ACA. Any assessed penalty tax is the greater of $695 or
2.5% of modified adjusted gross income in excess of the
filing threshold and capped at the average premium amount
for bronze coverage available on the health insurance
exchange. The penalty is collected from an individual’s tax
refund due after filing their personal income tax return with
the IRS.
Highly Compensated
The compensation threshold for a highly compensated
individual or participant (as defined by Code Section 414(q)
(1)(B) for purposes of Section 125 nondiscrimination
testing) again remains unchanged at $120,000 for 2018.
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 first
year of employment) had compensation in excess of the
compensation amount as specified in Code Section 414(q)
(1)(B).
Key Employee
The dollar limitation under Code Section 416(i)(1)(A)(i)
concerning the definition of a key employee for calendar
year 2018 remains unchanged at $175,000.
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.
Non-Grandfathered Plan Cost-Sharing
Limits
The 2018 maximum annual out-of-pocket limits for all
non-grandfathered plans are $7,350 for individual coverage
and $14,700 for family coverage.
These limits generally apply with respect to any essential
health benefits (EHBs) offered under the group health
plan. The final regulations established that starting in the
2016 plan year, the self-only annual limitation on cost
2017 Compliance Digest: Fourth Quarter | 15
2018 Cost of Living Adjustments October 23, 2017
sharing applies to each individual, regardless of whether
the individual is enrolled in other than self-only coverage,
including in a family HDHP.
Qualified Small Employer Health
Reimbursement Arrangements
For tax years beginning in 2018, to qualify as a qualified
small employer health reimbursement arrangement
(QSEHRA) under § 9831(d), the arrangement must provide
that the total amount of payments and reimbursements
for any year cannot exceed $5,050 ($10,250 for family
coverage).
Health Savings Accounts
As announced in May 2017, the inflation adjustments for
health savings accounts (HSAs) for 2018 were provided by
the IRS in Rev. Proc. 2017-37.
Annual contribution limitation.
For calendar year 2018, the limitation on deductions for an
individual with self-only coverage under a high deductible
health plan is $3,450. For calendar year 2018, the limitation
on deductions for an individual with family coverage under
a high deductible health plan is $6,900.
High deductible health plan.
For calendar year 2018, a “high deductible health plan” is
defined as a health plan with an annual deductible that is
not less than $1,350 for self-only coverage or $2,700 for
family coverage, and the annual out-of-pocket expenses
(deductibles, co-payments, and other amounts, but not
premiums) do not exceed $6,650 for self-only coverage
or $13,300 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.
Catch-up contribution.
Individuals who are age 55 or older and covered by a
qualified 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.
New York Stop-Loss
Legislation Passed
Governor Cuomo recently signed Assembly Bill A8264 into law, allowing
employers having 1-100 employees to continue to purchase stop-loss coverage,
catastrophic insurance and reinsurance coverage through December 31, 2019.
Background
The Affordable Care Act (“ACA”) required a change of the small group market from
1-50 to 1-100 employees. The ACA was subsequently amended by the PACE Act,
and the small group definition reverted to 1-50 employees. Prior to the PACE Act,
New York had changed the definition of small group market to 1-100 employees,
requiring legislative action to change the definition.
Stop-loss coverage, catastrophic insurance and reinsurance coverage are
generally prohibited to be sold to employers in the small group market in the State
of New York.
Prior to December 2015, the small group market was defined as an employer
having 1-50 employees. After December 2015, an employer in the small group
market became an employer with 1-100 employees. Prior Bills allowed an
employer to purchase stop-loss, catastrophic insurance or reinsurance coverage
until 2018 because the employer was in the large group market as of January
1,2015 or June 1, 2015. Employers that are part of a municipal cooperation or
school do not have to be treated as small group market employers if a policy or
coverage was in effect as of January 1, 2015 or June 1, 2015.
Published: October 31, 2017
2017 Compliance Digest: Fourth Quarter | 17
New York Stop-Loss Legislation Passed October 31, 2017
New Legislation
A8264 provides the review of the prohibited sale products
within the small group market and extends the purchase
of prohibited coverage until 2019. Under this legislation,
an employer that was permitted to purchase stop-loss
coverage, catastrophic insurance or reinsurance coverage
because the employer was in the large group market as of
January 1, 2015 or June 1, 2015 may continue to purchase
such coverage until 2019.
It is important to note that the definition of small group
market has not changed. In New York, a small group
continues to be an employer with 1-100 employees.
A review of the law will be completed by spring 2018. We
will keep you apprised of any changes.
For a copy of the Bill, visit:
https://www.nysenate.gov/legislation/bills/2017/a8264
IRS FAQs
on 2015 Employer
Penalty Payments
Recently, the Internal Revenue Service (“IRS”) issued additional FAQs regarding
the Employer Shared Responsibility Payment (an assessment under the
employer mandate).
Briefly, the FAQs:
• Describe a new Letter 226J that will be issued to Applicable Large
Employers (“ALEs”) if the IRS determined at least one full-time employee
(“FTE”) was enrolled in a qualified health plan for which a premium tax
credit was allowed and the ALE did not offer the FTE affordable, minimum
value coverage.
• Provide an opportunity and process for an ALE to follow and respond
to Letter 226J before any penalty assessed and notice and demand for
payment is made.
• Establish a specific notification timeframe (generally 30 days from the
date of the letter) that an ALE will have to respond to the IRS regarding
the proposed assessment. Failure to respond timely may result in the IRS
assessing the penalty and issuing a notice and demand for payment with
no further opportunity for the ALE to respond.
• Describe Notice CP 220J which will be used as formal notice and demand
for payment of a penalty.
• Suggest that, for calendar year 2015, the first Letters 226J will be issued to
ALEs in late 2017.
This update to the existing FAQs on the employer-shared responsibility
requirement offers the first real guidance on the process of notification and
assessment of any employer mandate penalties.
The IRS appears ready to move forward with this notification and assessment
process given the failure of ACA repeal and absent other rulemaking, guidance,
or legislation that further delays enforcement of the mandate.
Published: November 8, 2017
2017 Compliance Digest: Fourth Quarter | 19
IRS FAQs on 2015 Employer Penalty Payments November 8, 2017
Recently, however, new legislation has been introduced in
the House and Senate that would suspend the employer
mandate for the period before January 1, 2018. Whether
Republican leadership can secure enough votes to pass
another attempt at a party-line repeal remains uncertain.
The following provides additional details, including an
explanation of the various letters and notices that an ALE
may receive as part of this process. Copies or samples of
these letters are not currently available on the IRS website.
Background
Beginning in 2015, ALEs may be subject to an assessable
payment (referred to as a “penalty”) if any FTE receives
a premium tax-credit (a “subsidy”) to purchase health
insurance through the Marketplace. There are two possible
penalties (“A” and “B”). The penalty that may apply will
depend on the circumstances of the ALE.
While ALEs are generally defined as employers with at
least 50 FTEs (including full-time equivalent employees
and employees under common ownership) in the preceding
calendar year, for 2015 only (and plan years that begin 2015)
the IRS provided helpful relief generally excluding ALEs with
50-99 FTEs from penalty assessments, subject to specific
rules.
The 2015 Penalties
• “A” Penalty – “No Coverage” Penalty.
This penalty applies when an ALE does not offer
at least 70% of FTEs and their dependent children
minimum essential coverage and at least one FTE
receives a subsidy in the Marketplace to purchase
qualified health plan coverage.
• The penalty is $173.33/month (or $2,080/year)
multiplied by the total number of FTEs – 80.
• “B” Penalty – “Offer Coverage Penalty”.
This penalty applies when an ALE offers at least
70% of FTEs and their dependent children minimum
essential coverage but the coverage is not affordable,
does not provide minimum value or excludes 30% or
fewer FTEs and one (or more) of those FTEs receive
a subsidy in the Marketplace.
• The penalty is the lesser of:
• $260/month (or $3,120/year) multiplied by the
total number of FTEs who receive a subsidy; or
• The “A” penalty.
The above rules are somewhat different for years after
2015 and are not addressed in this summary.
MAKING A SHARED RESPONSIBILITY PAYMENT (FAQS
55 – 58)
20 | 2017 Compliance Digest: Fourth Quarter
Q1: How does an employer know that it
owes an employer shared responsibility
payment?
The IRS will use Letter 226J to describe the general
procedures it will use to propose and assess an employer
penalty. Letter 226J will be issued to an ALE if the IRS
determines that, for at least one month in the year, one or
more of the ALE’s FTEs was enrolled in a qualified health
plan (i.e. individual Marketplace plan) for which a premium
tax credit was allowed (and the ALE did not qualify for an
affordability safe harbor or other relief for the employee).
Letter 226J will include:
• a brief explanation of the employer mandate (Code
Section 4980(H));
• an employer shared responsibility payment summary
table itemizing the proposed payment by month
and indicating for each month if the liability is an “A”
penalty or a “B” penalty, or neither;
• an explanation of the employer shared responsibility
payment summary table;
• an employer shared responsibility response form,
Form 14764, “ESRP Response”;
• an employee PTC list, Form 14765, “Employee
Premium Tax Credit (PTC) List” which lists, by
month, the ALE’s assessable FTEs, and the
indicator codes, if any, the ALE reported on lines 14
and 16 of each assessable FTE’s Form 1095-C;
• a description of the actions the ALE should take if
it agrees or disagrees with the proposed employer
shared responsibility payment in Letter 226J; and
• a description of the actions the IRS will take if the
ALE does not respond timely to Letter 226J.
Employers that receive a Letter 226J must respond by
the date shown on the letter (usually within 30 days from
the date of the letter). The Letter 226J will include contact
information of a specific IRS employee that the ALE may
contact with questions.
Q2: Does an employer that receives a
Letter 226J proposing an employer
shared responsibility payment have
an opportunity to respond to the IRS
about the proposed payment, including
requesting a pre-assessment conference
with the IRS Office of Appeals?
Yes.
ALEs will have an opportunity to respond to Letter 226J
before any penalty is assessed and notice and demand for
payment is made. Letter 226J contains instructions for how
the ALE should respond in writing, either agreeing with
the proposed employer shared responsibility payment or
disagreeing with part (or all) of the proposed amount.
• The IRS will acknowledge the ALE’s response to
Letter 226J with an appropriate version of Letter
227 (a series of five different letters that, in general,
acknowledge the ALE’s response to Letter 226J and
describe further actions the ALE may need to take).
• If, after receipt of Letter 227, the ALE disagrees
with the proposed or revised employer shared
responsibility payment, the ALE may request a
pre-assessment conference with the IRS Office of
Appeals. The ALE should follow the instructions
provided in Letter 227 and Publication 5, Your Appeal
Rights and How To Prepare a Protest if You Don’t
Agree for requesting a conference. A conference
should be requested in writing by the response date
shown on Letter 227 (generally will be 30 days from
the date of Letter 227).
If the ALE fails to respond to either Letter 226J or
Letter 227, the IRS will assess the amount of the
proposed employer shared responsibility payment and
issue a notice and demand for payment, regardless of
actual liability.
Employer Action
ALEs should:
• For now, keep an eye out for the new Letter 226J in the
mail. Be mindful of the timeline to respond to the notice.
• Ensure they have records reflecting offers of coverage
to identified FTEs for CY 2015. This will include copies
of the Forms 1094-C and 1095-C that they filed. These
Forms will be helpful when reviewing any IRS notice
in determining whether an assessment is correct.
• Contact their tax advisor for assistance if they receive
the letter and have questions. Please note that we
cannot represent clients in this process.
Q3: How does an employer make an employer
shared responsibility payment?
If, after correspondence between the ALE and the IRS or
a conference with the IRS Office of Appeals, the IRS or
IRS Office of Appeals determines that an ALE is liable for
an employer shared responsibility payment, the IRS will
assess the employer shared responsibility payment and
issue a notice and demand for payment, Notice CP 220J.
Notice CP 220J will include a summary of the employer
shared responsibility payment and will reflect payments
made, credits applied, and the balance due, if any. That
notice will instruct the ALE how to make payment.
ALEs will not be required to include the employer shared
responsibility payment on any tax return that they file or
to make payment before notice and demand for payment.
For payment options, such as entering into an installment
agreement, refer to Publication 594, The IRS Collection
Process.
Q4: When does the IRS plan to begin
notifying employers of potential employer
shared responsibility payments?
For the 2015 calendar year, the IRS plans to issue Letter
226J informing ALEs of their potential liability for an
employer shared responsibility payment, if any, in late 2017.
The FAQs do not address when notification regarding
assessments in calendar year 2016 and 2017 will happen.
Further guidance expected.
IRS FAQs on 2015 Employer Penalty Payments November 8, 2017
2017 Compliance Digest: Fourth Quarter | 21
Guidance
Issued on QSEHRAs
The IRS recently issued Notice 2017-67 which provides guidance related to the
administration of Qualified Small Employer Health Reimbursement Arrangements
(QSEHRAs).
Background
Under the Affordable Care Act, a health reimbursement arrangement (HRA) must
be integrated with a group health plan (as it could not meet the market reform
provisions on its own) and was not able to reimburse employees for individual
premiums. However, on December 13, 2016, President Obama signed into law the
“21st Century Cures Act” which established QSEHRAs (a special standalone HRA).
According to the 21st Century Cures Act, a QSEHRA is an arrangement that
meets the following criteria:
1. The arrangement is funded solely by an eligible employer (less than 50
full-time employees (including full-time equivalent employees) in the preceding
calendar year not offering a group health plan to any of its employees);
2. The arrangement provides, after the eligible employee provides proof of
coverage, for the payment or reimbursement of the medical expenses
incurred by the employee or the employee’s family members;
3. The amount of payments and reimbursements described above cannot
exceed certain thresholds ($5,050 self-only/$10,250 for family coverage for
2018); and
4. The arrangement is generally provided on the same terms to all eligible
employees of the eligible employer.
On October 17, 2017, President Trump issued an Executive Order directing
federal agencies to revise guidance to increase the usability of HRAs, expand
employers’ ability to offer HRAs to their employees, and allow HRAs to be used
in conjunction with non-group coverage. The authors of Notice 2017-67 claim that
the guidance therein addresses each of those objectives.
Published: November 21, 2017
New Guidance
Notice 2017-67, structured as 79 Questions and Answers
(Q&As), explains several specifics related to QSEHRAs.
Here are some of the highlights:
• Eligible employer (Q&As 1-7):
• The 50-employee threshold and whether the
employer offers a health plan takes into account
the entire controlled group.
• An employer that goes over this threshold is not
an eligible employer as of January 1st of the
year it becomes an applicable large employer in
accordance with ACA rules.
• An employer will fail to be an eligible employer
for any month during which it offers a group
health plan, allows continued access to amounts
accumulated from a prior HRA or carried over in
an FSA.
• Offering a health plan to former employees
or contributing to employees’ HSAs (including
allowing HSA contributions through a cafeteria
plan) will not prevent an employer from being an
eligible employer.
• Eligible employee (Q&As 8-11):
• A QSEHRA may only be provided to employees
(not former employees, retirees, or non-employee
owners).
• If a previously ineligible employee becomes an
eligible employee, coverage must be provided by
the next day.
• Participation in the QSEHRA cannot be waived.
• Same terms requirement (Q&As 12-26): A QSEHRA
must be operated on a uniform and consistent basis
with respect to all eligible employees.
• A permitted design includes one that offers the
same dollar amount benefit whether self-only or
family coverage is elected.
• It is also permitted to structure a plan to reimburse
up to the self-only and family statutory limits or up
to an equal percentage thereof without referring to
a baseline policy.
• Statutory dollar limits (Q&As 27-34):
• Statutory dollar limits for non-calendar year or
short plan year QSEHRAs are prorated based
upon the number of months in the applicable
calendar year. The same prorating would apply as
to a newly eligible employee added mid-year.
• A carryover is permitted, but only if the annual
amount available to the employee does not exceed
the threshold for that year, taking into account the
carryover.
• Written notice requirement (Q&As 35-39): An eligible
employer that provides a QSEHRA during 2017
or 2018 must furnish the initial notice to eligible
employees by the later of February 19, 2018 or 90
days before the first day of the plan year.
• MEC requirement (Q&A 40): Reimbursements
through the QSEHRA are taxable for any month
that minimum essential coverage (MEC) is not
maintained.
• Proof of MEC requirement (Q&As 41-43): A QSEHRA
may only provide reimbursements after proof of
coverage is provided. Such proof, which must be
provided annually, can be third-party documentation
(i.e., an insurance card) accompanied by an
attestation or an attestation accompanied by the date
coverage began and the name of the provider. If this
proof is not provided, a reimbursement cannot be
made, even on a taxable basis. A model attestation is
provided as an Appendix to the Notice.
Guidance Issued on QSEHRAs November 21, 2017
2017 Compliance Digest: Fourth Quarter | 23
24 | 2017 Compliance Digest: Fourth Quarter
• Substantiation requirement (Q&As 44-45):
The eligible employee will follow substantiation
requirements if it complies with the FSA
substantiation requirements.
• Reimbursement of medical expenses (Q&As 46-56):
• A QSEHRA cannot provide a cash-out of unused
permitted benefits at the end of the year.
• It cannot impose a deductible or other costsharing
requirement.
• It cannot reimburse amounts incurred before
QSEHRA coverage begins.
• A QSEHRA can reimburse over-the-counter drugs
without a prescription.
• Reporting requirement (Q&As 57-64): Any benefit
provided through the QSEHRA must be reported on
the employee’s Form W-2.
• Coordination with the Premium Tax Credit (Q&As 65-
71): If an employee is provided QSEHRA coverage
for a coverage month, the premium tax credit
allowable is reduced by 1/12 of the permitted benefit
under the QSEHRA for the year.
• Failure to satisfy the requirements to be a QSEHRA
(Q&As 72-74): Plans that operate as QSEHRAs
but fail to satisfy the requirements to be QSEHRAs
will result in all amounts paid under the plan being
includable in each employee’s gross income and
wages.
• Interaction with HSA requirements (Q&As 75-78):
A QSEHRA that is structured to only reimburse
premiums will not jeopardize HSA-eligibility.
• Effective date (Q&A 79): The guidance provided in
Notice 2017-67 is effective for plan years beginning on
or after November 20, 2017 (but can be relied on by
plans established before that date). Nevertheless, if
an eligible employer has established a QSEHRA and
operated it consistent with the statutory provisions
(but not with this guidance), the employer may
continue to operate it in such a manner until the last
day of the plan year that began in 2017.
For Notice 2017-67, visit:
https://www.irs.gov/pub/irs-drop/n-17-67.pdf
Received Letter 226J
Now What?
The IRS issued Letter 226J to certain Applicable Large Employers (“ALEs”). This
letter describes the proposed Employer Shared Responsibility Payment (“ESRP”)
owed for calendar year 2015.
Letter 226J provides specific information on the ESRP and instructions for
responding to the proposed assessment. The IRS will issue a Notice and
Demand for payment of the proposed assessment (as the final amount) if the
ALE fails to timely respond to Letter 226J. If an employer disagrees with the
assessment, timely responding via Form 14764 and including a statement
explaining the objections and any back up documentation is crucial.
ALEs that receive these letters should carefully review them. It will be important
to have 2015 Forms 1094-C and 1095-C available as you work through the
information. Other materials may be relevant as well, including documentation
regarding employee eligibility, affordability and minimum value of employersponsored
coverage and/or copies of employee waiver forms.
This summary is intended to explain the information contained in Letter 226J and
to provide general guidance on these requirements.
Background
Beginning in 2015, ALEs may be subject to an ESRP (also referred to as a
“penalty”) if any ACA full-time employee (“ACA FTE”) receives a premium taxcredit
(“PTC”) to purchase health insurance through the Marketplace. There are
two possible penalties (“A” and “B”). The penalty that may apply will depend on the
circumstances of the ALE. A more detailed discussion of ESRP calculation and
assessments is available later in this summary.
“A” Penalty – “No Coverage” Penalty
• This penalty applies when an ALE does not offer at least 95% (70% for
2015) of ACA FTEs and their dependent children minimum essential
coverage (“MEC”) and at least one ACA FTE receives a subsidy in the
Marketplace to purchase qualified health plan coverage.
Published: December 15, 2017
2017 Compliance Digest: Fourth Quarter | 25
26 | 2017 Compliance Digest: Fourth Quarter
• For 2015, the penalty is $173.33/month (or $2,080/
year) multiplied by the total number of ACA FTEs –
80.
“B” Penalty – “Offer Coverage” Penalty
• This penalty applies when an ALE offers at least
95% of ACA FTEs and their dependent children MEC
but the coverage is not affordable, does not provide
minimum value or excludes 5% (30% for 2015) or
fewer ACA FTEs and one (or more) of those ACA
FTEs receive a subsidy in the Marketplace.
• For 2015, the penalty is the lesser of:
• $260/month (or $3,120 annually) multiplied
by each ACA FTE who receives a subsidy in
the Marketplace to purchase health insurance
coverage; or
• the “A” penalty.
Transition relief may be available to certain employers for
calendar year 2015 (and for non-calendar year 2015 plans
that ended in 2016).
• Subject to certain rules, ALEs with 50-99 full-time
employees are not subject to ESRP (however, these
ALEs were required to report information to the IRS
on Forms 1094-C and 1095-C).
• ALEs with at least 100 ACA FTEs avoid the “A” penalty
if an offer of coverage was made to at least 70% of
ACA FTEs (and their dependents). Additionally, if
subject to the “A” penalty (e.g., offered coverage to
50% of ACA FTEs), the ALE may exclude the first 80
ACA FTEs (as opposed to 30) when calculating the
assessment.
• Non-calendar year plans were not subject to any
penalty assessment until the first day of the 2015
plan year assuming, at that time, there was an offer
of affordable and minimum value coverage to all ACA
FTEs (and their dependents).
Beginning with calendar year 2015 (and each calendar
year thereafter), ALEs are responsible for providing certain
information to ACA FTEs and the IRS regarding offers of
health insurance coverage. ALEs use Forms 1094-C and
1095-C to meet this requirement. Information contained in
those Forms is used to determine eligibility for individual
premium tax credits as well as the application of an ESRP.
For every calendar year, Forms 1095-C are provided to ACA
FTEs (generally by January 31 of the following year) and
Forms 1094-C and 1095-C provided to the IRS (generally
March 31 of the following year unless filing fewer than 250
Forms, then February 28). This is the case regardless of an
employer’s plan year.
Letter 226J
The first page of the letter provides a general overview of the
Employer Shared Responsibility rules and contains some
important information:
• Tax year to which the letter applies, generally 2015.
• The date of the letter. This is important as the ALE
must respond within 30 days. Many of the letters were
issued mid-November 2017.
• A contact name, phone number and fax number for a
person at the IRS responsible for the specific letter.
• The response date. This date is important. It is 30
days from the date the letter is issued. Many of the
responses will be due in mid-December 2017. Keep
in mind that in order to consider that appeal of an
assessment, the IRS must receive the response by
this date (not just mailed on this date).
• The proposed penalty assessment. This dollar amount
is determined based on records the ALE submitted
to the IRS (i.e., Form 1094-C and Forms 1095-C for
2015) and the information submitted by the ACA FTEs
on their individual tax returns for 2015.
Letter 226J is a package of information relevant to the
proposed assessment and includes:
• An ESRP Summary Table itemizing the proposed
ESRP by month.
• Form 14764 – the ESRP Response Form.
• Form 14765 – the Employee PTC Listing.
• An envelope for submitting response to the IRS.
If the ALE AGREES with the proposed ESRP:
• Complete, sign and date Form 14764, ESRP
Response and return it to the IRS by the response
date shown on the first page of the letter.
• Include the payment amount via check or money
order. If the ALE is enrolled in the Electronic Federal
Tax Payment System (“EFTPS”), payment may be
made electronically.
• If the entire ESRP is not paid, a Notice and Demand
(essentially, a bill) for the remaining balance will be
issued.
• For additional payment options, see Publication 594 or
call the telephone number on the issued bill.
• Failure to pay the bill will result in a collections process
and interest assessed.
If the ALE DISAGREES with the proposed ESRP:
• Complete, sign and date Form 14764, ESRP
Response and return it to the IRS so that it is received
by the response date on the first page of the letter.
• Include a signed statement as to why you disagree
with part, or all, of the proposed ESRP. Documentation
may be included to support the statement.
• Make sure the statement describes corrections,
if any, that you want made to the information
reported on Forms 1094-C and 1095-C. Do not
file a corrected 1094-C with the IRS to reflect
these changes.
• Make changes, if any, on the Employee PTC Listing
using the indicator codes in the Instructions to Form
1094-C and 1095-C for the applicable tax year (i.e.,
2015). Do not file corrected 1095-Cs to report changes.
It is unclear whether you will also need to correct
prior returns or if the IRS will correct via this process.
Further guidance is needed.
Include the revised Employee PTC Listing, if
necessary, and any additional documentation
supporting the requested changes with the Form
14764, ESRP Response, and signed statement
Employee PTC Listing – Form 14765
Letter 226J includes Form 14765- Employee PTC Listing
and provides a snapshot of Form 1095-C for the calendar
year 2015. Briefly, this listing
• identifies individuals the IRS believe to be ACA FTEs
of the ALE; and
• received a PTC in any month of calendar year 2015.
The IRS identifies individuals as ACA FTEs receiving the
PTC, thus triggering the ESRP. Using Form 14765, the IRS
lists out the affected individuals and months of the calendar
year. Individuals and months that are not highlighted are
triggering the assessment. You will want to carefully review
the list and determine whether any corrections to the
information is needed. Corrections are made using the
2015 indicator codes applicable to Form 1095-C. We have
included these for your reference in Appendix B, along with
links to the 2015 instructions and forms.
Corrections are not needed for any month that is highlighted.
The following example illustrates the Form 14765 Employee
PTC listing.
Received Letter 226J: Now What? December 15, 2017
2017 Compliance Digest: Fourth Quarter | 27
Employee
Name
SSN
(last 4
digits)
All 12 months
Indicator Codes
(Form 1095-C,
lines 14 and 16
combined) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Additional Information
Attached
Mary
Smith 2233 First row as filled 1H/ 1H/ 1H/ 1H/ 1H/ 1H/ 1H/ 1H/ 1H/ 1H/ 1H/ 1H/
Mary
Smith
Second row for
corrections 1H/2A 1H/2A 1H/2A 1H/2D 1H/2D 1H/2D 1H/2D 1H/2D 1H/2D 1H/2D 1H/2D 1H/2D X
John Doe 4455 First row as filled No PTC No PTC No PTC No PTC No PTC No PTC No PTC 1H/ 1H/ 1H/ 1H/ 1H/
John Doe
Second row for
corrections
Tim Jones 6677 First row as filled 1H/ 1H/ 1H/ 1H/2A 1H/2A 1H/2A 1H/ 1H/ 1H/ 1H/ 1H/ 1H/
Tim Jones
Second row for
corrections
The grey highlights mean no penalty is assessed for these months. Months not highlighted grey reflect an ESRP. Review Forms 1095-C to
determine whether this is correct. If incorrect revise the applicable Codes
in the second row. If including additional information in support of the
correction check the additional information box.
Above is an example of corrections for “Mary Smith” in red. In this case,
Mary wasn’t hired until March 25th and she was a new hire variable
employee. Because the employer uses a 12-month initial measurement
period, the employer is correcting the Form to reflect 2A (not employed)
for Jan – Mar and then 2D for April – Dec to reflect that she is in a
limited non-assessment period and therefore not subject to a penalty.
The additional information box is checked as this employer is submitting
documentation that Mary is not an ACA FTE during 2015.
28 | 2017 Compliance Digest: Fourth Quarter
Employee Information and Calculation
This section describes how the IRS determined the ESRP
assessment for 2015. Specifically,
• The ESRP applies and is calculated on a monthly
basis and each month is a taxable period.
• The ALE may be liable for an ESRP for any month of
calendar year 2015 under either Section 4980H (a) or
(b) if it:
• Did not offer MEC to at least 70% of its ACA
FTEs (and their dependents) and at least
one ACA FTE received a PTC (4980H(a)
assessment or “A” penalty).
• Did offer MEC to at least 70% of ACA FTEs and
their dependents and at least one ACA FTE
received a PTC because (1) the coverage was
unaffordable, (2) the coverage did not provide
minimum value or (3) the ACA FTE was not
offered the coverage. (4980(b) assessment or
“B” penalty).
• The ESRP is not deductible for income tax purposes.
A summary table shows how the IRS came up with any
assessment (“A” or “B”) for each month of the calendar year.
For any month, an ALE may owe:
• no ESRP, or
• an ESRP under 4980H(a) (“A”), or
• an ESRP under 4980H(b) (“B”).
An ALE cannot be assessed both an A and B penalty in the
same month.
How to Read the ESRP Summary Table
• Column “a” shows whether (for each month of the
calendar year, as listed) the employer made an offer
of MEC to at least 70% of the ACA FTEs and their
dependents. The response will be “Yes” or “No”.
• Column “b” reflects the number of ACA FTEs the ALE
reported on the Form 1094-C. If “Yes” in any month,
this means the employer made an offer of coverage to
at least 70% of ACA FTEs.
• If the ALE failed to report the number of ACA
FTEs on the Form 1094-C Part III for the
calendar year, the IRS uses the number of
Forms 1095-C the ALE identified as submitting
on Form 1094-C, Part II Line 20.
• If the ALE failed to report the number of ACA
FTEs on the Form 1094-C Part III for any month
(or months) of the calendar year (e.g., left
November blank), the IRS uses the ACA FTE
count for the month with the greatest number of
ACA FTEs reported.
• Column “c” reflects the number of ACA FTEs that the
employer is allowed to subtract from the “A” penalty
calculation. If the employer qualified for transition
relief, this number is 80. Otherwise it is 30. In order to
claim relief, the ALE should have checked Box “C” on
Form 1094-C Part II Line 22 and entered “B” on the
Form 1094-C Part III Column “e”.
• Columns “d” and “e” provide the number of ACA FTEs
the IRS identified as receiving a PTC for at least one
month of the calendar year. Letter 226J describes
these as “assessable full-time employees” (or “ACA
FTEs”). Essentially, it is their receipt of the PTC that
triggered the proposed assessment on the ALE.
Details on each of the identified “assessable full-time
employees” can be found on the Employee PTC
Listing (Form 14765). Only one of the columns (“d”
or “e”) will be completed for a month as the employer
cannot be subject to both the “A” and “B” penalty in the
same month. Column “f” identifies whether it is the “A”
penalty (4980H(a)) or the “B” penalty (4980H(b)) that
applies to some (or all) of 2015.
• Column “g” provides the proposed ESRP for
each month of 2015 with a total annual proposed
assessment captured at the bottom of the table. This
number should match what is included as the ESRP
on the first page of Letter 226J.
Assessment of “A” or “B” Penalty
“A” penalty. The 4980H(a) ESRP applies for a month when:
• Column “a” MEC coverage offer indicator (offered to
at least 70% of ACA FTEs and their dependents) is
marked “No”; and
Received Letter 226J: Now What? December 15, 2017
2017 Compliance Digest: Fourth Quarter | 29
Important Note
Many Summary Tables have shown “No” in column “a”
even though the ALE made an offer of coverage to at
least 70% of ACA FTEs (therefore should be “Yes”).
ALEs will need to address this error in the statement
submitted with the ESRP Response. Do not try to
correct the error through the correction process for
Form 1094-C.
Practical Tip
Make sure you have your Form 1094-C from the
2015 reporting handy as you go through this letter for
accuracy. It will also help you identify whether you may
have missed certain information on some (or all) of the
months of the calendar year.
Important Note
Most ALEs will be able to use “80”. In some instances,
we have seen the IRS use “30” as opposed to “80”. This
may be due to mistakes on the Form 1094-C and can
be addressed in the statement included with the ESRP
Response (Form 14764). Do not try to correct the Form
1094-C as the response to Letter 226J.
• Column “d” has at least one (1) for that same month
(reflecting at least one ACA FTE received a PTC).
The 4980H(a) assessment is calculated by taking the
number in column “b” (the IRS ACA FTE count for the
month) and subtracting column “c” (number of ACA FTEs
the ALE can back out of its total for purposes of “A” penalty
calculation). The resulting number is then multiplied by
173.33 ($2,080/12) to arrive at the monthly ESRP.
“B” penalty. The 4980H(b) ESRP applies for a month when:
• Column “a” (offered to at least 70% of ACA FTEs and
their dependents) is marked “Yes”; and
• Column “e” has at least one (1) for that same month
(reflecting at least one ACA FTE received a PTC).
The 4980H(b) assessment for a month is calculated by
taking the number in column “e” (the number of ACA FTEs
who receive a PTC) and multiplying it by $260 ($3,120/12).
Form 14764 – ESRP Response
Regardless of whether you agree or disagree with the
proposed assessment, ALEs should timely respond to
Letter 226J. There is a phone number to call on the ESRP
Response form in the event you need additional time to
respond.
An ALE that disagrees with the proposed assessment must
submit the following:
• Form 14764 – ESRP Response,
• Signed statement, and
• Any supporting documentation.
An ALE that agrees with the proposed assessment must
submit the following:
• Form 14764, and
• Payment.
To complete Form 14764, the ALE needs the following
information.
Contact Information
• Your name
• Address
• Primary and secondary phone numbers and the best
time to call
Agreement or Disagreement with the ESRP
• Agree with the assessment. If you agree with the
proposed assessment, check the box reflecting the
agreement, print and sign your name and include the
date.
• Disagree with the assessment. If you disagree with
part (or all) of the proposed assessment, check the box
reflecting partial/total disagreement with the proposed
assessment.
Payment
This includes full or partial payment options if agreeing to the
proposed penalties. Payment can be made by check, money
order or, if participating, electronically through EFTPS.
• Include the employer ID number (EIN), the tax
year (2015) and ESRP on the payment and any
correspondence.
• Make check or money order payable to the United
States Treasury.
If you are not making a payment, for example because you
disagree with the assessment, check the box indicating no
payment.
Authorization – Optional
The ALE may authorize additional individuals to assist the
ALE with this process. ALEs must designate any authorized
individual in the ESRP Response. This may be another
30 | 2017 Compliance Digest: Fourth Quarter
person at the company, legal counsel or a tax adviser.
Please do not list us or a member of your service team as
we cannot interface directly with the IRS on your behalf.
Sign the authorization in order for the IRS to discuss and
provide information to the designated person.
Importance of Responding
If the employer does not respond by the date identified on
the first page of the letter, a Notice and Demand will be sent
for the ESRP that has been proposed and will be assessed.
The ESRP will be subject to IRS lien and levy enforcement
actions and interest will accrue from the date of the Notice
and Demand until the ESRP is paid in full.
Sample Statement Letter
We have crafted a sample statement letter that can be used
as a starting point for drafting a response disagreeing with
the proposed ESRP. The statement includes some examples
of why an ALE would disagree with the ESRP. These
examples are not exhaustive. ALEs that disagree with the
ESRP will need to include a statement explaining the reason
for the disagreement along with a completed Form 14765
and any supporting documentation in a response to the IRS.
See Appendix A for the sample.
Received Letter 226J: Now What? December 15, 2017
2017 Compliance Digest: Fourth Quarter | 31
Appendix A: Sample Statement – ESRP Response
The following is a sample response statement that may be used as a starting point to respond to the IRS when
disagreeing with an ESRP assessment. This is just a sample and does not take into account the particular facts and
circumstances of the employer’s offer of coverage (or lack thereof). Employers must carefully review the details of
the assessment and determine the reasons for disagreement. Areas that are highlighted reflect where the employer
information is needed. Our comments provide insight on where information may be found and/or examples. The examples
provided in this summary are not exhaustive and there may be situations not described in this letter which apply to a
particular employer. Employers should carefully review any Letters 226J and work with legal and tax advisors to respond
to the IRS in a timely manner.
Company Letterhead
(Insert Month, Day, Year)
Department of Treasury
Internal Revenue Service
Group 2219
7300 Turfway Road, Suite 410
Florence, KY 41042
Re: (Employer Name:)
(Employee ID Number)
(Contact ID Number)
Employer Response to Proposed ESRP
To Whom It May Concern:
This letter is being sent in response to Letter 226J dated (insert date of the letter) for Tax Year 2015.
Comment.
Should be no later than the Response Date on Letter 226J.
Comment
Located on the first page of Letter 226J.
32 | 2017 Compliance Digest: Fourth Quarter
Comment
Located on the first page of Letter 226J.
2017 Compliance Digest: Fourth Quarter | 33
(Employer Name) disagrees with the proposed Employer Shared Responsibility Payment in the amount of (insert
assessment amount) outlined in the ESRP Summary Table and submit this appeal.
(Name of Employer)
• Calendar Year Plan. Did offer minimum essential coverage to at least 70% of [Employer]’s full-time employees (and
their dependents) for all twelve months in accordance with IRC Section 4980h(a).
• Non-Calendar Year Plan. Did offer minimum essential coverage to at least 70% of [Employer]’s full-time employees
(and their dependents) from insert first day of non-calendar year plan (e.g., April 1), 2015 through December 31,
2015 in accordance with Section 4980H(a) and qualified for non-calendar year plan transition relief.
• Calendar Year Plans. Did offer minimum essential coverage to at least 70% of [Employer]’s full-time employees (and
their dependents) for all twelve months and the offer of coverage was minimum value and affordable as determined
by the [W-2 safe harbor, rate of pay safe harbor or Federal Poverty Level safe harbor] in accordance with Section
4980H(b).
• Non-Calendar Year plans. Did offer minimum essential coverage to at least 70% of [Employer]’s full-time employees
(and their dependents) from insert first day of non-calendar year plan (e.g., April 1), 2015 through December 31,
2015.
• Error on Form 1094-C. Reviewed Form 1094-C filed for Tax Year 2015 and determined that Part III, Column A
inaccurately states that minimum essential coverage was not offered to at least 70% of our full-time employees for
all twelve months [or from __________ 2015 through ________ 2015] and/or Part III, Column (a), (b), (c), or (e) was/
were inadvertently left blank. Please correct Form 1094-C, Part III as follows: insert requested corrections.
• Error(s) on Forms 1095-C. Reviewed the filed Forms 1095-C and determined that Part II, Line 14/16 [reflects an
incorrect code or was incomplete and/or did not identify the correct safe harbor]. I have updated the Employee
Premium Tax Credit (PTC) Listing on Form 14765 to reflect the correct codes.
Comment
ESRP payment amount is located on the first page of the Letter 226J and in the ESRP summary table.
Comment
The following are examples of why an employer may disagree with the ESRP. An employer’s specific reason for
disagreement will be based particular facts and circumstances unique to the employer. There may be more than
one reason for the disagreement. Employers will need to carefully draft a response disagreeing with the proposed
assessment that reflects the employer’s particular circumstances. The examples provided here are general in nature
and may not apply to a specific situation.
34 | 2017 Compliance Digest: Fourth Quarter
• Medium-sized employer relief. Reviewed Form 1094-C filed for Tax Year 2015 and determined that [Employer] was
eligible for transition relief from penalties as we employed fewer than 100 full-time employees (including full-time
equivalents) in calendar year 2014 and otherwise satisfied applicable requirements for relief. Form 1094-C Part II,
Line 22, Box C and/or Part III column (e) was/were inadvertently left blank (or other error). Please correct Form
1094-C, Part III as follows: insert requested corrections.
In support of this signed statement, please find enclosed the following:
1. Completed Form 14764, ESRP Response
2. [Revised Form 14765, Employee Premium Tax Credit (PTC) Listing]
3. Supporting documentation
Comment.
Use this space to describe the supporting documentation that is included with the response. They type of supporting
documentation will vary based on the facts and circumstances of the appeal. Following are some examples but is not
exhaustive.
• Enrollment/waiver form – to show that an offer of coverage was made and/or accepted
• SBC – to show that the plan meets minimum value
• Plan Documents (SPD/Certificate of Coverage/Booklet) – to show who is eligible for the plan and when benefit
coverage begins for new employees
• Contribution documentation (if not included on the enrollment form) – to show the amount the employee would pay
for coverage such as an open enrollment guide
• If the employer used the Rate of Pay or W-2 Affordability Safe Harbor, include either of the following: Copy of the
employee’s pay stub or the previous year’s Form W-2]
Sincerely,
[Name of contact person with title]
[Name of Employer]
2017 Compliance Digest: Fourth Quarter | 35
SERIES 1 CODES: Specify the type of coverage, if any, offered to an employee, the employee’s spouse, and the
employee’s dependents.
1A Qualifying Offer. Minimum essential coverage providing minimum value offered to full-time employee with employee
contribution for self-only coverage equal to or less than 9.56% mainland single federal poverty line (For 2015, $93.77
or less) and at least minimum essential coverage offered to spouse and dependent(s).
1B Minimum essential coverage providing minimum value offered to employee only.
1C Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage
offered to dependent(s) (not spouse).
1D Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage
offered to spouse (not dependent(s)).
1E Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage
offered to dependent(s) and spouse.
1F Minimum essential coverage NOT providing minimum value offered to employee; employee and spouse or dependent(s);
or employee, spouse and dependents.
1G Offer of coverage to employee who was not a full-time employee for any month of the calendar year (which may include
one or more months in which the individual was not an employee) and who enrolled in self-insured coverage for
one or more months of the calendar year.
1H No offer of coverage (employee not offered any health coverage or employee offered coverage that is not minimum
essential coverage, which may include one or more months in which the individual was not an employee)
1I Qualifying Offer Transition Relief 2015: Employee (and spouse or dependents) received no offer of coverage; received
an offer that is not a qualifying offer; or received a qualifying offer for less than 12 months.
SERIES 2 CODES: Safe Harbor
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 a full-time employee. Enter code 2B if the employee is not a full-time employee for the month and did
not enroll in minimum essential coverage, if offered for the month. Enter code 2B also if the employee is a full-time
employee 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).
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 (other than
code 2E) might also apply (for example, the code for a section 4980H affordability safe harbor). Do not enter 2C in line
16 if code 1G is entered in the All 12 Months Box in line 14 because the employee was not a full-time employee for any
months of the calendar year. Do not enter code 2C in line 16 for any month in which a terminated employee is enrolled
in COBRA continuation coverage (enter code 2A).
2D Employee in a section 4980H(b) Limited Non-Assessment Period. Enter code 2D for any month during which an
employee is in a Limited Non-Assessment Period for section 4980H(b) (e.g., waiting periods, initial measurement
period, etc.).
2E Multiemployer interim rule relief. Enter code 2E for any month for which the multiemployer arrangement interim
guidance applies for that employee, regardless of whether any other code in Code Series 2 (including code 2C) might
also apply.
Appendix B: 2015 Form 1095-C Codes
36 | 2017 Compliance Digest: Fourth Quarter
2F Section 4980H affordability Form W-2 safe harbor
2G Section 4980H affordability federal poverty line safe harbor.
2H Section 4980H affordability rate of pay safe harbor.
2I Non-calendar year transition relief applies to this employee. Enter code 2I if non-calendar year transition relief for section
4980H(b) applies to this employee for the month.
Final forms and instructions for 2015 are available here:
• Instructions: https://www.irs.gov/pub/irs-prior/i109495c–2015.pdf
• Form 1094-C: https://www.irs.gov/pub/irs-prior/f1094c–2015.pdf
• Form 1095-C: https://www.irs.gov/pub/irs-prior/f1095c–2015.pdf
Extension of Deadline for
2017 Forms 1095-C
On December 22, 2017, the IRS issued Notice 2018-06, which provides a limited
extension of time for employers to provide 2017 Forms 1095-C to individuals.
It also extends good-faith transition relief from certain penalties for the 2017
reporting year. The deadline to provide Forms 1094-C and 1095-C to the IRS was
not extended.
Q1: What was Extended?
2017 Forms 1095-C statements must be furnished to individuals by March 2,
2018 (rather than January 31, 2018).
This extension of time also applies to carriers providing Forms 1095-B to
individuals in insured plans.
Q2: Were the deadlines for reporting to the IRS extended?
No.
The 2017 Form 1094-C and all supporting Forms 1095-C (collectively, “the
return”) is due to the IRS by April 2, 2018 if filing electronically (or February 28,
2018 if filing by paper). These deadlines were not extended as part of the relief
announced in Notice 2018-06. Per the Notice, the government determined there
was no similar need for additional time for employers to file these Forms with the
IRS.
As a reminder, employers that file at least 250 Forms 1095-C must file
electronically. The IRS encourages all filers to submit returns electronically.
Published: December 28, 2017
2017 Compliance Digest: Fourth Quarter | 37
Q3: Is there penalty relief?
Yes
Notice 2018-06 extends transition relief from penalties
to reporting entities that have made good-faith efforts to
comply with the information reporting requirements for the
2017 reporting year, both for furnishing the Form 1095-C
to individuals and for filing with the IRS. Specifically, this
relief applies to missing or inaccurate taxpayer identification
numbers and dates of birth, as well as other information
required on the return or statement.
No relief is available if the reporting entity does not make
a good-faith effort to comply with the regulations or for
a failure to file a return or furnish a statement by the
applicable due dates.
This relief does not absolve an employer from correcting an
incorrect Form if so instructed by the IRS.
Q4: What if the submissions are late?
Employers that do not comply with these due dates are
subject to penalties. However, employers should still furnish
and file the forms and the IRS will take such furnishing and
filing into consideration when determining whether to abate
penalties.
Q5: What if employees do not have Forms
1096-C (or Forms 1095-B from the carrier)
before they file their tax returns?
Some taxpayers may not receive their Form 1095-C (or
1095-B from the carrier) by the time they are ready to file
their personal tax return for 2016. Taxpayers do not need to
wait until they receive their Form 1095-C (or 1095-B) to file
their annual tax return, and may rely on other information
from their employer (or carrier) for purpose of filing
individual taxes. Individuals need not send this information
to the IRS when filing their returns but should keep it with
their tax records.
Q6: Will the IRS offer this relief for 2018
reporting?
According to the Notice, the IRS does not anticipate
extending this transition relief, either with respect to the
due date for furnishing the Form 1095-C to individuals and
good-faith relief from certain penalties, to 2018 reporting.
38 | 2017 Compliance Digest: Fourth Quarter
Congress Passes Tax
Reform Bill
On December 20, 2017, the House and Senate sent President Trump the Tax
Cuts and Jobs Act for signature. The House of Representatives passed their
version of the bill on November 16, 2017 while the Senate passed their version
on December 2, 2017. Because the versions were not identical, a Tax-Bill
Conference Committee was formed from members of the Senate and the House
of Representatives to negotiate the text of the combined bill. After the finalized
text was approved and released by the committee, the House and Senate each
passed the combined bill (which happened on December 20th in the House and
December 19th in the Senate) before it was sent to the White House.
Included in the law are a few employer-provided health and welfare-related
provisions that can be summarized as follows:
• Individual Mandate. The law sets the Individual Mandate penalty to $0
starting in 2019. As a reminder, the Individual Mandate is the part of the
Affordable Care Act that institutes a penalty on individuals that do not
maintain health coverage during the year.
• Medical Expense Deduction. The law expands the medical expense
deduction for 2017 and 2018 for qualified expenses exceeding 7.5% of
adjusted gross income (from 10% under current law). In 2019, the deduction
will increase to expenses in excess of 10% of adjusted gross income.
• Transportation Benefits. The law eliminates the employer’s deduction for
qualified transportation fringe benefits. In addition, except as necessary
for ensuring the safety of an employee, the law would eliminate any
deduction for providing transportation or any payment or reimbursement
for commuting to work. This provision is effective for amounts paid or
incurred after 2017. It appears qualified transportation fringe benefits remain
excludable from the employee’s income. It is the employer’s ability to deduct
the employer’s cost for providing these benefits that is changed.
Published: December 28, 2017
2017 Compliance Digest: Fourth Quarter | 39
40 | 2017 Compliance Digest: Fourth Quarter
• Bicycle Commuter Benefits. Suspends the
exclusion from an employee’s gross income and
wages for qualified bicycle commuting benefits.
Under existing law, employers may provide
employees up to $20 per qualifying bicycle
commuting month on a tax-free basis. Effective
January 1, 2018, any payment or reimbursement
by the employer for bicycle commuting expenses
will be subject to ordinary income tax and
considered wages. The suspension will sunset
after December 31, 2025.
• Employer Tax Credit for FMLA Leave. Finally, for
2018 and 2019 only, the law creates a tax credit for
employers that pay employees while on FMLA leave.
Vacation leave, personal leave, or other medical or
sick leave do not count for this purpose. The credit
is generally 12.5% of the amount of wages paid to
qualifying employees (although it increases by .25%
for every percentage point an employee’s FMLA
wages exceed 50% of their normal wages).
• A qualifying employer is one who:
• Allows all qualifying FT employees at least two
weeks of annual paid FMLA leave (and a prorata
amount for non-FT employees); and
• Has a leave program providing for at least 50%
of normal wages.
• A qualifying employee is one who:
• Has been employed for at least one year; and
• Who had compensation in the previous
year below 60% of the highly compensated
threshold. The highly compensated threshold in
2018 is $120,000, meaning the compensation
to be a qualifying employee for purposes of the
credit is $72,000 for 2018.
Notably, the law does not:
• Repeal or otherwise change the employer mandate
and applicable Form 1094-C and 1095-C reporting.
• Eliminate tax code provisions associated with
dependent care flexible spending accounts and
adoption assistance programs (under the original
House bill, these were repealed).
• Address the high cost plan excise tax (i.e., the
Cadillac Plan Tax) set to take effect on January 1,
2020.
• Reinstate Federal funding for cost-sharing payments
to certain individuals buying individual and family
coverage in the Marketplace.
Please note that this is not a full review of the law, but
focuses solely on provisions that employers should be
aware of in relation to the health and welfare benefits they
provide.
The IRS will began reviewing the revised Code and issuing
regulations and guidance to address the changes in the
future. As guidance relates to health and welfare benefits,
we will keep you apprised of relevant changes.
For the current text, visit:
https://www.congress.gov/congressional-report/115thcongress/house-report/466/1.
www.emersonreid.com
© 2017 Emerson Reid LLC All Rights Reserved
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California | New Jersey | New York | Pennsylvania

Congress Passes Tax Reform Bill

On December 20, 2017, the House and Senate sent President Trump the Tax Cuts and Jobs Act for signature. The House of Representatives passed their version of the bill on November 16, 2017 while the Senate passed their version on December 2, 2017. Because the versions were not identical, a Tax-Bill Conference Committee was formed from members of the Senate and the House of Representatives to negotiate the text of the combined bill.

After the finalized text was approved and released by the committee, the House and Senate each passed the combined bill (which happened on December 20th in the House and December 19th in the Senate) before it was sent to the White House.

On December 20, 2017, the House and Senate sent President Trump the Tax Cuts and Jobs Act for signature. The House
of Representatives passed their version of the bill on November 16, 2017 while the Senate passed their version on
December 2, 2017. Because the versions were not identical, a Tax-Bill Conference Committee was formed from members
of the Senate and the House of Representatives to negotiate the text of the combined bill. After the finalized text was
approved and released by the committee, the House and Senate each passed the combined bill (which happened on
December 20th in the House and December 19th in the Senate) before it was sent to the White House.
Included in the law are a few employer-provided health and welfare-related provisions that can be summarized as follows:
• Individual Mandate. The law sets the Individual Mandate penalty to $0 starting in 2019. As a reminder, the
Individual Mandate is the part of the Affordable Care Act that institutes a penalty on individuals that do not maintain
health coverage during the year.
• Medical Expense Deduction. The law expands the medical expense deduction for 2017 and 2018 for qualified
expenses exceeding 7.5% of adjusted gross income (from 10% under current law). In 2019, the deduction will
increase to expenses in excess of 10% of adjusted gross income.
• Transportation Benefits. The law eliminates the employer’s deduction for qualified transportation fringe benefits.
In addition, except as necessary for ensuring the safety of an employee, the law would eliminate any deduction
for providing transportation or any payment or reimbursement for commuting to work. This provision is effective
for amounts paid or incurred after 2017. It appears qualified transportation fringe benefits remain excludable from
the employee’s income. It is the employer’s ability to deduct the employer’s cost for providing these benefits that is
changed.
Congress Passes Tax Reform Bill
Published: December 28, 2017
CA Insurance License 0F98081
Terry Denesha | (661) 201-0571 | tdenesha@earthlink.net
This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations. You
should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. CA Insurance License #0C94240.
Congress Passes Tax Reform Bill Published: December 28, 2017 | Page 2
• Bicycle Commuter Benefits. Suspends the
exclusion from an employee’s gross income and
wages for qualified bicycle commuting benefits.
Under existing law, employers may provide
employees up to $20 per qualifying bicycle
commuting month on a tax-free basis. Effective
January 1, 2018, any payment or reimbursement
by the employer for bicycle commuting expenses
will be subject to ordinary income tax and
considered wages. The suspension will sunset
after December 31, 2025.
• Employer Tax Credit for FMLA Leave. Finally,
for 2018 and 2019 only, the law creates a tax credit
for employers that pay employees while on FMLA
leave. Vacation leave, personal leave, or other
medical or sick leave do not count for this purpose.
The credit is generally 12.5% of the amount of
wages paid to qualifying employees (although
it increases by .25% for every percentage point
an employee’s FMLA wages exceed 50% of their
normal wages).
• A qualifying employer is one who:
• Allows all qualifying FT employees at least
two weeks of annual paid FMLA leave (and a
pro-rata amount for non-FT employees); and
• Has a leave program providing for at least
50% of normal wages.
• A qualifying employee is one who:
• Has been employed for at least one year; and
• Who had compensation in the previous
year below 60% of the highly compensated
threshold. The highly compensated
threshold in 2018 is $120,000, meaning the
compensation to be a qualifying employee for
purposes of the credit is $72,000 for 2018.
Notably, the law does not:
• Repeal or otherwise change the employer mandate
and applicable Form 1094-C and 1095-C reporting.
• Eliminate tax code provisions associated with
dependent care flexible spending accounts and
adoption assistance programs (under the original
House bill, these were repealed).
• Address the high cost plan excise tax (i.e., the
Cadillac Plan Tax) set to take effect on January 1,
2020.
• Reinstate Federal funding for cost-sharing
payments to certain individuals buying individual
and family coverage in the Marketplace.
Please note that this is not a full review of the law, but
focuses solely on provisions that employers should be
aware of in relation to the health and welfare benefits they
provide.
The IRS will began reviewing the revised Code and
issuing regulations and guidance to address the changes
in the future. As guidance relates to health and welfare
benefits, we will keep you apprised of relevant changes.
For the current text, visit:
https://www.congress.gov/congressional-report/115thcongress/house-report/466/1.

Extension of Deadline for 2017 Forms 1095-C

On December 22, 2017, the IRS issued Notice 2018-06, which provides a limited extension of time for employers to provide
2017 Forms 1095-C to individuals. It also extends good-faith transition relief from certain penalties for the 2017 reporting
year. The deadline to provide Forms 1094-C and 1095-C to the IRS was not extended.

On December 22, 2017, the IRS issued Notice 2018-06, which provides a limited extension of time for employers to provide
2017 Forms 1095-C to individuals. It also extends good-faith transition relief from certain penalties for the 2017 reporting
year. The deadline to provide Forms 1094-C and 1095-C to the IRS was not extended.
Q What was Extended?
A 2017 Forms 1095-C statements must be furnished to individuals by March 2, 2018 (rather than January 31,
2018).
This extension of time also applies to carriers providing Forms 1095-B to individuals in insured plans.
Q Were the deadlines for reporting to the IRS extended?
A No.
The 2017 Form 1094-C and all supporting Forms 1095-C (collectively, “the return”) is due to the IRS by April 2,
2018 if filing electronically (or February 28, 2018 if filing by paper). These deadlines were not extended as part
of the relief announced in Notice 2018-06. Per the Notice, the government determined there was no similar need
for additional time for employers to file these Forms with the IRS.
As a reminder, employers that file at least 250 Forms 1095-C must file electronically. The IRS encourages all
filers to submit returns electronically.
Extension of Deadline for 2017 Forms 1095-C
Published: December 28, 2017
CA Insurance License 0F98081
Terry Denesha | (661) 201-0571 | tdenesha@earthlink.net
This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations. You
should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. CA Insurance License #0C94240.
Extension of Deadline for 2017 Forms 1095-C Published: December 28, 2017 | Page 2
Q Is there penalty relief?
A Yes
Notice 2018-06 extends transition relief from penalties to reporting entities that have made good-faith efforts
to comply with the information reporting requirements for the 2017 reporting year, both for furnishing the Form
1095-C to individuals and for filing with the IRS. Specifically, this relief applies to missing or inaccurate taxpayer
identification numbers and dates of birth, as well as other information required on the return or statement.
No relief is available if the reporting entity does not make a good-faith effort to comply with the regulations or for
a failure to file a return or furnish a statement by the applicable due dates.
This relief does not absolve an employer from correcting an incorrect Form if so instructed by the IRS.
Q What if the submissions are late?
A Employers that do not comply with these due dates are subject to penalties. However, employers should still
furnish and file the forms and the IRS will take such furnishing and filing into consideration when determining
whether to abate penalties.
Q What if employees do not have Forms 1096-C (or Forms 1095-B from the carrier) before they file their tax
returns?
A Some taxpayers may not receive their Form 1095-C (or 1095-B from the carrier) by the time they are ready to file
their personal tax return for 2016. Taxpayers do not need to wait until they receive their Form 1095-C (or 1095-B)
to file their annual tax return, and may rely on other information from their employer (or carrier) for purpose of
filing individual taxes. Individuals need not send this information to the IRS when filing their returns but should
keep it with their tax records.
Q Will the IRS offer this relief for 2018 reporting?
A According to the Notice, the IRS does not anticipate extending this transition relief, either with respect to the due
date for furnishing the Form 1095-C to individuals and good-faith relief from certain penalties, to 2018 reporting.

The Denesha Difference: Why You Should Choose Us To Be Your Insurance Broker

I am frequently asked “Why should I choose you as my employee benefits broker” or “What makes you different?

My answer is always the same. Not sure if there is a difference. If your current broker is doing a wonderful job, there may not be much of a difference. I might have to ask his golf handicap?

If your agent is doint a great job, keep him/her. If you are comfortable with your health insurance benefits as it relates to cost, stay where you are. If you are confident you are compliant with existing federal, state and local compliance challenges, by all means stay right wher you are. If you like your enrollment technology and voluntary options, wonderful. There are a lot of good brokers and agents. Most do a pretty good job. But if you have a question with anything as it pertains to your benefits, does it hurt to get an independent review and confirm that you are where you should be, and compliant? Some people don’t want to know.
Everyone promises great customer service. That should be the norm. At the Denesha Insurance Agency, we strive to give our clients ‘value added’ services. We have a commitment to customer care that we believe ranks our business a cut above the average insurance agency. It’s a fundamental philosophy that we call the Denesha Difference. Here are just some of the reasons that business owners should choose our agency to be their insurance broker.

The Denesha Difference

We offer a unique business review program, a comprehensive assessment of your business’s insurance and employee benefit plan, with an eye toward compliance with all local, state, and federal laws and regulations. If you are positioned properly, we will tell you to stay right where you are.

We utilize the latest technology and software platforms. Most enrollment software is intended for larger companies of 100 or more employees, but developers are starting to to target the small to medium business niche with insurance solutions designed to meet their unique needs. We try out new products when they come on the market and thus can recommend the right solutions for a company’s specific needs, and can offer assistance with customizing and troubleshooting new technologies.

We offer the option of either electronic enrollment, one-on-one in person enrollment, or a combination of the two. Companies can monitor and maintain HR compliance functions online if they choose. We take a proactive approach to legislative compliance issues and any other critical factors that HR departments need to be aware of.

Open enrollment is usually the most challenging time of the year for our clients, and we’re there to guide you through the process, but Denesha Insurance Agency continues to serve our customers throughout the other 11 months of the year. We’ll advise you on the best and most in-demand employee benefits, and help you to develop a strategic plan to lower the cost of health claims. We fully understand that health benefits are more than just a perk, they’re also an important recruitment and retention tool, and choosing the right plan is important for employee morale. We also ensure that you’re always informed about the latest compliance requirements.
Our regular business hours are from 7:30 AM to 5:30 PM, Monday through Friday, longer than any other agency we’re aware of, and we can also be reached on weekends by phone, text, or email.

As more regulatory requirements are placed on businesses, they need an insurance broker who can not only actively engage with their employees, but also leverage new technologies to help streamline the administrative tasks associated with their benefit plan.
We help both businesses and families analyze the coverage they need for their particular situation, and develop a customized policy that also fits their budget.

When you call the Denesha Insurance Agency, the phone will most likely be answered by one of the owners, either Terry or his wife Debbie. They’ll be ready to assist you with benefits support, employee communications, and personalized insurance services.
We always try to anticipate our customer’s needs, and proactive service is one of the key points that differentiate us from our competition.

Free, no obligation review of current benefits and compliance. We believe that once you’ve worked with our agency, you’ll appreciate the Denesha Difference. Contact us at any time to discuss all of your insurance needs. Even if it’s only to confirm your guy is doing a great job.

What Employers Want From Their Broker

Insurance is changing. And with these changes, Employers are looking to evolve their company’s benefit plans to not only offer the best value available, but also views their employees holistically and sees the need for them to achieve a satisfying work-life harmony. Providing solution based advice for employers can be a valuable benefit should they seek guidance.

Most employers are doing just that. According to insurance giant MetLife’s most recent benefit trends study, at least 81% of employers surveyed say an insurance agent or a broker plays a crucial role when they are developing their benefit plans, and another 75% say a benefits consultant or consulting firm assisted them during their renewal period.

As a guide to benefits advisers, as well as a helpful checklist for employers, MetLife has created a list of 15 areas that employers most often seek advice about from their agents or brokers, along with the percentage that inquiries about those specific benefit areas increased from 2015 to 2016. The areas range from providing global benefit solutions to healthcare reform requirements. The list provides an interesting insight into the changing landscape of employee benefits.

15 Employee Benefit Plan Specifics Companies Most Commonly Seek Advice About

  1. Providing assistance with creating and maintaining an employee benefit handbook: 2015 52% – 2016 62%. Putting together an employee handbook that is comprehensive and informative, yet easy to understand, and keeping it updated as needed, can be a daunting task for any HR department, even those with benefits specialists on staff. An insurance agent or broker can provide valuable guidance about best-practices and effective solutions.
  2. Providing prompt, effective service and answering questions on time: 2015 60% – 2016 68%. Great customer service is one of the keys to a great employee benefit plan. There’s nothing more frustrating than having to spend time on the phone and getting passed around to different departments just to get answers to basic questions about benefits.
  3. Recommending new and innovative benefit solutions: 2015 57% – 2016 65%. This is an important area these days, with so many new solutions coming onto the market, especially for smaller companies with 100 employees or less, towards which a lot of new products are being marketed. New technologies are rapidly changing the way employee benefits are administered.
  4. Recommending cost savings alternatives: 2015 61% – 2016 68%. Everyone is interested in saving money obviously, and an experienced agent or broker can recommend the best values for both employers and employees.
  5. Help with legal, regulatory, and compliance issues: 2015 56% – 2016 64%. With the complexity of the myriad government regulations and new legislation, it doesn’t take much for a company to run afoul of the rules, and incur severe penalties and fines. Professional advice in this area is almost a must.
  6. Providing insights on employee needs and desires for benefits: 2015 53% – 2016 63%. An agent who is experienced in advising on benefit plans for companies in a wide range of industries will be able to help tailor a plan for different types of employees. For instance, companies that hire mostly younger, single people will have different needs than companies that employ mostly older, married individuals.
  7. Reducing the frequency and expense of claims: 2015 56% – 2016 65%. An obvious goal of any employer, there are many ways to achieve it, including employee awareness and educational programs.
  8. Recommending non-medical benefit solutions: 2015 48% – 2016 58%. These are usually preventative programs such as exercise, diet, nutritional, and other health and wellness programs, but also non-traditional medical solutions such chiropractic, massage and aromatherapy, acupuncture, and herbal treatments, among many others.
  9. Advising on employee physical wellbeing strategy: 2015 50% – 2016 60%. This parallels #8 above, but might be considered a more comprehensive, holistic approach encompassing many elements, both physical and mental, leading to total wellbeing.
  10. Advising on employee financial wellbeing strategies: 2015 50% – 2016 60%. Financial stability is actually an important part of a holistic health strategy, as the stress associated with money problems can lead to serious mental and physical illnesses, as well as family issues including divorce and domestic violence.
  11. Creating benefits statements: 2015 52% – 2016 62%. Employees need clear, easy to understand benefits statements on a regular basis throughout the year, at least quarterly, so that they know their exact status. A professional can inform an employer on best practices and technologies for generating these important reports.
  12. Advising on healthcare reform requirements: 2015 57% – 2016 64%. Healthcare reform is one of the biggest political issues of the day, and employers need to keep abreast of changes in legislation that might affect their benefit plans, and what they need to do to stay in compliance with the law.
  13. Providing benefits administration: 2015 54% – 2016 64%. Administering benefit plans can be a huge task for larger companies, an no easy chore for smaller ones either. New technologies and platforms are making the job easier for both, and employers need to be aware of their options.
  14. Recommending product bundling that will meet employee needs: 2015 55% – 2016 64%. There are many products on the market today that can make managing employee benefit plans much easier and more efficient. Finding the right combination for a particular company’s needs requires a professional who is thoroughly familiar with what’s available and the strengths and weaknesses of specific products.
  15. Providing insights regarding benefits trends: 2015 54% – 2016 62%. Like just about everything else, benefits follow trends, and a good, up-to-date plan will take the latest ones into account. An agent or broker will be aware of these and can advise an employer accordingly.

 

Terry and Debbie Denesha have been advising businesses both large and small on their insurance and employee benefits plans for over a decade. Contact us at 661-397-0041 to arrange a consultation and find out how they can help create a plan to meet your company’s unique requirements.

 

 

What Is The Real Reason for Insurance?

Insurance is a misunderstood issue for a lot of people, but it is also one of the most important issues employers and employees will address. When you have a business and offer insurance to the people who work their, you need to be able to show them why insurance matters and what kinds of benefits they are really getting when they sign up. The more you understand about insurance, the more easily you can explain it to your employees in ways they are comfortable with. Then they can go on to make informed choices about whether they want to purchase insurance and what plan or policy they should select.

Transferring Risk Away From the Employee

The biggest benefit to your employees when they have insurance is that risk is transferred away from them. They will no longer have to pay for huge medical bills if something happens to them, like an accident or an illness, because the insurance company will be paying the majority of the bill. While insurance does not cover everything an employee might need to spend, and there will be out-of-pocket costs, employees can save themselves from financial ruin at the hands of medical bills if they have good insurance. That is a big benefit they receive when they work with an employer who offers a good insurance plan.

As an employer, you can show your employees that you care by helping them have good quality insurance at a reasonable price. There are only so many options open to employers, but picking the best plans and offering their information to your employees is a way to show that they matter. You will be taking some of the risk off of the employee and putting it in the hands of the insurance company, and when you can convey the message and value of that to your employees they will better understand why they should consider getting insurance through the company at the rates that are offered to them.

Employees Feel More Valued When They Are Offered Insurance

Employees who are offered insurance feel valued by their company more than employees who do not get any kind of insurance benefits. Because the employee and the employer both have to pay into the cost of the insurance, employees see that the company they work for is investing in them. Companies that offer insurance are saying to their employees that the employees are worth keeping, and that their health and safety matters. By providing this understanding of value to your employees, you show them they are important and they mean something to the company they work for. That can affect loyalty and performance.

Having Good Insurance Plans Can Mean Better Employment Candidates

An important benefit employers get when they offer good health insurance plans is a better pool of job candidates to choose from. People who are looking for employment often want more than just a paycheck, and if they see that they can get good insurance through one company but not through another company that is comparable in pay and job duties, most of them will choose the company where they can receive insurance. Having insurance is about more than just keeping employees from going broke if they are injured or sick. It is also about acquiring and retaining the best employees for the job at hand.

It’s Easier to Pick From a Few, Company-Provided Options

Self-employed people often struggle with how and where to choose an insurance plan. For company employees, though, that struggle is avoided. There are just a few options offered, and employees can pick the ones that work best for them. That eliminates the possibility of having too many choices, and the decision fatigue that can come along with it. In short, it helps employees make better choices, because too many choices generally leads people to pick something that actually is not right for them. By limiting employee choices for insurance, you are doing them a favor and making things much easier for them, overall.

Insurance Can Motivate Employees to Work Harder

Giving bonuses and other incentives, along with the idea that they will be protected by insurance if the company keeps them on after their probationary period of up, can all encourage employees to work harder. They want to do more for a company that treats them right, and that cares about them and their lives. That is good news for any company that offers insurance, because happy, productive employees are so important to the proper running of any company. Without good employees, many companies are left struggling. Sometimes as simple as providing insurance can change motivation levels and improve the bottom line.

Good Insurance Means Employees May Remain On the Job Longer

When employees have good insurance through their employer, another thing they may do is stay on the job longer. When they quit they will lose their insurance, and if the choose to keep it the price often rises drastically. If they change jobs they may not be covered by the other company for a while, or the other company they are considering may not have as good of an insurance plan. In some cases, the other company may not have an insurance plan at all. That can make a significant difference in how long a person chooses to work for a company, and if they stay even if other opportunities are available.

The Bottom Line on Insurance

Because insurance is a transfer of risk from the employee to the insurance company, it helps to protect the employee financially if there is an injury or illness. Additionally, employees feel much more valued and important to the company if they are offered insurance, which can lead them to stay with the company longer and work harder than they otherwise would. Good insurance plans can also bring in other employees who are dedicated and talented, and their lives are made easier by not having to choose from too many insurance plans. When insurance is handled the right way, It is a winning situation for both the employees and their employer.

California Paid Family Leave

In 2002, California became the first state to adopt a paid family leave law, which provides
employees with up to 6 weeks of paid family leave (PFL) through the State Disability
Insurance (SDI) program. The following chart is a general overview of the law and its
requirements.
Who Pays for PFL? PFL is funded entirely by employee contributions to the SDI program, which
are made through payroll deductions.
Which Employers Must
Deduct SDI Contributions?
The PFL program applies to all California employers, regardless of size.
Which Employees Are
Eligible for PFL?
To be eligible for PFL, an employee generally must:
 Be unable to perform his or her regular or customary work for at least 8
days due to the need to provide care to a seriously ill family member or to
bond with a new child;
 Have paid into SDI in the past 5-18 months;
 Have not taken more than 6 weeks of PFL in the past 12 months; and
 Have a qualifying life event (depending on the life event, other eligibility
requirements may apply).
Which Life Events Qualify for
PFL?
An employee may file a claim for PFL through the SDI program for the
following reasons:
 To care for a seriously ill child, spouse, parent, parent-in-law, grandparent,
grandchild, sibling, or registered domestic partner; or
 To bond with a new child (including newly fostered and adopted children).
How Long Can an
Employee Be Out on PFL?
Up to 6 weeks within any 12-month period
Must an Employer Maintain
an Employee’s Health
Benefits While He or She is
Out on PFL?
Maintenance of health benefits is not required under PFL. However, it may
be required under the California Family Rights Act (CFRA) or the federal
Family and Medical Leave Act (FMLA).
Is an Employee Entitled to
His or Her Position Upon
Return from Leave?
Maintenance of job position is not required under PFL. However, it may be
required under the CFRA or the FMLA.
Are Employers Required to
Post or Provide Notices to
Employees Regarding PFL?
Yes. Employers are responsible for providing information on PFL to their
employees by:
o Posting DE 1857A; and
o Providing DE 2515 and DE 2511 to new hires and employees who notify
their employer that they need to take time off from work due to a nonwork-related
illness, injury, pregnancy, or childbirth.
Additional Information
For more information, employers may review the California Employment Development
Department’s website on PFL.
3
California Paid Family Leave
Provided by:
Denesha Insurance Agency
9711 Holland St
Bakersfield, CA 93309
Phone: 6613970041
www.denesha.net/HOME
Note: The information and materials herein are provided for general information purposes only and have been taken from sources believed to be reliable,
but there is no guarantee as to its accuracy. © 2017 HR 360, Inc. | Last Updated: July 24, 2017

DOL Sues Health Plan Alleging SPD and Wellness Program Failures

On August 16, 2017, the Department of Labor (“DOL”) filed a lawsuit against Macy’s Inc. Health and Welfare plan
(and its third party administrators) under ERISA Title I.
Specifically, the complaint alleges:
• The health plan and its fiduciaries failed to follow the written terms of the health plan’s Summary Plan Description
(SPD) when reimbursing out-of-network claims; and
• The wellness program that includes a tobacco surcharge violated the HIPAA wellness program rules.
The complaint alleges breach of fiduciary duty and asks, in part, for readjudication of all out-of-network claims
administered outside plan terms and for restitution of all the tobacco surcharges imposed.
Failure to Amend SPDs
According to the DOL’s complaint, Macy’s changed the reimbursement threshold for out-of-pocket claims from
“the lesser of the provider’s normal charge for a similar service or supply or between 75%-80% of usual and customary
charges” to the Medicare Allowable Rate when it is less than the provider’s normal charge for a similar service or supply.
Allegedly, the SPD was not amended to include language describing that the reimbursement for out-of-network claims
would be the Medicare Allowable Rate when less than provider’s normal charge. Additionally, the health plan participants
were not provided a copy of any summary of material modification reflecting the change in reimbursement.
DOL Sues Health Plan Alleging SPD and
Wellness Program Failures
Published: August 23, 2017
CA Insurance License 0F98081
Terry Denesha | Denesha Insurance Agency | (661) 201-0571 | tdenesha@earthlink.net
This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations. You
should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. ©2017 Emerson Reid, LLC. All Rights Reserved.
DOL Sues Health Plan Alleging SPD and Wellness Program Failures Published: August 23, 2017 | Page 2
Wellness Program Failures
The DOL alleges the tobacco cessation wellness program
sponsored by Macy’s did not meet the requirements of
the wellness regulations to provide a nondiscriminatory
wellness program for the years 2011 to present day.
Briefly, the employer imposed a surcharge on an
employee’s premium for individuals who were smokers.
While such surcharges are permissible, there are specific
guidelines that must be followed to comply with HIPAA
wellness regulations.
Specifically, the DOL alleges the wellness rules were
violated because the program:
• Required covered members participating in a
tobacco cessation program to be tobacco free for
six consecutive months in order to avoid a premium
surcharge;
• Did not allow individuals who completed the
tobacco cessation program to avoid the entire
surcharge (i.e., retroactively correct the application
of a surcharge); and
• From 2011-2013, the materials describing the
wellness program failed to include a notice of
a reasonable alternative standard to avoid the
surcharge.
Why is this Important?
The recent filing by the DOL of this complaint signals
the agency has not backed away from pursuing ERISA
violations against employer-sponsored health plans.
It also highlights the importance for plans to keep
documents up-to-date to ensure administration is
consistent with the written terms of the plan. Finally,
it highlights the importance of following the rules when
it comes to wellness programs, specifically offering a
reasonable alternative to achieve the reward without
conditioning it on satisfying the original standard
(e.g., non smoker status) and making the full reward
available upon completion of the alternative.
It will be interesting to see Macy’s response and to follow
developments in this litigation and any actionable items
for plan sponsors. We will continue to keep you apprised.

Employer Penalty and 1094-C/1095-C Reporting

Applicable large employers (“ALEs”) may be resting easy, having had no notification from the IRS of 2015 or 2016
assessments under the Employer Shared Responsibility Provisions (the Employer Penalty) and having reasonably
expected that the Republican-led administration would limit or choose not to enforce this mandate.
However, the recent failure in the Senate to pass legislation to repeal and replace the Affordable Care Act (“ACA”) has left
many employers wondering whether:
• Penalties associated with the Employer Penalty will be enforced; and
• Forms 1094-C and 1095-C will be required going forward.
Recently, the IRS published draft versions of the 2017 Forms 1094-C (https://www.irs.gov/pub/irs-dft/f1094c–dft.pdf) and
1095-C (https://www.irs.gov/pub/irs-dft/f1095c–dft.pdf).
These versions are substantially similar to past Forms. Notably though, the Form 1094-C has reserved areas once used
to reflect available transition relief (Line 22 Certifications of Eligibility, Boxes “B” and “C”). Final versions of the Forms are
expected in the fall. Draft instructions for the 2017 Forms have not yet been released.
To date there has been no guidance issued by the IRS that eliminates penalties for Employer Penalty violations or fines
associated with failures to accurately complete, provide and/or file Forms 1094-C and 1095-C. While some employers
may think a Trump-led IRS will ignore these requirements, absent non-enforcement guidance from the agency, employers
should continue to comply.
Nineteenth Set of FAQs on the ACA Issued
Published: May 12, 2014 Update
Employer Penalty and 1094-C/1095-C Reporting
Published: August 22, 2017

CA Insurance License 0F98081

Terry Denesha | Denesha Insurance Agency | (661) 201-0571 | tdenesha@earthlink.net

This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations. You
should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. ©2017 Emerson Reid, LLC. All Rights Reserved.
Update: Employer Penalty and 1094-C/1095-C Reporting Published: August 22, 2017 | Page 2

Why Comply? The Alternative may be
Expensive.
The potential penalties are not limited to the “A” and “B”
Employer Penalty assessments (which are substantial).
There are also significant penalties associated with
failures to accurately complete, provide and/or file Forms
1094-C and 1095-C:
• The penalty for failure to file a correct information
return is $260 for each return for which the failure
occurs, with the total penalty for a calendar year not
to exceed $3,193,000.
• The penalty for failure to provide a correct payee
statement is $260 for each statement for which the
failure occurs, with the total penalty for a calendar
year not to exceed $3,193,000.
• Special rules apply that increase the per-statement
and total penalties if there is intentional disregard
of the requirement to file the returns and furnish the
required statements.
An employer intentionally ignoring the 1094-C and 1095-
C requirement could be assessed penalties of more than
$520 per form, up to $6,386,000 per year.

Next Steps
At this point, ALEs should:
• Prepare for CY 2017 Form 1094-C and 1095-C
reporting. The Form 1095-C for CY 2017 will be

due January 31, 2018 to ACA FTEs and, for self-
insured group health plans, any covered non-ACA

FTEs. Filings to the IRS are expected electronically
by April 2, 2018 (and, for those eligible, on paper
by February 28, 2018). We will update you if any
extension of time is announced.
• Prepare to address notifications of a potential
penalty assessment from the IRS. Likely, any
notices associated with the 2015 calendar year
would be issued first, with 2016 notices to follow.
• Continue to identify ACA FTEs using the
appropriate measurement method (monthly or
look-back) and manage offers and affordability of
coverage. Understand any potential penalty liability
that exists in your organization.
• Await updates from the IRS, including issuance of
the final CY 2017 Forms and Instructions, likely in
September or October.

Five Most Common Open Enrollment Mistakes

A company’s open enrollment period can be a hectic time for management, HR staff, and employees alike. While a successful open enrollment period can increase employee health and satisfaction, an unsuccessful open enrollment period can result in compliance risk and reputational damage.

Learn the five most common open enrollment mistakes and how to avoid them below.

Mistake #1: Not Informing Employees of the Value of the Health Plan

Retention is greatly increased when employees understand the value of their employer-sponsored health plan. To aid this understanding, employers should consider providing their employees with:

  • A well-organized benefits summary which addresses the key features of the health plan; and
  • A total compensation statement which emphasizes that health plan benefits are a form of compensation received by the employee.

Mistake #2: Not Informing Employees of Health Plan Changes

If the employee has not experienced a job or family change, he or she may simply re-enroll in the health plan without giving it a second thought. However, health plan premiums, deductibles, and coverage networks may change each plan year, and the employer may be offering new benefits with unique requirements. As a result, it is important for the employer to inform employees of plan changes. Employers should consider using tools such as benefits summary documents, emails, in-person meetings, and social media posts to help ensure that employees fully understand their health benefits.

Mistake # 3: Not Responding to Employee Questions or Concerns

Some employees may have specific questions about the health plan which go unaddressed, while others may want a benefit that is not part of the current health plan. Employers should be mindful of these concerns and seek to better understand what employees want from their health plan. By using online surveys and other methods to obtain employee feedback during open enrollment, employers can satisfy concerned employees and learn how to enhance their health plan.

Mistake #4: Not Offering Coverage to Dependents

Under the Affordable Care Act (ACA), employers with 50 or more full-time employees (including full-time equivalent employees) may be liable for a penalty of over $3,000 per full-time employee if they do not offer coverage to the dependents of their full-time employees. In addition, the ACA requires all plans that offer dependent coverage to offer coverage to plan enrollees’ adult children until they reach age 26, even if the child is eligible for coverage through his or her own employer. As a result, it is very important for employers to offer dependent coverage and inform employeesof its availability.

Mistake #5: Not Fully Explaining any Tax-Favored Accounts Offered

To take the sting out of high plan deductibles and other out-of-pocket costs borne by employees, many employers have begun offering health savings accounts (HSAs), health flexible spending arrangements (health FSAs), and health reimbursement arrangements (HRAs) in conjunction with their health plans. However, the rules governing these tax-favored accounts can be complicated, and violations of their specific participation, contribution, and distribution requirements can lead to tax penalties. Employers should take the time to fully explain any tax-favored account they offer, and remember to emphasize that the employer’s establishment of and contribution to these accounts is yet another part of the employee’s total compensation.

 

 

Medicare Information Booklet

MedicareWhat’s inside
Contacting Social Security 3
Medicare 4
What is Medicare? 4
Who can get Medicare? 6
Help for some low-income people 9
Signing up for Medicare 10
Choices for receiving health services 15
If you have other health insurance 15Contacting Social Security
Visit our website
At our website, www.socialsecurity.gov, you can:
• Create a my Social Security account to review your
Social Security Statement, verify your earnings, print
a beneft verifcation letter, change your direct deposit
information, request a replacement Medicare card, get a
replacement 1099/1042S, and more;
• Apply for Extra Help with Medicare prescription drug
plan costs;
• Apply for retirement, disability, and Medicare benefts;
• Get the address of your local Social Security offce;
• Find copies of our publications; and
• Get answers to frequently asked questions.
Call us
Call us toll-free at 1-800-772-1213 or at our TTY number,
1-800-325-0778, if you’re deaf or hard of hearing.
We provide general information by automated phone
service 24 hours a day. You can also use this automated
response system to tell us a new address or request a
replacement Medicare card. We can answer your casespecifc questions from 7 a.m. to 7 p.m., Monday through
Friday. You’ll generally have a shorter wait time if you call
after Tuesday.
We treat all calls confdentially, and a second Social
Security representative monitors some telephone calls,
because we want to make sure you receive accurate and
courteous service.4
Medicare
This booklet provides basic information about what
Medicare is, who’s covered, and some of the options
you have for choosing Medicare coverage. For the latest
information about Medicare, visit the website or call the
toll-free number listed below.
Medicare
Website: www.Medicare.gov
Toll-free number: 1-800-MEDICARE
(1-800-633-4227)
TTY number: 1-877-486-2048
What is Medicare?
Medicare is our country’s health insurance program
for people age 65 or older. People younger than age 65
with certain disabilities, or permanent kidney failure, or
amyotrophic lateral sclerosis (Lou Gehrig’s disease), can
also qualify for Medicare. The program helps with the cost
of health care, but it doesn’t cover all medical expenses or
the cost of most long-term care. You have choices for how
you get Medicare coverage. If you choose to have original
Medicare coverage, you can buy a Medicare supplement
policy (called Medigap) from a private insurance company
to cover some of the costs that Medicare does not.
A portion of the payroll taxes paid by workers and
their employers cover most Medicare expenses. Monthly
premiums, usually deducted from Social Security checks
also cover a portion of the costs.
The Centers for Medicare & Medicaid Services is the
agency in charge of the Medicare program. But, you apply
for Medicare at Social Security, and we can give you general
information about the Medicare program.5
Medicare has four parts
• Medicare Part A (hospital insurance) helps pay for
inpatient care in a hospital or skilled nursing facility
(following a hospital stay). Part A also pays for some
home health care, and hospice care.
• Medicare Part B (medical insurance) helps pay for
services from doctors and other health care providers,
outpatient care, home health care, durable medical
equipment, and some preventive services.
• Medicare Part C (Medicare Advantage plans) are
available in many areas. People with Medicare Parts A
and B can choose to receive all their health care services
through a private insurance company approved by
Medicare to provide this coverage.
• Medicare Part D (Medicare prescription drug coverage)
helps cover the cost of prescription drugs.
You can get more details about what Medicare covers
from Medicare & You (Publication No. CMS-10050). To
get a copy, call the toll-free number or go to the Medicare
website shown on the previous page.
A word about Medicaid
You may think Medicaid and Medicare are the same,
but they’re two different programs. Medicaid is a staterun program that provides hospital and medical coverage
for people with low income. Each state has its own rules
about who’s eligible, and what Medicaid covers. Some
people qualify for both Medicare and Medicaid. For more
information about the Medicaid program, contact your local
medical assistance agency or social services offce.6
Who can get Medicare?
Medicare Part A (hospital insurance)
People age 65 or older, who are citizens or permanent
residents of the United States, are eligible for Medicare Part
A. You’re eligible for “Part A” at no cost at age 65 if:
• You receive or are eligible to receive Social Security
benefts; or
• You receive or are eligible to receive railroad retirement
benefts; or
• Your spouse (living or deceased, including divorced
spouses) receives or is eligible to receive Social Security
or railroad retirement benefts; or
• You or your spouse worked long enough in a government
job through which you paid Medicare taxes; or
• You are the dependent parent of a fully insured
deceased child.
If you don’t meet these requirements, you may be able
to get Medicare Part A by paying a monthly premium.
Usually, you can purchase this coverage only during
designated enrollment periods.
NOTE: Even though Social Security’s full retirement
age is no longer 65, you should sign up for Medicare three
months before your 65th birthday. You can apply on our
website at www.socialsecurity.gov.
Before age 65, you are eligible for Medicare Part A at no
cost if:
• You’ve been entitled to Social Security disability
benefts for 24 months; or
• You receive a disability pension from the railroad
retirement board and meet certain conditions; or
• You receive Social Security disability benefts because you
have Lou Gehrig’s disease (amyotrophic lateral sclerosis); or
• You worked long enough in a government job through
which you paid Medicare taxes, and you’ve been entitled
to Social Security disability benefts for 24 months; or7
• You’re the child or widow(er) age 50 or older, including
a divorced widow(er), of someone who’s worked long
enough in a government job through which Medicare
taxes were paid, and you meet the requirements of the
Social Security disability program; or
• You have permanent kidney failure and you receive
maintenance dialysis or a kidney transplant and
—You’re eligible for or receive monthly benefts under
Social Security or the railroad retirement system; or
—You’ve worked long enough in a Medicare-covered
government job; or
—You’re the child or spouse (including a divorced spouse)
of a worker (living or deceased) who has worked long
enough under Social Security or in a Medicare-covered
government job.
Medicare Part B (medical insurance)
Anyone who’s eligible for Medicare Part A at no cost
can enroll in Medicare Part B by paying a monthly
premium. Some people with higher incomes will
pay a higher monthly Part B premium. For more
information, read Medicare Premiums: Rules for
Higher-Income Benefciaries (Publication No. 05-10536),
or visit www.socialsecurity.gov/mediinfo.htm.
If you’re not eligible for Part A at no cost, you can buy
Part B, without having to buy Part A, if you’re age 65 or
older and you’re:
• A U.S. citizen; or
• A lawfully admitted noncitizen, who has lived in the
United States for at least fve years.
You can only sign up for Part B during designated
enrollment periods. If you don’t enroll in Part B when
you’re frst eligible for it, you may have to pay a late
enrollment penalty for as long as you have Part B coverage.
Read Signing up for Medicare on page 10.8
Medicare Part C (Medicare Advantage plans)
If you receive your Part A and Part B benefts directly
from the government, you have original Medicare. If
you receive your benefts from a Medicare Advantage
organization or other company approved by Medicare,
you have a Medicare Advantage plan. Many of these
plans provide extra coverage and may lower your
out-of-pocket costs.
If you have Medicare Parts A and B, you can join a
Medicare Advantage plan. Private companies, approved
by Medicare, offer Medicare Advantage plans. With these
plans, you can’t have a Medigap policy, because Medicare
Advantage plans cover many of the same benefts a Medigap
policy covers. This includes benefts like extra days in the
hospital after you’ve used days that Medicare covers.
Medicare Advantage plans include:
• Medicare managed-care plans;
• Medicare preferred provider organization plans;
• Medicare private fee-for-service plans; and
• Medicare specialty plans.
If you decide to join a Medicare Advantage plan, you use
the health card that you get from your Medicare Advantage
plan provider for your health care. Also, you might have to
pay a monthly premium for your Medicare Advantage plan
because of the extra benefts it offers.
You can enroll in a Medicare Advantage plan during your
initial enrollment period (as explained under Signing up
for Medicare on page 10), the frst time you’re eligible for
Medicare. You can also enroll during the annual Medicare
open enrollment period from October 15 – December 7
each year. The effective date for the enrollment is January 1
of the upcoming year. There are also special enrollment
periods for some situations.9
Medicare Part D (Medicare prescription
drug coverage)
Anyone who has Medicare Part A or Part B is eligible
for Part D (Medicare prescription drug coverage). Joining
a Medicare prescription drug plan is voluntary, and
you pay an extra monthly premium for the coverage.
Some benefciaries with higher incomes will pay a
higher monthly Part D premium. For more information,
read Medicare Premiums: Rules for Higher-Income
Benefciaries (Publication No. 05-10536), or visit
www.socialsecurity.gov/mediinfo.htm. If you don’t
enroll in a Medicare drug plan when you’re frst eligible,
you may pay a late enrollment penalty if you join a plan
later. You’ll have to pay this penalty for as long as you
have Medicare prescription drug coverage. However, you
won’t pay a penalty if you have Extra Help (see below), or
another creditable prescription drug plan. To be creditable,
the coverage must pay, on average, at least as much as
Medicare’s standard prescription coverage.
You can enroll during your initial enrollment period (as
explained under Signing up for Medicare on page 10), the
frst time you’re eligible for Medicare. You can also enroll
during the annual Medicare open enrollment period from
October 15 – December 7 each year. The effective date for
the enrollment is January 1 of the upcoming year. There are
also special enrollment periods for some situations.
Help for some low-income people
If you can’t afford to pay your Medicare premiums and
other medical costs, you may be able to get help from
your state. States offer programs for people entitled to
Medicare who have low income. Some programs may pay
for Medicare premiums and some pay Medicare deductibles
and coinsurance. To qualify, you must have Medicare Part
A and have limited income and resources.10
You can go online to get more information about these
programs from the Centers for Medicare & Medicaid
Services website. Visit www.medicare.gov/publications
and fnd Get help with your Medicare costs (Publication
No. CMS-10126) at the “Your Medicare Costs” tab.
Only your state can decide if you qualify for help under
these programs. To fnd out, contact your state or local
medical assistance (Medicaid) agency, social services, or
welfare offce.
You may also be able to get Extra Help paying for the
annual deductibles, monthly premiums, and prescription
co-payments related to the Medicare prescription drug
program (Part D). You may qualify for Extra Help if you
have limited income (tied to the federal poverty level)
and limited resources. These income and resource limits
usually change each year, and you can contact us for the
current numbers.
You automatically qualify and don’t need to apply for
Extra Help if you have Medicare and meet one of the
following conditions:
• Have full Medicaid coverage;
• Have Supplemental Security Income (SSI); or
• Take part in a state program that pays your
Medicare premiums.
For more information about getting help with your
prescription drug costs, call Social Security’s toll-free
number or visit our website. You can also apply online
at www.socialsecurity.gov/extrahelp.
Signing up for Medicare
When should I apply?
If you’re already getting Social Security benefts or railroad
retirement checks, we’ll send you information a few months
before you become eligible for Medicare. If you live in one
of the 50 states, Washington, D.C., the Northern Mariana
Islands, Guam, American Samoa, or the U.S. Virgin Islands,11
we’ll automatically enroll you in Medicare Parts A and
B. However, because you must pay a premium for Part B
coverage, you can choose to turn it down.
NOTE: Residents of Puerto Rico or foreign countries won’t
receive Part B automatically. They must elect this beneft.
If you’re not already getting benefts, you should contact
Social Security about three months before your 65th
birthday to sign up for Medicare. You can sign up for
Medicare even if you don’t plan to retire at age 65.
After you enroll in Medicare, you’ll receive a red,
white, and blue Medicare card showing whether you
have Part A, Part B or both. Keep your card in a safe
place so you’ll have it when you need it. If your card
is lost or stolen, you can apply for a replacement card
online by setting up a my Social Security account at
www.socialsecurity.gov/myaccount, or call Social
Security’s toll-free number. You’ll also receive a Medicare &
You handbook (Publication No. CMS-10050) that describes
your Medicare benefts and plan choices.
Special enrollment situations
You should also contact Social Security about applying
for Medicare if:
• You’re a disabled widow or widower between age 50
and age 65, but haven’t applied for disability benefts
because you’re already getting another kind of
Social Security beneft;
• You’re a government employee and became disabled
before age 65;
• You, your spouse, or your dependent child has
permanent kidney failure;
• You had Medicare Part B in the past, but dropped
the coverage;
• You turned down Medicare Part B when you frst got
Part A; or
• You or your spouse worked for the railroad industry.12
Initial enrollment period for Part B
When you frst become eligible for Medicare Part A, you
have a seven-month period (your initial enrollment period)
in which to sign up for Part B. If you’re eligible at age 65,
your initial enrollment period begins three months before
your 65th birthday, includes the month you turn age 65,
and ends three months after that birthday. If you’re eligible
for Medicare based on disability or permanent kidney
failure, your initial enrollment period depends on the date
your disability or treatment began.
NOTE: If you don’t enroll in Part B when you’re frst
eligible for it, you may have to pay a late enrollment
penalty for as long as you have Part B coverage. Also, you
may have to wait to enroll, which will delay this coverage.
When does my enrollment in Part B
become effective?
If you accept the automatic enrollment in Medicare Part B,
or if you enroll during the frst three months of your initial
enrollment period, your coverage will start with the month
you’re frst eligible. If you enroll during the last four months,
your coverage will start from one to three months after
you enroll.
The following chart shows when your Medicare Part B
becomes effective:
If you enroll in this month of
your initial enrollment period
Then your Part B Medicare
coverage starts
One to three months before you
reach age 65 The month you reach age 65
The month you reach age 65 One month after the month you
reach age 65
One month after you reach age 65 Two months after the month of enrollment
Two or three months after you
reach age 65
Three months after the month of
enrollment13
General enrollment period for Part B
If you don’t enroll in Medicare Part B during your
initial enrollment period, you have another chance each
year to sign up during a “general enrollment period” from
January 1 through March 31. Your coverage begins on July 1
of the year you enroll. However, you may have to pay a late
enrollment penalty for as long as you have Part B coverage
Your monthly premium will go up 10 percent for each
12-month period you were eligible for Part B, but didn’t
sign up for it
Special enrollment period for people leaving Part C
If you’re in a Medicare Part C (Medicare Advantage plan),
you can leave that plan and switch to original Medicare
from January 1 through February 14. If you use this
option, you also have until February 14 to join a Medicare
Part D (Medicare prescription drug plan). Your coverage
begins the frst day of the month after the plan gets your
enrollment form.
Special enrollment period for people covered under
an employer group health plan
If you’re 65 or older and covered under a group health
plan, either from your own or your spouse’s current
employment, you may have a “special enrollment period”
in which to sign up for Medicare Part B. This means that
you may delay enrolling in Medicare Part B without having
to wait for a general enrollment period and paying the
penalty for late enrollment. There are limits, so we strongly
advise you to contact the Centers for Medicare & Medicaid
Services (CMS) for more information. The CMS contact
information is on page 4 of this booklet. The rules allow
you to:
• Enroll in Medicare Part B any time while you have a
group health plan based on current employment; or
• Enroll in Medicare Part B during the eight-month period
that begins the month after the employment ends or the
group health coverage ends, whichever happens frst.14
You can’t enroll using a special enrollment period if your
employment or the employer-provided group health plan
coverage ends during your initial enrollment period.
When you enroll in Medicare Part B while you’re still in
the group health plan, or during the frst full month when
you are no longer in the plan, your coverage begins either:
• On the frst day of the month you enroll; or
• By your choice, on the frst day of any of the following
three months.
If you enroll during any of the remaining seven months
of the “special enrollment period,” your Medicare Part B
coverage begins on the frst day of the following month.
If you don’t enroll by the end of the eight-month period,
you’ll have to wait until the next general enrollment period,
which begins January 1 of the next year. You may also have
to pay a late enrollment penalty for as long as you have Part
B coverage, as described previously.
If you get Social Security disability benefts and have
coverage under a large group health plan from either your
own or a family member’s current employment, you may
also have a special enrollment period. If so, you have
premium rights similar to those for current workers age
65 or older. For more information, contact the Centers for
Medicare & Medicaid Services.
NOTE: COBRA and retiree health coverage don’t count
as current employer coverage.15
Choices for receiving health services
Medicare benefciaries can have choices for getting
health care services.
You can get more information about your health care
choices from the following publications:
• Medicare & You (Publication No. CMS-10050) — CMS
mails this guide to people after they enroll in Medicare
and sends them an updated version each year after that.
• Choosing a Medigap Policy: A Guide to Health
Insurance for People with Medicare (Publication
No. CMS-02110) — This guide describes how other
health insurance plans supplement Medicare and offers
some shopping hints for people looking at those plans.
To get a copy of these publications, visit
Medicare.gov/publications, or call the toll-free number,
1-800-MEDICARE (1-800-633-4227). If you’re deaf or hard
of hearing, call TTY 1-877-486-2048.
If you have other health insurance
Medicare Part A (hospital insurance) is free for almost
everyone. You have to pay a monthly premium for Medicare
Part B (medical insurance). If you already have other health
insurance when you become eligible for Medicare, is it
worth the monthly premium cost to sign up for Part B?
The answer varies with each person and the kind of other
health insurance you have. Although we can’t give you
“yes” or “no” answers, we can offer information that can
help you decide. We can also advise if you’ll be subject to a
late enrollment penalty if you delay signing up.16
If you have a private insurance plan
Get in touch with your insurance agent to see how your
private plan fts with Medicare Part B. This is especially
important if you have family members who have coverage
under the same policy. And remember, just as Medicare
doesn’t cover all health services, most private plans
don’t either. In planning your health insurance coverage,
keep in mind that most nursing home care isn’t covered
by Medicare or private health insurance policies. One
important word of caution: For your own protection, do
not cancel any health insurance you now have until your
Medicare coverage begins
If you have insurance from an employer-provided
group health plan
By law, group health plans of employers with 20 or
more employees have to offer current workers and their
spouses who are age 65 (or older) the same health benefts as
younger workers.
If you or your spouse are still working and covered
under an employer-provided group health plan, talk to the
personnel offce before signing up for Medicare Part B.
If you have health care protection from other plans
If you have TRICARE (insurance for active-duty, military
retirees, and their families), your health benefts can change
or end when you become eligible for Medicare. This applies
for any reason, regardless of age or place of residence. If you’re
retired from the military or are a military retiree’s family
member, you must enroll in Part A and Part B when frst
eligible to keep TRICARE coverage. You can fnd a military
health benefts adviser at milconnect.dmdc.mil, or call the
Defense Manpower Data Center, toll-free at 1-800-538-9552
(TTY 1-866-363-2883) before you decide whether to enroll in
Medicare medical insurance (Part B).17
If you have health care protection from the Indian Health
Service, Department of Veterans Affairs, or a state medical
assistance program, contact those offces to help you decide
if it’s to your advantage to have Medicare Part B.
IMPORTANT: If you have VA coverage and don’t enroll
in Part B when you’re frst eligible, you may have to pay
a late enrollment penalty for as long as you have Part B
coverage. Also, you may have to wait to enroll, which will
delay this coverage.
For more information on how other health insurance
plans work with Medicare, visit Medicare.gov/publications
to view the booklet Medicare and Other Health Benefts:
Your Guide to Who Pays First (Publication No. CMS-02179),
or call the Medicare toll-free number, 1-800-MEDICARE
(1-800-633-4227). If you’re deaf or hard of hearing,
call TTY 1-877-486-2048.18
Notes19
NotesPrinted on recycled paper
Produced and published at U.S. taxpayer expense
Social Security Administration
SSA Publication No. 05-10043
ICN 460000
Unit of Issue (HD – one hundred)
April 2016 (Recycle prior editions)

List of Savviest 17 Company Perks

Savviest 17 company perks
Google
Fortune magazine has consistently listed Google as the No. 1 best company to work each year. The
company offers free food, an on-campus gym, a bowling alley, game room and basketball courts. On top of
that, employees can also find a barber shop, massage parlor and a laundromat.
Cisco Systems
Cisco’s Health Center is more than just fitness. Its LifeConnections Health Center also provides employees
with primary care, physical therapy, acupuncture and there is even an on-site pharmacy. Cisco says it
believes in a strong work-life balance, so it also provides employees with telecommuting technologies like
data and voice services for a home-office experience.
Southwest Airlines
Free flights for themselves as well as family and friends. Enough said. Also, the company gives its
employees access to discounts with a handful of other companies including other airlines, hotels, theme
parks and rental car companies.
General Mills
Another work-life balance advocate, General Mills starts all new hires immediately with three weeks of
paid vacation. On top of that, the company provides flexible telecommuting and for those who go to the
Minneapolis headquarters, a flexible seating schedule — instead of assigned seating, employees can work
from any part of the office where they are most comfortable.
J.M. Smucker Company
The Ohio employer starts its relationship off on the right foot with every employee, sending a new-hire gift
basket to their home. In addition, the company provides a 100% tuition reimbursement program to its
employees with no cap on costs, as well as free technical training in the event they would like to learn a
new workplace skill.
Yahoo
Yahoo offers perks both in and out of the office. The Yahoo offices have on-site fitness centers with yoga,
cardio-kickboxing, pilates and golf classes. The offices are also equipped with ergonomic support chairs,
plus healthy snacks and drinks on every floor. Outside the office, Yahoo offers discounts to ski resorts and
California theme parks. The company will even throw a baby shower for employees who become parents.
Quinn Emanuel
The law firm Quinn Emanuel says it gives its lawyers a $2,000 allowance to work one week a year from
anywhere in the world — so long as they work their normal hours. Additionally, the office provides a
casual dress policy to increase creativity and evaluates its prospective summer associates at parties on law
school campuses, rather than a stuffy office interview.
Boeing
To celebrate inclusivity, new employees at Boeing are connected through what the employer calls the
“REACH program,” setting up employees up with community service and social activities. The icing on the
cake from the aerospace and defense company is a schedule that includes 12 paid holidays and a winter
recess between Christmas and New Year’s Day.
Mattel
As a children’s toy maker, Mattel offers several child-related programs such as one that defrays the costs in
pursuing an adoption, and another policy that offers 16 hours of paid time off for school-related absences
such as parent-teacher conferences or field trips.
Microsoft
Microsoft gives new parents paid maternity and paternity leave. Also, the company provides a network of
support systems, such as mentoring programs and health care coverage for Applied Behavioral Analysis
therapy, which treats autism — a first major corporation to offer this unique benefit.
The World Wildlife Fund
What the nonprofit calls “Panda Friday,” employees work a little extra throughout the week to have every
other Friday off. The company also points that shutting down the office saves energy and reduces its carbon
footprint.
Oshkosh Corporation
The truck and military vehicle manufacturer shows loyalty to its employees through extensive training and
advancement opportunities, as well as tuition reimbursement for advanced degrees. Additionally, the
employer lists job opportunities specific for internal candidates, and hosts a rotational engineer program
that provides engineers the ability to learn a variety of other skills.
3M
3M Corporation offers a host of health and wellness programs to its employees. The company offers life
insurance and retirement plans on top of the standard medical, dental and vision perks — and extends those
same benefits to same-sex couples in domestic partnerships. Also, the company provides child- and
eldercare consulting services, smoking cessation programs, weight management reimbursements and stress
management coaching.
TIAA-CREF
A sports addict? TIAA-CREF gives its employees access to the corporate athletic program which allows
employees to play up to six sports on site, as well the Toastmasters communication development program
for leadership development.
Epic Systems
Loyalty is valued by this health care technology company, as it gives a month-long paid vacation to
employees after five years. What’s better, if it is in a never-before-visited country, Epic will help pay most
of the travel expenses for the employee and a friend. Also, when at the office, the Wisconsin campus
features an Indiana Jones-themed tunnel, a tree-house conference room, a moat and plenty of green space
for outdoor activities.

Case Study Highlights

# of people that filed claim Claims Payments
Plan Year with Healthiest You Prior Year % of change
Primary Care
Urgent Care/ER
2.2 fewer PTO days per employee
$30,387 annual claims savings
Truth in Numbers
Number of employees
Membership fee
Annual cost for program
# Annual doctor consultations
Utilization percent
Claim redirection savings
Effective cost
Annual broker commission

Navigating the Affordable Care Act

Employers across America are facing the uncharted waters of complying with the Affordable Care Act (ACA). For many it is a murky mix of looming requirements and deadlines that impact your health benefits, administrative processes, reporting responsibilities, employee staffing and bottom line. While Paycom cannot change your compliance obligations, our human capital management technology was designed to help ease your compliance burden. With one application for your employee data and all your FEINs, you are a step ahead of the tracking and reporting requirements of this health care reform legislation.

What You Need To Know About Stress

SmartEngage TM
In Depth Report
Extensive review of health topics and links to related information
Stress
2
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STRESS
An in-depth report on the causes, diagnosis, treatment, and prevention of stress.
Highlights
Overview:
• Nearly everyone experiences stress at some time. Stress produces changes in the body such as
increased heart rate, blood pressure, and altered immune function.
• Some amount of stress is healthy, but excessive stress, left untreated, can increase a person’s risk for
anxiety and illness.
Causes
• In the American Psychological Association’s Stress in America Survey, major causes of stress include
work, money, the economy, family responsibilities, and health concerns. Unhealthy habits uch as
overeating or eating unhealthy foods can result from stress.
Risks
• The combined effect of job stress and an unhealthy lifestyle poses the highest risk for coronary heart
disease (CHD) compared to either factor alone. Among those with job strain, making healthy lifestyle
choices can lower the risk of CHD significantly.
• Similar studies have shown that job stress is not a significant risk for colorectal, breast, prostate, or lung
cancers.
• Chronic stress is associated with adverse pregnancy outcomes, such as low birth weight. Screening
and intervention strategies may help to improve outcomes.
• Researchers are looking at the effectiveness of medications, such as escitalopram, in reducing the risk
of mental stress-induced myocardial ischemia (MSIMI).
Stress Reduction
• Several strategies have been shown to help reduce stress, such as exercise, practicing mindfulnessbased stress reduction (meditation and yoga), acceptance and commitment therapy (ACT), and
participating in a cognitive behavioral therapy (CBT) program.
• CBT has been shown to help reduce the stress associated with many chronic medical conditions,
including back pain, arthritis, and tinnitus (buzzing in the ears).
3
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STRESS
• Meditation may help ease symptoms of anxiety, depression, and pain, but its role in modulating
positive mood, attention, substance use, eating habits, sleep, and weight gain is less clear.
• Certain medications may help to treat specific post-traumatic stress disorder (PTSD) symptoms,
such as trauma nightmares.
• Several pilot projects are underway to assess the effects of “virtual healing” using devices such as
video game simulators that might augment traditional stress management therapies.
• Internet-based approaches are improving access to guided self-help psychological interventions.
Introduction
Stress affects most people in some way. Acute (sudden or short-term) stress leads to rapid changes
throughout the body. Almost all body systems (the heart and blood vessels, immune system, lungs,
digestive system, sensory organs, and brain) gear up to meet perceived danger.
These stress responses could prove beneficial in a critical, life-or-death situation. Over time, however,
repeated stressful situations put a strain on the body that may contribute to physical and psychological
problems. Chronic (long-term) stress can have real health consequences and should be addressed like
any other health concern.
Fortunately, research is showing that lifestyle changes and stress-reduction techniques can help
people manage stress.
External and Internal Stressors
People can experience stress from external or internal factors.
• External stressors include adverse physical stimuli (such as pain or hot or cold temperatures) or stressful
psychological environments (such as poor working conditions or abusive relationships).
• Internal stressors can also be physical (infections and other illnesses, inflammation) or psychological
(such as intense worry about an event that may or may not occur). As far as anyone can tell, internal
psychological stressors are rare or absent in most animals except humans.
Acute or Chronic Stress
4
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STRESS
Stressors can also be defined as short-term (acute) or long-term (chronic).
Acute Stress
Acute stress is the reaction to an immediate threat, commonly known as the fight or flight response, and
is accompanied with the release of stress hormones. The threat can be any situation that is perceived, even
subconsciously or falsely, as a danger.
Common acute stressors include:
• Noise (which can trigger a stress response even during sleep)
• Crowding
• Isolation
• Hunger
• Danger
• Infection
• High technology effects (such as playing
video games or frequently ringing mobile phones)
• Imagining a threat or remembering a dangerous event
Under most circumstances, once the acute threat has passed, levels of stress hormones return to normal.
This is called the relaxation response.
Chronic Stress:
Frequently, modern life exposes people to long-term stressful situations. Stress, then, becomes chronic.
The urge to act (to fight or flee) must therefore be controlled.
Common chronic stressors include:
• Ongoing work pressure
• Long-term relationship problems
• Loneliness
• Persistent financial worries
Stress in America Survey
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STRESS
The American Psychological Association conducted its most recent Stress in America Survey in 2014. A
representative sample of 3,068 adults in the general population were evaluated. The survey found that
overall, Americans are experiencing somewhat less stress than 7 years earlier. However, this trend is not
equally shared in the population, and higher stress levels are still reported among low-income households,
parents, younger generations, and women. Money appears to be the major source of high stress levels, and
has impacted about one-third of Americans from leading a healthier life. Twenty percent of individuals with
financial concerns are less likely to see a doctor when they need health care. They are also more likely to
engage in unhealthy habits, such as lying awake at night or oversleeping, overeating, skipping meals, or
becoming sedentary in general, due to stress. Emotional support was found as an important factor in helping
individuals manage their stress in more effective and healthier ways.
Specific results include:
• Most Americans report feeling moderate-to-high stress levels.
• 72% of adults report that money causes them stress at least some of the time.
• Steep health care costs and rising costs of living are a major source of money-related stress, particularly
among parents and younger generations (Millennials and Gen Xers).
• Adults in lower-income households are more likely to engage in sedentary or unhealthy behavior than
in higher-income households.
• Women report a higher level of stress than men, most of which is caused by money and family
responsibilities.
• Other sources of stress include work, the economy, and personal health concerns.
• Lack of willpower, time, and finances are barriers to making changes to better manage stress.
• Emotional support from friends and family can significantly improve stress levels and management.
However finding support proves difficult, with 21% of Americans reporting that they have no one to
turn to.
The Body’s Response
The best way to envision the effect of acute stress is to imagine yourself in a primitive situation, such as being
chased by a bear.
The Brain’s Response to Acute Stress
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STRESS
In response to seeing the bear, a part of the brain called the
hypothalamic-pituitary-adrenal (HPA) system is activated.
Release of Steroid Hormones and the Stress Hormone Cortisol:
The HPA system triggers the production and release of steroid hormones glucocorticoids), including
the primary stress hormone cortisol. Cortisol is very important in organizing systems throughout the body
(including the heart, lungs, circulation, metabolism, immune systems, and skin) to deal quickly with the
bear.
Release of Catecholamines:
The HPA system also releases certain neurotransmitters (chemical messengers) called catecholamines,
particularly those known as dopamine norepinephrine, and epinephrine (also called adrenaline).
Catecholamines activate an area inside the brain called the amygdala, which appears to trigger an
emotional response to a stressful event. In the case of the bear, this emotion is most likely fear.
Release of Neuropeptide S:
The brain releases neuropeptide S, a small protein that modulates stress by decreasing sleep and
increasing alertness and a sense of anxiety. This gives the person a sense of urgency to run away from the
bear.
Effects on Long- and Short-Term Memory:
During the stressful event, catecholamines also suppress activity in areas at the front of the brain
concerned with short-term memory, concentration, inhibition, and rational thought. This sequence of
mental events allows a person to react quickly, either to fight the bear or to flee from it. It also interferes
with the ability to handle difficult social or intellectual tasks and behaviors during that time.At the same
time, neurotransmitters signal the hippocampus (a nearby area in the brain) to store the emotionally
loaded experience in long-term memory. In primitive times, this brain action would have been essential
for survival, because long-lasting memories of dangerous stimuli (such as the large bear) would be critical
for avoiding such threats in the future.
Research also finds that during times of stress, nerve cells in the brain interpret chemical signals incorrectly.
Instead of switching “off,” these nerve cells perceive the signals as telling them to switch “on.” It is as
though the brain’s “brakes” fail in response to stress.
Response by the Heart, Lungs, and Circulation to Acute Stress
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STRESS
The stress response also affects the heart, lungs, and circulation:
• As the bear comes closer, the heart rate and blood pressure increase instantaneously.
• Breathing becomes rapid, and the lungs take in more oxygen.
• The spleen discharges red and white blood cells, allowing the blood to transport more oxygen
throughout the body. Blood flow may actually increase 300 to 400%, priming the muscles, lungs, and
brain for added demands.
The Immune System’s Response to Acute Stress
The effect of confronting the bear on the immune system is similar to mobilizing a defensive line of soldiers to
potentially critical areas. The steroid hormones reduce activity in parts of the immune system, so that specific
infection fighters (including important white blood cells) or other immune molecules can be repositioned.
These immune-boosting troops are sent to the body’s front lines where injury or infection is most likely to
occur, such as the skin and the lymph nodes.
The Acute Response in the Mouth and Throat
As the bear gets closer, fluids are diverted from nonessential locations, including the mouth. This causes
dryness and difficulty talking. In addition, stress can cause spasms of the throat muscles, making it difficult to
swallow.
The Skin’s Response to Acute Stress
The stress effect moves blood flow away from the skin to support the heart and muscle tissues. This also
reduces blood loss in the event that the bear causes a wound. The physical effect is cool, clammy, sweaty
skin. The scalp also tightens so that the hair seems to stand up.
Metabolic Response to Acute Stress
Stress reduces digestive activity, a body function that is not essential during short-term periods of hard
physical work or crisis.
The Relaxation Response: the Resolution of Acute Stress
Once the threat has passed without any harmful outcome (for example, the bear has not wounded the
human), the stress hormones return to normal. This is known as the relaxation response. In turn, the body’s
systems also return to normal.
Risk Factors for Stress
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At some point in their lives, virtually everyone will experience stressful events or situations that overwhelm
their natural coping mechanisms. Some people are simply biologically prone to stress. Many outside factors
influence susceptibility as well.
Conditions Most Likely To Produce Stress-Related Health Problems:
Conditions that are most likely to be associated with stress and negative physical effects include the
following:
• An accumulation of persistent stressful situations, particularly those that a person cannot easily control
(for example, a high-pressure job plus an unhappy relationship)
• Persistent stress after a severe acute response to a traumatic event (such as an automobile accident)
• Acute stress accompanying a serious illness, such as heart disease
Factors That Influence the Response to Stress:
Angiography is an invasive test. It is used when doctors require a detailed “road map” of coronary artery
blockages. In the procedure:
• Early nurturing: People who were abused in childhood may have long-term abnormalities in the HPA
system, which regulates stress.
• Personality traits: Certain people have personality traits that cause them to over-respond to stressful
events. For example, those who are neurotic may get stressed more easily and turn to unhealthy
behaviors such as smoking and heavy drinking as a result. Being more outgoing and aware of the
world may improve a person’s response to stress by lowering levels of stress-related inflammatory
hormones.
• Genetic factors: Some people have genetic factors that affect stress, such as having a more or less
efficient relaxation response.
• Immune regulated diseases: Certain diseases that are associated with immune abnormalities (such as
rheumatoid arthritis or eczema) may weaken the response to stress.
• The length and quality of stressors: The longer the duration and the more intense the stressors, the
more harmful the effects.
Individuals at Higher Risk for Stress:
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Studies indicate that the following people are more vulnerable than others to the effects of stress:
• Older adults: As people age, achieving a relaxation response after a stressful event becomes more
difficult. Aging may simply wear out the systems in the brain that respond to stress, so that they become
inefficient. The elderly, too, are very often exposed to major stressors such as medical problems, the loss
of a spouse and friends, a change in a living situation, and financial worries. No one is immune to stress,
however.
• Women in general and working mothers specifically: Working mothers, regardless of whether they are
married or single, face higher stress levels and possibly adverse health effects, most likely because they
bear a greater and more diffuse work load than men or other women. This effect has been observed in
women in the U.S. and in Europe. Such stress may also have a harmful effect on their children. It is not
clear, however, whether stress has the same adverse effects on women’s hearts as it does on men’s.
• Less educated individuals.
• Divorced or widowed individuals: Numerous studies indicate that unmarried people generally do not
live as long as their married contemporaries.
• Anyone experiencing financial strain, particularly the long-term unemployed and those without health
insurance.
• People who are isolated or lonely.
• People who are targets of racial or sexual discrimination.
• People who live in cities.
Childhood Factors
Children are frequent victims of stress because they are often unable to communicate their feelings
accurately. They also have trouble communicating their responses to events over which they have no
control. Certain physical symptoms, notably repeated abdominal pain without a known cause, may be
indicators of stress in children. Various conditions can affect a child’s susceptibility to stress.
Parental Stress:
Parental stress, especially in mothers, is a particularly powerful source of stress in children. Young children of
mothers who are highly stressed (particularly if they are also depressed) tend to be at high risk for developing
stress-related problems. This may be especially true if the mothers were stressed during both the child’s
infancy and early years. Stressed parents may even make their children more likely to develop asthma. Some
evidence supports the old idea that stress during pregnancy can have adverse effects on the infant’s mood
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and behavior. Older children with stressed mothers may become aggressive and anti-social. Stress-reduction
techniques in parents may improve their children’s behavior.
Gender Differences in Adolescent Stress:
Adolescent boys and girls experience equal amounts of stress, but the source and effects may differ. Girls
tend to become stressed from interpersonal situations, and stress is more likely to lead to depression in girls
than in boys. For boys, however, specific events, such as changing schools or getting poor grades, appear to
be the major sources of stress.
Work and Stress
Health care costs are much higher in workers who are stressed or depressed than in others who are not
stressed. Nearly half of American workers describe their jobs as very stressful, making job-related stress
an important and preventable health hazard. In a struggling economy, worry about job loss produces a
tremendous amount of stress.
Several studies are now suggesting that job-related stress is as great a threat to health as smoking or not
exercising. Stress impairs concentration, causes sleeplessness, and increases the risk for illness, back problems,
accidents, and lost time from work. Work stress can lead to harassment or even violence on the job. At its
most extreme, chronic stress places a burden on the heart and circulation that in some cases may be fatal.
Not all work stress is harmful. However, studies suggest the following job-related stressors may increase health
risks, particularly in men:
• Having no control over decisions that affect one’s responsibilities
• Unrelenting and unreasonable performance demands
• Lack of effective communication and conflict-resolution methods among workers and employers
• Lack of job security
• Night-shift work, long hours, or both
• Spending too much time away from home and family
• Wages not matching levels of responsibility
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Reducing Stress on the Job:
Many companies put intense pressure on their employees to behave in ways that increase tension. Yet, there
are numerous effective tools and techniques available to reduce stress, and have proven beneficial for both
the employee and employer. Studies show that stress management programs save in workers compensation
costs, and may lower employees’ blood pressure.
In general, however, few workplaces offer stress management programs, and it is usually up to the
employees to find their own ways to reduce stress. Here are some suggestions:
• Seek out someone in the Human Resources department or a sympathetic manager and communicate
concerns about job stress. Work with them in a non-confrontational way to improve working conditions,
letting them know that productivity can be improved by reducing the pressure on employees.
• Establish or strengthen a network of friends at work and at home.
• Restructure priorities and eliminate unnecessary tasks.
• Learn to focus on positive outcomes.
• If the job is unendurable, plan and execute a career change. Send out resumes or work on getting
a transfer within the company.
• If this is not possible, be sure to schedule pleasant activities and physical exercise every day
during free time.
Caregiving
Caregivers of Family Members:
Studies show that caregivers of physically or mentally disabled family members are at risk for chronic
stress. Spouses who care for a disabled partner are particularly vulnerable to a range of stress-related
health threats, including influenza, depression, and heart disease. Caring for a spouse who has even minor
disabilities can lead to severe stress.
Specific risk factors that put caregivers at higher risk for severe stress, or stress-related illnesses, include:
• Being a wife: Some studies suggest that wives experience significantly greater stress from caregiving
than husbands.
• Having a low income.
• Being African-American: African-Americans tend to be in poorer physical health, and have lower
incomes, than Caucasians. They, therefore, face greater stress as caregivers to their spouses than their
white counterparts.
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• Living alone with a patient.
• Helping a highly dependent person.
• Having a difficult relationship with a person.
Intervention programs aimed at caregivers can help reduce stress, and help the caregiver maintain a
positive attitude. Moderate-intensity exercise can also be very helpful in reducing stress and improving sleep
in caregivers.
Health Professional Caregivers:
Caregiving among health professionals is also a high risk factor for stress. One study found that registered
nurses with low job control, high job demands, and low work-related social support experienced very
dramatic health declines, both physically and emotionally.
Anxiety Disorders
People who are less emotionally stable or who have high anxiety levels tend to experience specific
events more stressfully than others. Some doctors describe an exaggerated negative response to stress as
“catastrophizing” the event (thinking of a problem as a catastrophe). However, research has found that
patients with anxiety disorder do not have any differences in their actual physical response to stress (such as
heart rate, blood pressure, or release of stress hormones) compared to people without anxiety.
Lacking a Social Network
The lack of an established network of family and friends predisposes a person to stress disorders and
stress-related health problems, including heart disease and infections. Older people who maintain active
relationships with their adult children are buffered against the adverse health effects of chronic stressinducing situations, such as low income or lower social class. This may be because people who live alone are
unable to discuss negative feelings to relieve their stress.
People who remain happy and healthy despite many life stresses typically have very good social support
networks. Having a pet may help reduce medical problems that are aggravated by stress, including heart
disease and high blood pressure.
Complications
In prehistoric times, the physical changes in response to stress were an essential adaptation for meeting
natural threats. Even in the modern world, the stress response can be an asset for raising levels of
performance during critical events, such as a sports activity, an important meeting, or in situations where
there is actual danger or a crisis.
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When stress becomes persistent and low-level all parts of the body’s stress apparatus (the brain, heart, lungs,
blood vessels, and muscles) become chronically over-activated or under-activated. Such chronic stress may
produce physical or psychological damage over time. Acute stress can also be harmful in certain situations,
particularly in individuals with pre-existing heart conditions.
Psychological Effects of Stress
Studies suggest that the inability to adapt to stress is associated with the onset of depression or anxiety.Some
evidence suggests that the repeated release of stress hormones produces hyperactivity in the hypothalamicpituitary-adrenal (HPA) system, and disrupts normal levels of serotonin, the brain chemical that is critical for
feelings of well-being. Some people appear to be more at risk for an overactive HPA system under stress,
including those with personality traits that tend towards perfectionism. On a more obvious level, stress
reduces quality of life by affecting feelings of pleasure and accomplishment. In addition, relationships are
often threatened in times of stress.
Heart Disease
The full impact of mental stress on heart disease is just coming to light, but the underlying mechanisms are not
always clear. Stress can influence the activity of the heart when it activates the automatic nervous system.
Such actions and others could negatively affect the heart in several ways:
• Sudden stress increases the pumping action and rate of the heart, while at the same time causing the
arteries to constrict (narrow). As a result blood pressure rises.
• The emotional effects of stress alter the heart rhythms, which could pose a risk for serious arrhythmias
(rhythm abnormalities) in people with existing heart rhythm disturbances.
• Stress causes certain blood cells to become stickier (possibly in preparation for potential injury).
• Stress appears to impair the clearance of fat molecules in the body.
• Stress that leads to depression appears to be associated with increased intima-medial thickness, a
measure of the arteries that signifies worsening blood vessel disease.
• Stress causes the body to release inflammatory markers into the bloodstream. These markers may
worsen heart disease or increase the risk of a heart attack or stroke.
• Studies have reported an association between stress and high blood pressure, which may be more
pronounced in men than in women. According to some evidence, people who regularly experience
sudden spikes in blood pressure (caused by mental stress) may, over time, develop injuries to the inner
lining of their blood vessels.
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Evidence is still needed to confirm any clear-cut relationship between stress and heart disease. However,
research has linked stress to heart disease in men, particularly in work situations where they lack control. The
association between stress and heart problems in women is weaker, and there is some evidence that the
ways in which women cope with stress may be more heart-protective.
Studies have shown that the combined effect of job stress and an unhealthy lifestyle poses a higher risk for
coronary heart disease (CHD) than either factor alone. Among those with job strain, making healthy lifestyle
choices can lower the risk of CHD significantly. A condition called stress cardiomyopathy (or Takotsubo
cardiomyopathy) is widely recognized. In this disease, intense emotional or physical stress causes severe
but reversible heart dysfunction. The person experiences chest pain, and electrocardiograms (EKGs) and
echocardiograms indicate a heart attack, but further tests show no underlying obstructive coronary artery
disease.
Psychological stress is also recognized as a possible cause of acute coronary syndrome (ACS), a collection of
symptoms that indicate a heart attack or approaching heart attack. High levels of psychological stress are
associated with harmful changes to the blood. Research suggests that stress has the potential to trigger ACS,
particularly in patients with heart disease. Studies also suggest that the risk is greatest immediately after a
stressful incident, rather than during it.
Researchers are looking at the effectiveness of medications, such as escitalopram, in reducing the risk of
mental-stress induced myocardial ischemia (MSIMI), a condition characterized by reduced blood supply to
the heart. More research is necessary however.
Stress Reduction and Heart Disease:
Calcium Studies suggest that treatments that reduce psychological distress improve the long-term outlook
in people with heart disease, including after a heart attack. Evidence indicates that stress management
programs may significantly reduce the risk of heart attacks in people with heart disease. Specific stress
management techniques may help some heart problems but not others. For example, acupuncture in one
study helped people with heart failure but had no effect on blood pressure. Relaxation methods, on the
other hand, may help people with high blood pressure.
Stroke
In some people, prolonged or frequent mental stress causes an increase in blood pressure, a risk factor for
stroke and heart disease.
Effect on the Immune System
Chronic stress affects the immune system in complicated ways, and may have various results.
If you have questions or concerns about your heart, Ask A Doctor.
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Susceptibility to Infections:
Chronic stress may have an effect on the immune system’s response to infections. Several studies claim that
people who are under chronic stress have low white blood cell counts and are more vulnerable to colds.
Once a person catches a cold or flu, stress can make symptoms worse. People who carry the herpes virus
may be more susceptible to viral activation after they are exposed to stress.
Inflammatory Response:
Some evidence suggests that chronic stress triggers an over-production of certain immune factors called
cytokines. Such findings may partly explain the association between chronic stress and numerous diseases,
including heart disease and asthma.
Cancer
A relationship between excess stress and cancer has not been proven. Evidence has shown that job stress
is not a significant risk for colorectal, breast, prostate, or lung cancer. However, there may be a connection
between stress and cancer survival. One study suggested that cancer patients who were separated from
their spouses had lower survival rates than married cancer patients. Although stress reduction techniques
have no effect on survival rates, studies show that they are very helpful in improving a cancer patient’s
quality of life.
Gastrointestinal Problems
The brain and intestines are closely related. They are controlled by many of the same hormones and parts
of the nervous system. Some research suggests that the gut itself has features of a primitive brain. It is not
surprising then that prolonged stress can disrupt the digestive system, irritating the large intestine and causing
diarrhea, constipation, cramping, and bloating. Excessive production of digestive acids in the stomach may
cause a painful burning.
Irritable Bowel Syndrome (IBS):
IBS (or spastic colon) is strongly related to stress. With this condition, the large intestine becomes irritated, and
its muscular contractions are spastic rather than smooth and wave-like. The abdomen is bloated, and the
patient experiences cramping and alternating periods of constipation and diarrhea. Sleep disturbances due
to stress can make irritable bowel syndrome even worse.
Peptic Ulcers:
It is now well established that most peptic ulcers are caused by H. pylori bacteria or the use of nonsteroidal
anti-inflammatory (NSAID) medications (such as aspirin and ibuprofen). Nevertheless, studies still suggest that
stress may predispose a person with H. pylori to ulcers.
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Inflammatory Bowel Disease:
Although stress is not a cause of inflammatory bowel disease (Crohn disease or ulcerative colitis), there are
reports of an association between stress and symptom flare-ups.
Eating and Stress
Stress can have varying effects on eating problems and weight. Many Americans report overeating, eating
unhealthy foods, or skipping meals due to stress.
Weight Gain:
Often stress is related to weight gain and obesity. Many people develop cravings for salt, fat, and sugar
to counteract tension. As a result, they gain weight. For some people who are exposed to stress, they gain
weight even with a healthy diet. In addition, the weight gained is often abdominal fat, which increases the
risk of diabetes and heart problems.
The release of cortisol, a major stress hormone, appears to boost abdominal fat and may be the primary
connection between stress and weight gain. Cortisol is a glucocorticoid. These hormones, along with insulin,
appear to be responsible for stress-related food cravings. Evidence suggests that hormonally induced
cravings for “comfort foods” may have a biological benefit for managing stress. Eating comfort foods
appears to reduce the negative hormonal and behavioral changes associated with stress, which might
lessen the impact of stress on an individual. Carbohydrates in particular may increase levels of tryptophan
and large neutral amino acids. This leads to more production of the chemical messenger serotonin, which
might improve mood and performance under stress.
There may be a “reward-based stress eating” model. In this theory, both stress and tasty, high-calorie foods
cause the brain to make chemicals called endogenous opioids. These neurotransmitters help protect against
the harmful effects of stress, slowing activity of a brain process called the hypothalamic-pituitary-adrenal
(HPA) axis, thus weakening the stress response. Repeated stimulation of the reward pathways through stressinduced HPA stimulation, eating tasty food, or both, may lead to changes in the brain that cause compulsive
overeating.
Research finds that overeating may be triggered by different stressors in men and women. Women tend to
put on extra pounds when dealing with financial and work problems, as well as strained family relationships.
Men gain more weight from lack of decision authority at work and difficulty in learning new skills on the job.
Eating Disorders:
Chronically elevated levels of stress chemicals have been observed in people with anorexia and bulimia.
Some studies, however, have not found any strong link between stress and eating disorders. More research is
needed to determine whether changes in stress hormones are a cause or a result of eating disorders.
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Diabetes
Stress can exacerbate existing diabetes by impairing the patient’s ability to manage the disease effectively.
Pain
Researchers are attempting to find the relationship between pain and emotion, but the area is complicated
by many factors, including the effects of different personality types, fear of pain, and stress itself. Evidence
suggests that chronic pain may impair the action of neutrophils, a type of white blood cell, thereby
weakening the immune response.
Muscular and Joint Pain:
Stress may intensify chronic pain caused by arthritis and other conditions. Psychological distress also plays
a significant role in the severity of back pain. Some studies have clearly associated job dissatisfaction and
depression to back problems, although it is still unclear whether stress is a direct cause of the back pain.
Research suggests that the risk of long-term disability from low back pain can be reduced through early
treatment for depression and stress.
Headaches:
Tension-type headaches are highly associated with stress and stressful events. Sometimes the headache
does not start until long after the stressful event has ended. Additionally, stress can contribute to the
development or cause headaches to occur more frequently.
Some research suggests that people who experience tension-type headaches may have some biological
predisposition for translating stress into muscle contractions. Among the wide range of possible migraine
triggers is emotional stress, although the headaches often erupt after the stress has eased.
Sleep Disturbances
The tensions of unresolved stress frequently cause insomnia, which prevents stressed people from sleeping or
causes them to awaken in the middle of the night or early morning. This appears to be due to the fact that
stress causes physiological arousal during non-rapid eye movement sleep.
Sexual and Reproductive Dysfunction
Sexual Function:
Stress can reduce sexual desire and prevent women from achieving orgasm. The stress response can lead to
sexual problems, including erectile dysfunction, in men.
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Premenstrual Syndrome:
Some studies indicate that the stress response in women with premenstrual syndrome may be more intense
than in those without the syndrome.
Fertility:
Chronic stress may affect fertility. Stress hormones have an impact on the hypothalamus, which produces
reproductive hormones. This effect may lead to changes in a woman’s menstrual cycle, as well as a
reduction in a man’s sperm count. Stress can also reduce sex drive.
Effects on Pregnancy:
Old wives’ tales about a pregnant woman’s emotions affecting her baby may have some credence. Stress
may cause physiological alterations, such as increased adrenal hormone levels or resistance in the arteries,
which may interfere with normal blood flow to the placenta. Maternal stress during pregnancy has been
linked to a higher risk for miscarriage, lower birth weight, and an increased incidence of premature births.
Some evidence also suggests that an expectant mother’s stress can even influence the way in which her
baby’s brain and nervous system will react to stressful events. One study found a higher rate of crying and
low attention in infants of mothers who had been stressed during pregnancy. These outcomes can have farreaching effects on a child’s life.
Menopause:
A drop in estrogen levels during perimenopause and menopause may be responsible for changes in mood
precipitated by stress.
Memory, Concentration, and Learning
Stress affects the brain, particularly memory, but the effects vary widely depending on whether the stress is
acute or chronic.
Effect of Acute Stress on Memory and Concentration:
Studies indicate that the immediate effect of acute stress impairs short-term memory, particularly verbal
memory. On the plus side, high levels of stress hormones during short-term stress have been associated with
enhanced memory storage, improved working memory, and greater concentration on immediate events.
The difference in effect may be due to how cortisol impacts glucocorticoid receptors in the hippocampus
and prefrontal cortex.
Effect of Chronic Stress on Memory:
If stress becomes chronic, sufferers often lose concentration at work and home, and they may become
inefficient and accident-prone. In children, the physiologic responses to chronic stress can interfere with
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learning. Studies have connected long-term exposure to excess amounts of the stress hormone cortisol
to a shrinking of the hippocampus, the brain’s memory center. It is not yet known whether this shrinking is
reversible.
Other Disorders
Skin Disorders:
Stress may worsen numerous skin conditions, including hives, psoriasis, acne, and rosacea, and it is one of the
most common causes of eczema. Unexplained itching may also be caused by stress. Evidence suggests that
experiencing the stress of a traumatic event (parental divorce or separation, or a severe disease in a family
member) before age 2 increases the risk of developing eczema.
Unexplained Hair Loss (Alopecia Areata):
Alopecia areata is hair loss that occurs in localized (individual) patches. The cause is unknown, but stress is
suspected as a player in this condition. For example, hair loss often occurs during periods of intense stress,
such as when people are in mourning.
Teeth and Gums:
Stress has now been implicated in increasing the risk for periodontal disease, which can cause tooth loss and
has been linked to heart disease.
Substance Abuse
People who are under chronic stress often turn to alcohol or tobacco for relief. Stress compounds the
damage that these self-destructive habits cause under ordinary circumstances. Many people also resort to
unhealthy eating habits, smoking, or passive activities, such as watching television when they are stressed.
Alcohol affects receptors in the brain that reduce stress. Lack of nicotine increases stress in smokers, which
creates a cycle of dependency on smoking.
The cycle is self-perpetuating: a sedentary routine, an
unhealthy diet, alcohol abuse, and smoking all promote
heart disease. They also interfere with sleep patterns, and
lead to increased rather than reduced tension levels.
Drinking four or five cups of coffee, for example, can
cause changes in blood pressure and stress hormone
levels similar to those produced by chronic stress. Animal
fats, simple sugars, and salt are known contributors to
health problems.
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Conditions with Similar Symptoms
The physical symptoms of anxiety disorders mirror many symptoms of stress, including:
• A fast heart rate
• Rapid, shallow breathing
• Increased muscle tension
Anxiety is an emotional disorder that is characterized by feelings of apprehension, uncertainty, fear, or
panic. Unlike stress, the triggers for anxiety are not usually associated with specific stressful or threatening
conditions. Some individuals with anxiety disorders have numerous physical complaints, such as headaches,
gastrointestinal disturbances, dizziness, and chest pain. Severe cases of anxiety disorders are debilitating,
interfering with a person’s career, family, and social life.
Depression
Depression can be a disabling condition, and, like anxiety disorders, it may sometimes be linked to chronic
stress. Individuals with high levels of work-related stress are more than twice as likely to experience a major
depressive episode, compared with people who are under less stress. Evidence also suggests that certain
people may be genetically susceptible to depression after they experience stressful life events.
Depression shares some of the symptoms of stress, including changes in appetite, sleep patterns, and
concentration. Serious depression, however, is distinguished from stress by feelings of sadness, hopelessness,
loss of interest in life, and, sometimes, thoughts of suicide. Acute depression is also accompanied by
significant changes in the person’s functioning. The person may need professional therapy to determine
whether depression is caused by stress, or if it is the primary problem.
Post-Traumatic Stress Disorder Symptoms
Post-traumatic stress disorder (PTSD) is a reaction to a very traumatic event, and it is typically classified as
an anxiety disorder. The event that brings on PTSD is usually outside the norm of human experience, such
as intense combat or sexual assault. The patient struggles to forget the traumatic event and frequently
develops emotional numbness and event-related amnesia. Often, however, there is a mental flashback,
and the person re-experiences the painful circumstance in the form of dreams and disturbing thoughts and
memories. These thoughts and dreams resemble or recall the trauma. Other symptoms may include a lack
of pleasure in previously enjoyed activities, hopelessness, irritability, mood swings, sleep problems, inability to
concentrate, and an excessive startle-response to noise.
There are several screening tools available to screen for post-traumatic stress, such as Breslau’s Short
Screening Scale and Primary Care PTSD Screen (PC-PTSD).
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While various interventions to treat or prevent PTSD are being tested, not just one program will help all victims,
and research is somewhat limited. Many experts favor a multifactorial approach to therapy that includes
talk therapy (such as cognitive behavioral therapy [CBT]) and medications (such as drugs in the selective
serotonin reuptake inhibitor (SSRI) family used for depression). Core symptoms of PTSD can be treated with
medications. For example, prazosin is effective for treating trauma nightmares, associated with PTSD.
There is evidence that CBT is effective in treating children and adolescents with PTSD, but more research is
needed. Early intervention appears to have the most benefit. Acceptance and commitment therapy (ACT)
is another form of behavioral therapy being evaluated for treating PTSD.
On the horizon are “virtual therapies,” computerized programs or simulations, to treat PTSD symptoms. This
approach is being studied in military veterans suffering from PTSD.
Treatment
The process of learning to control stress is life-long. Overcoming stress will not only contribute to better health,
but it will also increase an individual’s ability to succeed.
When to Seek Professional Help for Stress
Stress can be a factor in a variety of physical and emotional illnesses, which should be professionally treated.
Many stress symptoms are mild and can be managed with over-the-counter medications (for example,
aspirin, acetaminophen, or ibuprofen for tension headaches; antacids, anti-diarrhea medications, or
laxatives for mild stomach distress). A physician should be consulted, however, for physical symptoms that
are out of the ordinary, particularly those that get worse or wake a person up at night. A mental health
professional should be consulted for unmanageable acute stress or for severe anxiety or depression. Often
short-term therapy can resolve stress-related emotional problems.
The Depression Anxiety Stress Scales (DASS) and other assessment tools are available to help identify aspects
of stress such as difficulty relaxing, nervous arousal and being agitated/irritable, and determine whether
depression and/or anxiety are present as well. The DASS is available to the public online.
Considerations for Choosing a Stress-Reduction Strategy
When choosing specific strategies for treating stress, several factors should be considered.
• No single method is always successful: A combination of approaches is generally most effective.
• What works for one person does not necessarily work for someone else.
• Stress can be positive as well as negative. Appropriate and controllable stress provides interest and
excitement, and motivates the individual to greater achievement. A lack of stress may lead to
boredom and depression.
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Stress may play a part in making people vulnerable to illness. A physician or psychologist should be consulted
if there are any indications of accompanying medical or psychological conditions, such as heart symptoms,
significant pain, anxiety, or depression.
Overcoming Obstacles to Treatment
People often succeed in relieving stress for the short term. However, they go back to their previous stressful
thoughts and behaviors because of outside pressure, long-held beliefs, or old habits. The following are some
obstacles to managing stress:
• The fight or flight urge: The very idea of relaxation can feel threatening, because it is perceived as
letting down one’s guard. For example, an over-demanding boss may put a subordinate into a
psychological state of fighting-readiness, even though there is no safe opportunity for the subordinate
to fight back or express anger. Stress builds up, but the worker has the illusion, even subconsciously,
that the stress itself is providing safety or preparedness. For this reason, the employee does nothing to
correct the condition.
• Many people are afraid of being perceived as selfish if they engage in stress-reducing activities that
benefit only themselves. The truth is that self-sacrifice (not intended for reducing one’s stress) may be
inappropriate and even damaging, if the person making the sacrifice is unhappy, angry, or physically
unwell.
• Some people believe that certain emotional responses to stress, such as anger, are natural and
unchangeable features of their personality. Research has shown, however, that with cognitive
behavioral therapy, individuals can be taught to change their emotional reactions to stressful events.
• In addition, many Americans report that lack of willpower, time, finances, and stress itself are barriers to
better stress management.
Reducing stress and staying relaxed clears the mind so it can begin the appropriate actions to get rid of the
stress-related conditions.
Stress Reduction and Its Effects on Health
Although treating stress cannot cure medical problems, stress management can be a very important part
of medical treatment. Specific stress reduction approaches may benefit different medical problems. For
example, acupuncture can help reduce harmful heart muscle actions in people with heart failure, but it
has no effect on blood pressure. Relaxation methods, on the other hand, may help people with high blood
pressure. Stress reduction may improve well-being and quality of life in many people who are experiencing
stress because of severe or chronic medical conditions.
Important Note: Never use stress reduction techniques as the only treatment, or in place of proven
treatments, for any medical condition.
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Lifestyle Changes
A healthy lifestyle is an essential companion to any stress-reduction program. People can enhance their
general health and stress resistance by getting regular exercise, eating a diet rich in a variety of whole grains,
vegetables, and fruits, and avoiding excessive alcohol, caffeine, and tobacco.
Exercise
Exercise in combination with stress management techniques is extremely important for many reasons:
• Exercise is an effective distraction from stressful events.
• Exercise may directly blunt the harmful effects of stress on blood pressure and the heart (exercise
protects the heart).
Vary the exercise program, combining aerobic exercise with strength training. Start slowly. Strenuous exercise
in people who are not used to it can be very dangerous. In addition, half of all people who begin a vigorous
training program drop out within a year. Discuss any exercise program with a health care provider before
starting. The key is to find activities that are exciting, challenging, and satisfying. The following are some
suggestions:
• Aerobics classes at a gym
• Brisk walking (even short walks can relieve bouts of stress)
• Swimming (an ideal exercise for many stressed people, including pregnant women, people with
musculoskeletal problems, and those who have exercise-induced asthma)
• Yoga or Tai chi (these techniques combine many of the relaxation benefits of breathing, muscle
relaxation, and meditation while toning and stretching the muscles)
As in other areas of stress management, making a plan and executing it successfully provides feelings of
mastery and control, which are very beneficial in and of themselves. Start slowly. Just 10 minutes of exercise
three times a week can build a good base for novices. Gradually build up the length of these sessions to 30
minutes or more.
Cognitive-Behavioral Therapy
Cognitive-behavioral therapy (CBT) is among the most effective ways of reducing stress, whether the source
of stress is chronic pain or a chronic disease. CBT may be more helpful than support groups for improving
well-being and quality-of-life. It aims to alter behavior, and change thoughts, feelings, and beliefs.
A typical CBT approach includes identifying sources of stress, restructuring priorities, changing one’s response
to stress, and finding methods for managing and reducing stress.
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Identifying Sources of Stress:
One key component in most CBT approaches is keeping a diary to record daily events and activities. The
first step is to note activities that put a strain on energy and time, trigger anger or anxiety, or precipitate a
negative physical response (such as a sour stomach or headache). Also note positive experiences, such as
those that are mentally or physically refreshing or that produce a sense of accomplishment.
After a week or 2, try to identify 2 or 3 events or activities that have been significantly upsetting or
overwhelming.
Questioning the Sources of Stress:
Individuals should then ask themselves the following questions:
• Do these stressful activities meet my goals or someone else’s?
• Have I taken on tasks that I can reasonably accomplish?
• Which tasks are under my control and which ones aren’t?
Restructuring Priorities: Adding Stress Reducing Activities:
The next step is to attempt to shift the balance from stress-producing to stress-reducing activities. Eliminating
stress entirely is rarely possible, but there are many ways to reduce its impact.
Consider as many relief options as possible. Examples include:
• Listen to music. Music is an effective stress reducer in both healthy individuals and people with health
problems. Research finds that listening to soothing music can decrease blood pressure, heart rate, and
anxiety levels in heart patients.
• Take long weekends or vacations.
• If the source of stress is in the home, plan times away, even if only for an hour or two a week.
• Replace unnecessary time-consuming chores with pleasurable or interesting activities.
• Make time for recreation. This is as essential as paying bills or shopping for groceries.
• Own a pet. Research finds that pet owners have a lower blood pressure increase in response to stress
than people who do not own pets.
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Discuss Feelings:
The concept of communication and letting your feelings out has been so excessively promoted and
parodied that it has nearly lost its value as good psychological advice. Nevertheless, feelings of anger or
frustration that are not expressed in an acceptable way may lead to hostility, a sense of helplessness, and
depression.
Expressing feelings does not mean venting frustration. In fact, anger may cause a spike in blood pressure in
some people. Some therapists strongly recommend just talking, rather than venting anger.
The primary goal is to explain and assert one’s needs to a trusted individual in as positive a way as possible.
Direct communication may not even be necessary. Writing in a journal, writing a poem, or composing a
letter that is never mailed may be sufficient.
Expressing one’s feelings solves only half of the communication puzzle. Learning to listen, empathize, and
respond to others with understanding is just as important for maintaining the strong relationships necessary for
emotional fulfillment and reduced stress.
Keep Perspective and Look for the Positive:
Reversing negative ideas and learning to focus on positive outcomes helps reduce tension and achieve
goals. The following steps, using an example of a person who is alarmed at the prospect of giving a speech,
may be useful:
• First, identify the worst possible outcomes (forgetting the speech, stumbling over words, humiliation,
and audience contempt).
• Rate the likelihood of these bad outcomes happening (probably very low, or the speaker would not
have been selected in the first place).
• Envision a favorable result (a well-rounded, articulate presentation with rewarding applause).
• Develop a specific plan to achieve the positive outcome such as preparing in front of a mirror, using a
video camera or tape recorder, or doing relaxation exercises.
• Try to recall previous situations that initially seemed negative but ended well.
Use Humor:
Research has shown that humor is a very effective mechanism for coping with acute stress. Keeping a sense
of humor during difficult situations is a common recommendation of stress management experts. Laughter
not only releases the tension of pent-up feelings and helps a person maintain perspective, but it also appears
to have actual physical effects that reduce stress hormone levels. It is not uncommon for people to laugh
intensely during tragic events, such as the death of a loved one, because this laughter helps them endure
the emotional pain of the experience.
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Acceptance and Commitment Therapy (ACT)
ACT is another type of behavioral analysis and therapy used for a range of mental health issues, including
stress. It employs acceptance and mindfulness strategies to help individuals cope with stress. Rather than try
to change difficult thoughts and feelings and eliminate stress, as CBT does, ACT aims to help people adopt
acceptance, mindfulness, cognitive witnessing, values, and committed action. The practice may help to
alter the experience of stress. ACT is based on six core practices:
• Acceptance of odd or uncomfortable thoughts, feelings, and sensations
• Observing one’s own uncomfortable thoughts without automatically taking them literally or
attaching too much significance to them
• Deciding to give attention to the present events rather than automatically focusing on the
past or future
• A sense of self and ongoing awareness
• Identifying values that are personally important
• Commitment to action for achieving the personal values
ACT training can be delivered in one on one or group sessions, workshops, or self-help tools.
Relaxation and Other Alternative Techniques
Relaxation Method:
Because stress is here to stay, everyone needs to develop methods to promote the relaxation response,
the natural unwinding of the stress response. Relaxation lowers blood pressure, respiration, and pulse rate,
releases muscle tension, and eases emotional strain. This response is highly individualized, but there are
certain approaches that seem to work for most people. Meditation during the run-up to a stressful event can
reduce the stress response without impairing alertness, concentration or memory.
Combinations of these techniques probably work best. No one should expect these approaches to
completely relieve their stress, but if they are done regularly, these programs can be very effective. In a
recent review, it was shown that mindfulness based stress reduction (MBSR) techniques are effective stress
reliever, lowering stress in healthy people. Techniques include yoga and meditation. Significant reductions in
stress levels were seen in participants compared to those not engaging in any treatment. Outcomes were
assessed using the Mindfulness Attention Awareness Scale (MAAS).
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Deep Breathing Exercises.
During stress, breathing becomes shallow and rapid.
Taking a deep breath is an automatic and effective
technique for winding down. Deep breathing exercises
consciously intensify this natural physiologic reaction
and can be very useful during a stressful situation, or for
maintaining a relaxed state during the day.
Muscle Relaxation.
Muscle relaxation techniques, often combined with
deep breathing, are simple to learn and very useful for
getting to sleep. In the beginning it is useful to have a
friend or partner check for tension by lifting an arm and
dropping it. The arm should fall freely. Practice makes
the exercise much more effective and produces relaxation much more rapidly. Small studies have reported
beneficial effects on blood pressure in patients with high
blood pressure who use this technique.
• Inhale through the nose slowly and deeply to
the count of 10.
• Make sure that the stomach and abdomen
expand, but the chest does not rise.
• Exhale through the nose, slowly and completely, also to the count of 10.
• To help quiet the mind, concentrate fully on
breathing and counting through each cycle.
• Repeat 5 to 10 times, and make a habit of
doing the exercise several times each day,
even when not feeling stressed.
Relaxation Methods Specific Procedure
• After lying down in a comfortable position
without crossing the limbs, concentrate on
each part of the body.
• Maintain a slow, deep breathing pattern
throughout this exercise.
• Tense each muscle as tightly as possible for a
count of 5 to 10, and then release it completely.
• Experience the muscle as totally relaxed and
lead-heavy.
• Begin with the top of the head and progress
downward to focus on all the muscles in the
body.
• Be sure to include the forehead, ears, eyes,
mouth, neck, shoulders, arms and hands,
fingers, chest, belly, thighs, calves, and feet.
• Once the review is complete, imagine tensing
and releasing the internal muscles.
Meditation.
Meditation, used for many years in Eastern cultures, is
now widely accepted in this country as a relaxation
technique. The goal of all meditative procedures, both
religious and therapeutic, is to quiet the mind (essentially,
to relax thought). Small studies have suggested that
regular meditation can benefit the heart and help
reduce blood pressure. Better research is needed,
however, to confirm such claims.
Some experts recommend meditating for no longer than
20 minutes in the morning after waking up and then
again in the early evening before dinner. Even meditating just once a day is helpful.
New practitioners should understand that it can be
difficult to quiet the mind, and should not be discouraged by a lack of immediate results.
Mindfulness Meditation. Mindfulness is a
common practice that focuses on breathing.
It employs the basic technique used in
other forms of meditation.
• Sit upright with the spine straight, either
cross-legged or sitting on a firm chair with both
feet on the floor, uncrossed.
• With the eyes closed or gently looking a few
feet ahead, observe the exhalation of the
breath.
• As the mind wanders, simply note it as a fact
and return to the “out” breath. It may be
helpful to imagine the thoughts as clouds
dissipating away.
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Relaxation Methods Specific Procedure
Meditation continued…
Meditation, used for many years in Eastern cultures, is
now widely accepted in this country as a relaxation
technique. The goal of all meditative procedures, both
religious and therapeutic, is to quiet the mind (essentially,
to relax thought). Small studies have suggested that
regular meditation can benefit the heart and help
reduce blood pressure. Better research is needed,
however, to confirm such claims.
Some experts recommend meditating for no longer
than 20 minutes in the morning after waking up and
then again in the early evening before dinner. Even
meditating just once a day is helpful.
New practitioners should understand that it can be
difficult to quiet the mind, and should not be discouraged by a lack of immediate results.
Transcendental Meditation (TM). TM uses a
mantra (a word that has a specific chanting
sound but no meaning). The person meditating
repeats the word silently, letting thoughts
come and go.
Mini-Meditation.
• The method involves heightening awareness of
the immediate surrounding environment.
Choose a routine activity, for example:
• While washing dishes, concentrate on the feel
of the water and dishes.
• Allow the mind to wander to any immediate
sensory experience (sounds outside the
window, smells from the stove, colors in the
room).
• If the mind begins to think about the past or
future, or fills with unformed thoughts or worries,
redirect it gently back.
• This redirection of brain activity from your
thoughts and worries to your senses disrupts the
stress response and prompts relaxation. It also
helps promote an emotional and sensual
appreciation of simple pleasures.
• During biofeedback, electric leads are taped to
a subject’s head.
• The person is encouraged to relax using methods
such as those described above.
• Brain waves are measured and an audible signal
is emitted when alpha waves are detected, a
frequency that coincides with a state of deep
relaxation.
• By repeating the process, people associate the
sound with the relaxed state and learn to
achieve relaxation by themselves.
Biofeedback.
Biofeedback is a technique that measures bodily
functions, such as breathing, heart rate, blood pressure,
skin temperature, and muscle tension. By watching
these measurements, individuals can learn how to alter
these functions by relaxing or holding pleasant images
in their mind.
Massage Therapy.
Massage therapy may decrease cortisol levels, and
some research suggests a possible role of physical
touch in managing stress.
The only potential risks from meditating are in people
with psychosis, in whom meditating may trigger a
psychotic event.
Many massage techniques are available,
such a the following:
• Swedish massage is the standard massage
technique. It uses long smooth strokes, and
kneading and tapping of the muscles.
• Shiatsu applies intense pressure to the same
points targeted in acupuncture. It can be
painful, but people report deep relaxation
afterward.
• Reflexology manipulates acupuncture points in
the hands and feet.
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Acupuncture:
Some evidence suggests that acupuncture might improve some of the physical factors associated with both
stress and health problems. For example, acupuncture may improve stress-related heart muscle activity in
heart failure patients, which could provide an important benefit to these patients. However, acupuncture has
no effect on stress-related blood pressure or heart rate.
Hypnosis:
Hypnosis may benefit some people with severe stress. In one study of people with irritable bowel syndrome
(IBS), stress reduction from hypnosis led to improvements in many bowel symptoms. Herbal and Natural
Remedies
Some people who experience chronic stress try herbal or natural remedies. Although many benefits are
claimed, few (if any) have been proven. In addition, just as with standard drugs, so-called natural remedies
can cause health problems, which can sometimes be serious. Similarly, homeopathic remedies have not
shown to be effective treatments for anxiety or stress.
Aromatherapy:
The smell of lavender has long been associated with a calming effect. In addition, several other
aromatherapies are now used for relaxation. Use caution, however, as some of the exotic plant extracts in
these formulas have been associated with a wide range of skin allergies.
Valerian:
Valerian is an herb that has sedative qualities, and it may reduce stress and its associated physical effects.
This herb is on the FDA’s list of generally safe products. However, the herb’s effects could be dangerously
increased if it is used with standard sedatives. Side effects include vivid dreams. High doses of valerian can
cause blurred vision, excitability, and changes in heart rhythm. Other interactions and long-term side effects
are unknown.
Generally, manufacturers of herbal remedies and dietary supplements do not need FDA approval to sell their
products. Just like drugs, however, herbs and supplements can affect the body’s chemistry, and therefore
have the potential to produce side effects that may be harmful. There have been numerous reported cases
of serious and even lethal side effects from herbal products. Always check with your doctor before using any
herbal remedies or dietary supplements.
Special Warning on Kava:
Kava has been commonly used to reduce anxiety and stress. It is now highly associated with liver injury and
even liver failure in a few cases. Experts now strongly warn against its use.
People seeking relief from stress should be wary of any product that promises a quick cure, or that requires
the purchase of expensive treatments. These treatments may be useless and sometimes even dangerous.
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Resources
• www.nimh.nih.gov — National Institute of Mental Health
• www.nami.org — National Alliance for the Mentally Ill
• www.nmha.org — Mental Health America (formerly the National Mental Health Association)
• www.amtamassage.org — American Massage Therapy Association
• www.healthyminds.org — The American Psychiatric Association
• www.apa.org — The American Psychological Association
• www.naswdc.org — The National Association of Social Workers
• www.aacap.org — American Academy of Child and Adolescent Psychiatry
• www.stress.org — The American Institute of Stress www2.psy.unsw.edu.au/groups/dass — Depression
Anxiety Stress Scale (DASS)
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