Articles Posted in Employee Benefits

An annual fee to help pay for the Patient-Centered Outcomes Research Institute (“PCORI”) is imposed by the Affordable Care Act (the “ACA”) on issuers of specified health insurance policies and sponsors of self-insured health plans. In the case of a self-insured multiemployer plan, the sponsor is normally the Board of Trustees which administers the plan and manages its assets.

The payment of the fee must be accompanied by a tax return, Form 720, Quarterly Excise Tax Return (Second Quarter). This form and its instructions are here and here.  The payment may, but need not, be made electronically, through the Electronic Federal Tax Payment System. Similarly, the Form 720 may, but need not, be filed electronically.

This year, the fee and return are due by August 1, 2016. The fee generally applies to major medical coverage. It does not apply to dental and vision coverage which are excepted benefits. For more information on whether a type of insurance coverage or arrangement is subject to the fee, see this Chart.

The New Rev. Proc. The IRS has issued Rev. Proc. 2016-37, its periodic update on the determination letter program for qualified retirement plans. But this year there is a twist-as announced last year, in IRS Announcement 2015-19, the IRS is curtailing the program for individually designed plans. Rev. Proc. 2016-37 summarizes the new rules for individually designed plans as follows.

The New Rules.

–Consistent with IRS Announcement 2015-19, this revenue procedure eliminates, as of January 1, 2017, the staggered five-year remedial amendment cycle system for individually designed plans, currently set forth in Rev. Proc. 2007-44. However, sponsors of Cycle A plans (that is, generally, plan sponsors with employer identification numbers ending in 1 or 6) will continue to be permitted to submit determination letter applications during the period beginning February 1, 2016, and ending January 31, 2017.

The U.S. Department of Labor (the “DOL”) has issued a new FAQ (Part 32), to provide guidance on the Notice of Coverage Options required in accordance with COBRA and the Affordable Care Act (the “ACA”). Here is what the FAQ says:

Notice of Coverage Options – COBRA and Health Insurance Marketplace Coverage

The ACA Health Insurance Marketplaces (the “Marketplaces”) are designed to ensure that individuals and small businesses have access to affordable coverage through a competitive private health insurance market. The Marketplaces offer “one-stop shopping” to assist individuals in finding, comparing and enrolling in private health insurance options. In general, under the COBRA continuation coverage provisions, an individual who was covered by a group health plan on the day before a qualifying event (such as termination of the covered employee’s employment, divorce, or a dependent aging out of a plan, if the event causes a loss of coverage) may be able to elect COBRA continuation coverage upon experiencing the qualifying event. Individuals with such a right are called qualified beneficiaries. A group health plan must provide qualified beneficiaries with a COBRA election notice that, among other things, describes their rights to COBRA continuation coverage and how to make a COBRA coverage election.

In IRS Health Care Tax Tip 2016-57, June 22, 2016, self-insured employers, applicable large employers and health coverage providers are reminded that the June 30 deadline to electronically file information returns with the IRS is approaching. The Tax Tip and the helpful information therein is here.

In IRS Health Care Tax Tip 2016-56, June 15, 2016, the IRS advises as follows:

If you filed for an extension of time to file your 2015 federal tax return – and you benefit from advance payments of the premium tax credit being made to your coverage provider – it’s important you file your return sooner rather than later.

You must file your 2015 tax return and reconcile your advance payments to ensure you can continue having advance credit payments paid on your behalf in future years. Advance payments of the premium tax credit are reviewed in the fall by the Health Insurance Marketplace for the next calendar year as part of their annual re-enrollment and income verification process. If you do not file and reconcile, you will not be eligible for advance payments of the premium tax credit in 2017. Use Form 8962, Premium Tax Credit, to reconcile any advance credit payments made on your behalf and to maintain your eligibility for future premium assistance.

In Employee Plans News, Issue No. 2016-5, April 4, 2016, the IRS cautions against the use of certain discriminatory plan designs. Here is what the IRS says:

Qualified retirement plans must ensure “the contributions or benefits provided under the plan do not discriminate in favor of highly compensated employees.” (Internal Revenue Code Section 401(a)(4)). A plan that meets statutory or regulatory checklists, but primarily or exclusively benefits highly compensated employees (HCEs) with little to no benefits for nonhighly compensated employees (NHCEs), may still discriminate and violate IRC Section 401(a)(4).

Discriminatory plan designs

To continue my blogs of the two previous days, the VCP Submission Kit, according to the IRS, is for plan sponsors that maintain a pre-approved defined contribution plan but failed to adopt a new plan document by April 30, 2016, and are correcting the failure by adopting a pre-approved defined contribution retirement plan that reflects the provisions of the Pension Protection Act (the “PPA”). The discussion about the VCP Submission Kit is here.

Continuing yesterday’s blog, in Employee Plans News, Issue No. 2016-5, April 4, 2016, the IRS announces a new way to correct the failure to timely adopt a pre-approved plan. Here is what the IRS says:

Previously, the only way an employer could correct not signing a pre-approved defined contribution (DC) retirement plan by the deadline was to complete a submission under the Voluntary Correction Program (VCP) as outlined in 1 below.

A new option, 2 below, allows the financial institution or service provider that offers the plan document to request a closing agreement on behalf of all adopters who missed the deadline.

In Employee Plans News, Issue No. 2016-5, April 4, 2016, the IRS discusses deadlines pertaining to pre-approved retirement plans. Here is what the IRS says:

April 30, 2016, is the deadline for employers using pre-approved retirement plan documents to sign an updated version of their 401(k), profit-sharing or other defined contribution retirement plans.

April 30, 2017, is the extended deadline for any defined contribution pre-approved plan adopted on or after January 1, 2016, other than a plan that is adopted as a modification and restatement of a defined contribution pre-approved plan that had been maintained by the employer prior to January 1, 2016. This extension is to facilitate a plan sponsor’s ability to convert an existing individually designed plan into a current defined contribution pre-approved plan. See Notice 2016-3.

In IRS Health Care Tax Tip 2016-41, April 6, 2016, the IRS discusses how the ACA affects employers with less than 50 employees. Here is what the IRS says:

Most employers have fewer than 50 full-time employees or full-time equivalent employees and are not subject to the Affordable Care Act’s employer shared responsibility provision.

If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year. Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting provisions for the current year.