New Form I-9 Released for Use in September

OVERVIEW

On July 17, 2017, U.S. Citizenship and Immigration Services (USCIS), part of the U.S. Department of Homeland Security, issued an updated version of Form I-9: Employment Eligibility Verification (Form I-9). Under federal law, every employer that recruits, refers for a fee or hires an individual for employment in the United States must complete a Form I-9.

The updated form replaces a version that was issued in 2016. Employers may continue using the 2016 form until September 17, 2017. Exclusive use of the updated form is expected by September 18, 2017. The new form expires on August 31, 2019.

ACTION STEPS

• Employers must become familiar with the new Form I-9 and transition to its exclusive use by September 18, 2017.
• Employers must continue their compliance with collecting and retaining Form I-9.
• Employers may download the 2017 Form I-9 from the USCIS website.

IMPORTANT DATES

July 17, 2017

Updated Form I-9 is published

September 18, 2017

Employer must transition to exclusive use of the 2017 Form I-9 by this date.

 

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Final Market Stabilization Rule

The following Update provides an overview of the Centers for Medicare & Medicaid Services (CMS) Market Stabilization regulations.

The Department of Health and Human Services released final regulations on April 13, 2017 to stabilize the federal and state market exchanges for 2018 and calendar years going forward. The regulations intended purpose is to help lower premiums and stabilize individual and small group markets and increase choice for American who are obtaining coverage in the Marketplace created by the Affordable Care Act (ACA.

WHAT IS THE REGULATION?

The final rule made several policy changes to improve to promote stability in the market and is effective June 19, 2017, including:

• Shortened Individual Annual Open Enrollment Period for 2018 – more closely aligns with Medicare Open Enrollment and the private marketplace. Open Enrollment for 2018 calendar year coverage will start on November 1, 2017 and run through December 15, 2017. This changes from the prior year which allowed an Open Enrollment Period in 2017 from November 1st through January 31st.
• Reduction of Fraud, Waste, and Abuse – requiring individuals to submit supporting documentation for Special Enrollment Period and ensure that only those who are eligible with Qualifying Events to be able to enroll. In addition, it encourages individuals to stay enrolled in coverage all year, reducing gaps in coverage and resulting in fewer individual mandate penalties to help lower premiums.
• Promotes Continuous Coverage – allows insurance carriers (insurers) to require individuals to pay back past due premiums before being able to enroll into a plan with the same carrier the following year. This provision is intended to encourage individuals to maintain continuous coverage throughout the year, which is expected to bring a positive impact on the risk pool and discourage gaming of the system.
• More Choices for Consumers – allowing for insurers additional actuarial value flexibility to develop more choices with lower premium options for individual consumers and to continue offering existing plans.
• Empower States & Reduce Duplications – returns oversight of network adequacy to states that are best positioned to evaluate network adequacy and reduce waste of taxpayer dollars on duplicative review by the federal government.

A press release that accompanied the final regulations for the Patient Protection and Affordable Care Act Market Stabilization cites the evidence to support the views of the government that federal and state exchanges required intervention to help stabilize the exchanges.

Below is a brief summary of those citations:

• In 2017, approximately one-third of the counties in the U.S. had only one carrier participating in the 2017 exchange.
• Five states had only one carrier participating in their state’s exchange for 2017.
• Premiums for the benchmarked second-lowest cost “Silver Plan” on www.healthcare.gov increased by an average of 25% from 2016-2017.
• 500,000 fewer Americans selected a plan in the exchange during open enrollment in 2017 compared to 2016.
• Many states witnessed double digit increases in their insurance premiums including: Arizona – 116%; Oklahoma – 69%; Tennessee – 63%; Alabama – 58%; Pennsylvania – 53%.

OTHER CHANGES OF THE REGULATION

Additional notable changes for the regulations include:

Special Enrollment Periods

•  Individuals enrolling mid-year as a result of a Qualifying Event (Loss of Job, Loss of Coverage, Death, etc.) will be given 30 days for the date of the insurance application to provide verifying information to substantiate the Qualifying Event. Once approved, the insurance coverage will be retroactive to the initial application date. Should verification take two to three months, the individual will not be required to pay the insurance premium for the first month of coverage.
• Limits individuals from changing from one metal tier (i.e. the platinum, gold, silver and bronze levels) to another metal level.
• Individuals will no longer have the option to choose a later effective date if the enrollment is delayed due to verification issues.
• Imposes additional limitations on eligibility such as if an individual has a special enrollment due to loss of insurance would be ineligible to enroll if the loss is due to non-payment of premiums. That is unless and until the past due premiums are paid in full.

Actuarial Value

Exchange plans must fit into four categories identified by metal tiers – platinum, gold, silver and bronze. The highest level being that the plan covers 90% of the health care expenses:

o   Platinum – 90%

o   Gold – 80%

o   Silver – 70%

o   Bronze – 60%

Recognizing it’s difficult to target an exact actuarial value, the previous regulations established a de minimis variation of +/- 2%.

In 2018 the new regulations increase the allowable de minimis variation to:

o  Bronze: -4 to +5%

o  All others: -4 to +2%

Over the next couple of weeks insurance carriers will be notifying their individual clients via email and standard mailing these new regulations.

Should you, employees or individual CBIS clients have any questions regarding the final Market Stabilization Regulation, please contact your dedicated CBIS Representative.

ADDITIONAL INFORMATION

Information contained in this Important Updates—In The Know & How It Applies is not intended to render tax or legal advice. Employers should consult with qualified legal and/or tax counsel for guidance with respect to matters of law, tax and related regulations. Creative Benefits & Insurance Solutions provides comprehensive benefits advice and administrative services with respect to all forms of employee benefits, risk management, property & casualty, workers’ compensation, staffing insurance and human resources services. For additional information about our services, please contact us at (586) 992-0404 or email us at service@cbis-lc.com.

Vice President Creative Benefits & Insurance Solutions

Creative Benefits & Insurance Solutions Receives 2017 Best of Utica Award

Utica Award Program Honors the Achievement

UTICA May 2, 2017 — Creative Benefits & Insurance Solutions has been selected for the 2017 Best of Utica Award in the Insurance, Risk Management & Group Benefits category by the Utica Award Program.

Each year, the Utica Award Program identifies companies that we believe have achieved exceptional marketing success in their local community and business category. These are local companies that enhance the positive image of small business through service to their customers and our community. These exceptional companies help make the Utica area a great place to live, work and play.

Various sources of information were gathered and analyzed to choose the winners in each category. The 2017 Utica Award Program focuses on quality, not quantity. Winners are determined based on the information gathered both internally by the Utica Award Program and data provided by third parties.

About Utica Award Program

The Utica Award Program is an annual awards program honoring the achievements and accomplishments of local businesses throughout the Utica area. Recognition is given to those companies that have shown the ability to use their best practices and implemented programs to generate competitive advantages and long-term value.

The Utica Award Program was established to recognize the best of local businesses in our community. Our organization works exclusively with local business owners, trade groups, professional associations and other business advertising and marketing groups. Our mission is to recognize the small business community’s contributions to the U.S. economy.

SOURCE: Utica Award Program
CONTACT:
Utica Award Program
URL: http://www.onlineawarded.org

Another ACA Repeal Bill

The following Update provides an overview of the second attempt by the Republican to repeal the Affordable Care Act.  The first bill failed to pass in March 2017.

Shortly after the failure of the Republicans’ Affordable Care Act (ACA) replacement in March 2017, the American Health Care Act (AHCA), GOP leaders continued to quietly work to change the bill enough to gain passage. On May 4, 2017, House members voted on party lines to pass an amended version of the American Health Care Act – proposed legislation to repeal and replace the ACA. The AHCA will now move on to be considered by the Senate.

If passed there, on to the Senate-House Reconciliation process. New developments will emerge on a daily basis, making it difficult to pin down the status of employer compliance regulations at this point in the legislative process. However, we understand that our clients are anxiously curious about the impact a potential replacement would have on the insurance products they offer.

Unless the AHCA is passed by the Senate and signed by President Trump, the ACA will remain intact.

WHAT IS THE PROPOSED LEGISLATION?

As the proposed ACA replacement plan stands today, employers would not be required to provide group health insurance. The employer and employee mandates are eliminated. Employees who are not offered a (compliant) plan could receive a minimum of $2,000 tax credit toward the purchase of an insurance plan on the open market.

In addition to these provisions which were in the previously proposed bill, two major amendments were added in order to achieve the majority needed for passage in the House:

(1) The MacArthur amendment allows states to seek waivers, essentially to opt out, from certain Obamacare requirements: pricing of plans, pre-existing conditions and required Essential Health Benefits, and;

(2) The Upton amendment addresses additional funding for states’ high risk pools in an attempt to ensure coverage for persons needing expensive care and treatment.

ACA PROVISIONS NOT IMPACTED

The majority of the ACA would not be affected by the AHCA. The MacArthur amendments specifically maintain most of the ACA’s market reforms. For example, the following key ACA provisions would remain in place:

• Cost-sharing limits on essential health benefits (EHBs) for non-grandfathered plans (currently $7,150 for self-only coverage and $14,300 for family coverage)
• Prohibition on lifetime and annual limits for EHBs
• Requirements to cover pre-existing conditions
• Coverage for adult children up to age 26
• Guaranteed availability and renewability of coverage
• Nondiscrimination rules (on the basis of race, nationality, disability, age or sex)
• Prohibition on health status underwriting
• Age rating restrictions would also continue to apply, with the age ratio limit being revised to 5:1 (instead of 3:1), and states would be allowed to set their own limits. The MacArthur amendments also reinstate EHBs as the federal standard, eliminating a prior controversial amendment to the AHCA, although states may obtain waivers from these rules.
• One or more employers for the benefit of their employees or former employees;
• One or more employee organizations for the benefit of their members or former members;
• Jointly by one or more employers and one or more employee organizations for the benefit of employees or former employees;
• A voluntary employees’ beneficiary association (VEBA); or
• Other specified organizations, including a multiple employer welfare arrangement

REPEALING THE EMPLOYER/INDIVIDUAL MANDATE

The ACA imposes both an employer and individual mandate. The AHCA would reduce the penalties imposed under these provisions to zero beginning in 2016, effectively repealing both mandates (although they would technically still exist).

However, beginning with open enrollment for 2019, the AHCA would allow issuers to add a 30 percent late-enrollment surcharge to the premium cost for any applicants that had a lapse in coverage for greater than 63 days during the previous 12 months. The late-enrollment surcharge would be discontinued after 12 months.

REPLACING HEALTH INSURANCE SUBSIDIES WITH TAX CREDITS

The ACA currently offers federal subsidies in the form of premium tax credits and cost-sharing reductions to certain low-income individuals who purchase coverage through the Exchanges. The AHCA would repeal both of these subsidies, effective in 2020, and replace them with a portable, monthly tax credit for all individuals that could be used to purchase individual health insurance coverage.

The AHCA would also repeal the ACA’s small business tax credit beginning in 2020. In addition, under the AHCA, between 2018 and 2020, the small business tax credit generally would not be available with respect to a qualified health plan that provides coverage relating to elective abortions.

STATE WAIVERS

The MacArthur amendments include an option for states to obtain limited waivers from certain federal standards, in an effort to lower premiums and expand the number of insured. Under this option, states could apply for waivers from the ACA’s EHB requirement and community rating rules, except that states could not allow rating based on:

• Gender;
• Age (except for reductions in the 5:1 ratio already included by the AHCA); or
• Health status (unless the state established a high-risk pool or is participating in a federal high-risk pool).

To receive the waiver, states would need to attest that the purpose of the waiver is to reduce premium costs, increase the number of individuals with health coverage or advance another benefit to the public interest in the state (including guaranteed coverage for individuals with pre-existing condition exclusions).

STATE STABILITY FUND

The last set of corrective amendments to the AHCA establishes a Patient and State Stability Fund for 2018 through 2023. This fund is intended to provide an additional $8 billion to states that have applied for, and been granted, a waiver from community rating, as specified by the MacArthur amendments.

The funds would be required to be used in “providing assistance to reduce premiums or other out-of-pocket costs” of individuals who may be subject to an increase in their monthly premium rates because they:

• Reside in a state with an approved waiver;
• Have a pre-existing condition;
• Are also uninsured because they have not maintained continuous coverage; and
• Purchase health care in the individual market.

ENHANCEMENTS TO HEALTH SAVINGS ACCOUNTS (HSA)S

HSAs are tax-advantaged savings accounts tied to a high deductible health plan (HDHP), which can be used to pay for certain medical expenses. To incentivize use of HSAs, the AHCA would:

• Increase the maximum HSA contribution limit: The HSA contribution limit for 2017 is $3,400 for self-only coverage and $6,750 for family coverage. Beginning in 2018, the AHCA would allow HSA contributions up to the maximum out-of-pocket limits allowed by law (at least $6,550 for self-only coverage and $13,100 for family coverage).
• Allow both spouses to make catch-up contributions to the same HSA: The AHCA would allow both spouses of a married couple to make catch-up contributions to one HSA, beginning in 2018, if both spouses are eligible for catch-up contributions and either has family coverage.
• Address expenses incurred prior to establishment of an HSA: Under the AHCA, starting in 2018, if an HSA is established within 60 days after an individual’s HDHP coverage begins, the HSA funds would be able to be used to pay for expenses incurred starting on the date the HDHP coverage began.

RELIEF FROM ACA TAX CHANGES

The AHCA would provide relief from many of the ACA’s tax provisions. The amendments made to the AHCA accelerated this relief by one year for most provisions, moving the effective dates for repeal up to 2017. The affected tax provisions include the following:

• Cadillac tax: The ACA imposes a 40 percent excise tax on high cost employer-sponsored health coverage, effective in 2020. The AHCA would change the effective date of the tax, so that it would apply only for taxable periods beginning after Dec. 31, 2025.
• Restrictions on using HSAs for over-the-counter (OTC) medications: The ACA prohibits taxpayers from using certain tax-advantaged HSAs to help pay for OTC medications. The AHCA would allow these accounts to be used for OTC purchases, beginning in 2017.
• Increased tax on withdrawals from HSAs: Distributions from an HSA (or Archer MSA) that are not used for qualified medical expenses are includible in income and are generally subject to an additional tax. The ACA increased the tax rate on distributions that are not used for qualified medical expenses to 20 percent. The AHCA would lower the rate to pre-ACA percentages, beginning with distributions in 2017.
• Health flexible spending account (FSA) limit: The ACA limits the amount an individual may contribute to a health FSA to $2,500 (as adjusted each year). The AHCA would repeal the limitation on health FSA contributions for taxable years beginning in 2017.
• Additional Medicare tax: The ACA increased the Medicare tax rate for high-income individuals, requiring an additional 0.9 percent of wages, compensation and self-employment income over certain thresholds to be withheld. The AHCA would repeal this additional Medicare tax beginning in 2023.
• Deduction limitation for Medicare Part D subsidy: The ACA eliminated the ability for employers receiving the retiree drug subsidy to take a tax deduction on the value of this subsidy. Effective in 2017, the AHCA would repeal this ACA change and reinstate the business-expense deduction for retiree prescription drug costs without reduction by the amount of any federal subsidy.

Beginning after December 31, 2016, the AHCA would also repeal the medical devices excise tax, the health insurance providers fee and the fee on certain brand pharmaceutical manufacturers. The 10 percent sales tax on indoor tanning services would be repealed effective June 30, 2017, to reflect the quarterly nature of this collected tax. Finally, the AHCA would also reduce the medical expense deduction income threshold to 5.8 percent (lower than the pre-ACA level of 7.5 percent), beginning in 2017.

MODERNIZE MEDICARE

The AHCA would repeal the ACA’s Medicaid expansion, and make certain other changes aimed at modernizing and strengthening the Medicaid program. The amendments to the AHCA made a number of modifications to the proposed Medicaid changes. For example, the AHCA would provide enhanced federal payments to states that already expanded their Medicaid programs, and then transition Medicaid’s financing to a “per capita allotment” model starting in 2020, where per-enrollee limits would be imposed on federal payments to states. It would also allow states the option to implement a work requirement for nondisabled, nonelderly, nonpregnant adults as a condition for receiving Medicaid coverage.

The AHCA would also modernize Medicaid’s data and reporting systems, repeal the ACA’s disproportionate share hospital (DSH) cuts and make changes to the process for eligibility determinations.

WHAT CREATIVE BENEFITS & INSURANCE SOLUTIONS IS DOING TO HELP!

CBIS is monitoring legislative developments on a moment-by-moment basis. We maintain a team of employees and benefit consultants that are in constantly reviewing the debate and direction of the repeal and replacement of the ACA. This enables us to see beyond the current news coverage and better understand what is truly happening.

 ADDITIONAL INFORMATION

Information contained in this Important Updates—In The Know & How It Applies is not intended to render tax or legal advice. Employers should consult with qualified legal and/or tax counsel for guidance with respect to matters of law, tax and related regulations. Creative Benefits & Insurance Solutions provides comprehensive benefits advice and administrative services with respect to all forms of employee benefits, risk management, property & casualty, workers’ compensation, staffing insurance and human resources services. For additional information about our services, please contact us at (586) 992-0404 or email us at service@cbis-lc.com.

PCORI – Reminder Due July 31, 2017

Comparative Effectiveness Research Fee (PCORI)

The following Update provides an overview of the Patient-Centered Outcomes Research Institute (PCORI) Fee.

The Affordable Care Act (ACA) created the Patient-Centered Outcomes Research Institute to help patients, clinicians, payers and the public make informed health decisions by advancing comparative effectiveness research. The Institute’s research is funded, in part, by fees paid by health insurance issuers and sponsors of self-insured health plans. These fees are widely known as Patient-Centered Outcomes Research Institute fees (PCORI fees), although they may also be called PCOR fees or comparative effectiveness research (CER) fees.

On Dec. 5, 2012, the Internal Revenue Service (IRS) issued final regulations on the PCORI fees. The Form 720 and related instructions include a section where issuers and plan sponsors will report and pay the PCORI fee.

Last year Creative Benefits & Insurance Solutions assisted those clients subject to direct PCORI filing and will continue to assist in educating and informing of updates. Creative Benefits & Insurance Solutions will be reaching out to each client directly regarding the next steps for filing in 2017 by July 31^st.

WHEN ARE THE PCORI FEES EFFECTIVE?

The PCORI fees apply for plan years ending on or after Oct. 1, 2012, but do not apply for plan years ending on or after Oct. 1, 2019. For calendar year plans, the fees will be effective for the 2012 through 2018 plan years.

Issuers and plan sponsors will be required to pay the PCORI fees annually on IRS Form 720 by July 31 of each year. It will generally cover plan years that end during the preceding calendar year. Thus, the deadline for filing Form 720 is July 31, 2017, for plan years ending in 2016.

HOW MUCH ARE THE PCORI FEES?

The PCORI fees are based on the average number of covered lives under the plan or policy. This generally includes employees and their enrolled spouses and dependents. Individuals who are receiving continuation coverage (such as COBRA coverage) must be included in the number of covered lives under the plan in calculating the PCORI fee. The final regulations outline a number of alternatives for issuers and plan sponsors to determine the average number of covered lives.

WHAT POLICIES AND PLANS ARE SUBJECT TO PCORI FEES?

The PCORI fees generally apply to insurance policies providing accident and health coverage and self-insured group health plans. The final regulations contain some exceptions to this general rule and also clarify how the PCORI fees apply to certain types of health coverage arrangements. For example, the PCORI fees do not apply if substantially all of the coverage under a plan or policy is for excepted benefits, as defined under HIPAA. In addition, the PCORI fees may apply to retiree-only plans and policies, even though retiree-only coverage is exempt from many of the ACA’s other requirements.

Health Insurance Policies and Health Plans

The PCORI fees apply to “specified health insurance policies” and “applicable self-insured health plans.” ACA broadly defines these terms as follows:

• Specified Health Insurance Policy—An accident or health insurance policy (including a policy under a group health plan) issued with respect to individuals residing in the United States, including prepaid health coverage arrangements.
• Applicable Self-Insured Health Plan—A plan providing accident or health coverage, any portion of which is provided other than through an insurance policy, which is established or maintained by:
  • One or more employers for the benefit of their employees or former employees;
  • One or more employee organizations for the benefit of their members or former members;
  • Jointly by one or more employers and one or more employee organizations for the benefit of employees or former employees;
  • A voluntary employees’ beneficiary association (VEBA); or
  • Other specified organizations, including a multiple employer welfare arrangement (MEWA).

Governmental Entities

Governmental entities that are health insurance issuers or sponsors of self-insured health plans are subject to the PCORI fees, except the fees do not apply to “exempt governmental programs”—Medicare, Medicaid, the Children’s Health Insurance Program (CHIP) and any program established by federal law to provide medical care (other than through insurance policies) for members of the Armed Forces or veterans or for members of Indian tribes.

Excepted Benefits

The PCORI fees do not apply if substantially all of the coverage under a plan is for excepted benefits, as defined under HIPAA. Excepted benefits include, for example, stand-alone dental and vision plans, accident-only coverage, disability income coverage, liability insurance, workers’ compensation coverage, credit-only insurance or coverage for on-site medical clinics.

A health FSA qualifies as an excepted benefit if:

• Other group health plan coverage, not limited to excepted benefits, is made available to the eligible class of participants; and
• The maximum benefit payable under the FSA to any eligible participant does not exceed two times the participant’s salary reduction election (or, if greater, $500 plus the amount of the salary reduction election).

Retiree Health Plans

Although stand-alone retiree health plans are generally exempt from many of ACA’s requirements, sponsors and issuers of these plans are subject to the PCORI fees, unless the plan qualifies as an excepted benefit under HIPAA.

Continuation Coverage

If continuation coverage under COBRA (or similar continuation coverage under federal or state law) provides accident and health coverage, the coverage is subject to ACA’s PCORI fees.

Multiple Health Plans

The final regulations address how the PCORI fees apply when an employer sponsors more than one health plan for its employees (for example, a full-insured major medical insurance policy and a self-insured prescription drug plan). As a general rule, an issuer or plan sponsor may not disregard a covered life when calculating its PCORI fees merely because that individual is also covered under another specified health insurance policy or applicable self-insured plan.

However, multiple self-insured arrangements established and maintained by the same plan sponsor with the same plan year are subject to a single fee. For example, if a plan sponsor establishes or maintains a self-insured arrangement providing major medical benefits, and a separate self-insured arrangement with the same plan year providing prescription drug benefits, the two arrangements may be treated as one applicable self-insured health plan so that the same life covered under each arrangement would count as only one covered life under the plan for purposes of calculating the fee.

HRAs and Health FSAs

HRAs and health FSAs are not completely excluded from the obligation to pay PCORI fees. However, the final regulations provide two special rules for plan sponsors that provide an HRA or health FSA. Under these special rules:

• If a plan sponsor maintains only an HRA or health FSA (and no other applicable self-insured health plan), the plan sponsor may treat each participant’s account as covering a single life. This means that the plan sponsor is not required to count spouses or other dependents.
• An HRA is not subject to a separate research fee if it is integrated with another self-insured plan providing major medical coverage, provided the HRA and the plan are established and maintained by the same plan sponsor and have the same plan year. This rule allows the sponsor to pay the PCORI fee only once with respect to each life covered under the HRA and other plan. However, if an HRA is integrated with an insured group health plan, the plan sponsor of the HRA and the issuer of the insured plan will both be subject to the research fees, even though the HRA and insured group health plan are maintained by the same plan sponsor.

The same analysis applies to health FSAs that do not qualify as excepted benefits.

Employee Assistance, Disease Management and Wellness Programs

Employee assistance programs (EAPs), disease management programs and wellness programs that do not provide significant benefits in the nature of medical care or treatment are not subject to the PCORI fees. This exception also covers an insurance policy to the extent it provides for an EAP, disease management program or wellness program, if the program does not provide significant benefits in the nature of medical care or treatment.

WHO MUST PAY THE PCORI FEES?

The entity that is responsible for paying the PCORI fees depends on whether the plan is insured or self-insured.

• For insured health plans, the issuer of the health insurance policy is required to pay the research fees.
• For self-insured health plans, the research fees are to be paid by the plan sponsor.

Although sponsors of fully-insured plans are not responsible for paying research fees, issuers may shift the fee cost to sponsors through a modest premium increase.

The Department of Labor (DOL) has advised that, because the PCORI fees are imposed on the plan sponsor under ACA, it is not permissible to pay the fees from plan assets under ERISA, although special circumstances may exist in limited situations. On Jan. 24, 2013, the DOL issued a set of frequently asked questions (FAQs) regarding ACA implementation that include a limited exception allowing multiemployer plans to use plan assets to pay PCORI fees (unless the plan document specifies another source of payment for the fees).

When two or more related employers provide health coverage under a single self-insured plan, the employer responsible for the PCORI fees is the one designated in the plan documents as the plan sponsor (or as the plan sponsor for purposes of reporting the research fees). This designation must be made by the due date for reporting the research fees, which is July 31 of each year for plan years ending in the preceding calendar year. If this designation is not made in a timely fashion, then each employer is required to report and pay research fees with respect to its own employees.

How are the PCORI fees calculated?

The PCORI fees are based on the average number of lives covered under the plan or policy. This generally includes employees and their enrolled spouses and dependents. Individuals who are receiving continuation coverage (such as COBRA coverage) must be included in the number of covered lives under the plan in calculating the PCORI fee.

The final regulations outline a number of alternatives for issuers and plan sponsors to determine the average number of covered lives. As a general rule, plan sponsors and issuers may only use one method for determining the average number of covered lives for each plan year.

Insured Health Plans

Health insurance issuers have the following options for determining the average number of covered lives:

• The Actual Count Method—This method involves calculating the sum of lives covered for each day of the plan year and dividing that sum by the number of days in the plan year.
• The Snapshot Method—This method involves adding the total number of lives covered on a date in each quarter of the plan year, or an equal number of dates for each quarter, and dividing the total by the number of dates on which a count was made.
• The Form Method—As an alternative to determining the average number of lives covered under each individual policy for its respective plan year, this method involves determining the average number of lives covered under all policies in effect for a calendar year based on the data included in the National Association of Insurance Commissioners Supplemental Health Care Exhibit (Exhibit) that some issuers are required to file (called the member months method). For issuers that are not required to file an Exhibit, there is a similar available method that uses data from equivalent state insurance filings (called the state form method).

Self-insured Health Plans

Sponsors of self-insured plans may determine the average number of covered lives by using the actual count method or the snapshot method. Alternatively, plan sponsors may use the Form 5500 method, which involves a formula using the number of participants reported on the Form 5500 for the plan year.

For HRAs and health FSAs that are required to be reported separately (for example, because they are integrated with an insured group health plan and do not qualify as excepted benefits), the regulations simplify the determination of average number of covered lives by allowing plan sponsors to assume one covered life for each employee with an HRA or health FSA.

In addition, a self-insured health plan that provides accident and health coverage through fully-insured options and self-insured options may determine the plan’s PCORI fees by disregarding the lives that are covered solely under the fully-insured options.

How are the PCORI fees reported and paid?

In general, the PCORI fees are assessed, collected and enforced like taxes under the Internal Revenue Code. Issuers and plan sponsors must report and pay the research fees annually on IRS Form 720 (Quarterly Federal Excise Tax Return). Form 720 and full payment of the research fees will be due by July 31 of each year. It will generally cover plan years that end during the preceding calendar year. Thus, the first possible deadline for filing Form 720 was July 31, 2013. The deadline for filing Form 720 is July 31, 2017, for plan years ending in 2016.

Deposits are not required for this fee, so issuers and plan sponsors are not required to pay the fee using Electronic Federal Tax Payment System (EFTPS). However, if the fee is paid using EFTPS, the payment should be applied to the second quarter.

Multiemployer Plans

In the case of a multiemployer plan, the plan sponsor liable for the PCORI fee would generally be the independent joint board of trustees appointed and directed to establish the employee benefit plan. According to the Departments, a multiemployer plan’s joint board of trustees would be permitted to pay PCORI fees from assets of the plan, unless the plan document specifies a source other than plan assets for payment of the fee.

The Employee Retirement Income Security Act (ERISA) imposes certain responsibilities on fiduciaries that are designed to avoid misuse and mismanagement of plan assets. Generally, plan assets must be used for the exclusive benefit of plan participants and beneficiaries.

The Departments understand that a multiemployer plan’s joint board of trustees normally has no function other than to sponsor and administer the multiemployer plan and has no source of funding independent of plan assets to pay PCORI fees. The fee is not an excise tax or penalty imposed on the trustees in connection with a violation of federal law or a breach of their fiduciary obligations in connection with the plan. In addition, the Departments stated that the joint board would not be acting in a capacity other than as a fiduciary of the plan in paying a PCORI fee.

As a result, the Departments believe that it would be unreasonable to construe ERISA’s fiduciary provisions as prohibiting the use of plan assets to pay a PCORI fee to the federal government.

Non-Multiemployer Plans

According to the Departments, there may be rare circumstances where sponsors of employee benefit plans that are not multiemployer plans would also be able to use plan assets to pay the PCORI fee. For example, a VEBA that provides retiree-only health benefits may be able to use plan assets to pay a PCORI fee if the sponsor is a trustee or board of trustees that:

• Exists solely for the purpose of sponsoring and administering the plan; and
• Has no source of funding independent of plan assets.

However, this exception would not necessarily apply to other plan sponsors required to pay the PCORI fee. For example, a group or association of employers that act as a plan sponsor, but that also exist for reasons other than solely to sponsor and administer a plan, may not use plan assets to pay the fee even if the plan uses a VEBA trust to pay benefits under the plan. These entities or associations, such as employers that sponsor single employer plans, would have to identify and use some other source of funding to pay the PCORI fee.

Are the PCORI Fees Deductible?

On May 31, 2013, the IRS issued a Chief Counsel Memorandum addressing the deductibility of the PCORI Fees. According to the IRS, the required PCORI fee will be an ordinary and necessary business expense paid or incurred in carrying on a trade or business and, therefore, will be deductible under section 162 of the Internal Revenue Code.

What should employers do now?

The deadline for filing Form 720 is July 31, 2017, for plan years ending in 2016. Employers should take the following steps to assess their compliance obligations:

• Determine which employee benefit plans will be subject to the research fees;
• Assess plan funding status (insured vs. self-insured) to determine whether the employer or a health policy issuer will be responsible for the fees; and
• For any self-insured plans, select an approach for calculating average covered lives.

The PCORI fee applies separately to “specified health insurance policies” and “applicable self-insured health plans,” and is based on the average number of lives covered under the plan or policy.

Using Part II, Number 133 of Form 720, issuers and plan sponsors will be required to report the average number of lives covered under the plan separately for specified health insurance policies and applicable self-insured health plans. That number is then multiplied by the applicable rate for that tax year, as follows:

• $1 for plan years ending before Oct. 1, 2013 (that is, 2012 for calendar year plans).
• $2 for plan years ending on or after Oct. 1, 2013, and before Oct. 1, 2014.
• $2.08 for plan years ending on or after Oct. 1, 2014, and before Oct. 1, 2015 (see Notice 2014-56).
• $2.17 for plan years ending on or after Oct. 1, 2015, and before Oct. 1, 2016 (see Notice 2015-60).
• $2.26 for plan years ending on or after Oct. 1, 2016, and before Oct. 1, 2017 (see Notice 2016-64).
• For plan years ending on or after Oct. 1, 2017, and before Oct. 1, 2019, the rate will increase for inflation.

The fees for specified health insurance policies and applicable self-insured health plans are then combined to equal the total tax owed.

Issuers or plan sponsors that file Form 720 only to report the PCORI fee will not need to file Form 720 for the first, third or fourth quarter of the year. Issuers or plan sponsors that file Form 720 to report quarterly excise tax liability for the first, third or fourth quarter of the year (for example, to report the foreign insurance tax) should not make an entry on the line for the PCORI tax on those filings.

ADDITIONAL INFORMATION

Information contained in this Important Updates—In The Know & How It Applies is not intended to render tax or legal advice. Employers should consult with qualified legal and/or tax counsel for guidance with respect to matters of law, tax and related regulations. Creative Benefits & Insurance Solutions provides comprehensive benefits advice and administrative services with respect to all forms of employee benefits, risk management, property & casualty, workers’ compensation, staffing insurance and human resources services. For additional information about our services, please contact us at (586) 992-0404 or email us at service@cbis-lc.com.

2017 – State Disability Insurance (SDI) Schedules

Does Your State Provide SDI?

 In the United States, there are several states and one commonwealth that provide statutory disability programs, commonly known as “disability insurance”. They are funded by mandatory contributions of employees (optionally covered by employers). Employees’ contributions are federal tax-deductible.

Those States are California, Hawaii, New Jersey, New York, and Rhode Island.  Puerto Rico is the commonwealth that also provides disability insurance. Below is a brief description of what each of the 5 states and commonwealth must provide in the form of disability coverage.

California (SDI)

State administered State Disability Insurance (SDI) Plan or Self Insured Plan, which must exceed State Plan benefits in at least one provision. Weekly statutory benefit rate is 55% of average weekly earnings in highest quarter of Base Period.

• Minimum: $50.00
  Maximum: $1,173.00

Benefits would begin on the 8^th consecutive day of disability and are payable 52 weeks for disability leaves and 6 weeks in a 12-month period for paid family leaves.

Hawaii

Hawaii does not administer a State Plan, but requires a minimum Temporary Disability Insurance (TDI) Plan which may be; Insured, Self-Insured, or an approved collective bargaining agreement that provides sick leave & disability benefits.  Weekly statutory benefit rate is 58% of average weekly earnings.

• Minimum: $14.00
• Maximum: $594.00

Benefits would begin on the 8^th consecutive day of disability and are payable 26 weeks.

New Jersey

State administered State Temporary Disability (TDI) Plan, an Insured Plan, or a Self-Insured Plan which must at least equal the provision of the State Plan.  Weekly statutory benefit rate is 66 2/3% of average weekly wage.

• Minimum: N/A
• Maximum: $633.00

Benefits would begin on the 8^th consecutive day of disability or the 1^st day if disability lasts longer than 21 days.  Benefits are payable 26 weeks for disability leave and 6 weeks for paid family leave.

New York

State Disability Benefits Law (DBL) from State Insurance Fund, Insured or Self-Insured Plan meeting minimum state requirements.  Weekly statutory benefit rate is 50% of average weekly wage base on previous 8 weeks earnings.

• Minimum: $20.00
• Maximum: $170.00

Benefits would begin on the 8^th consecutive day of disability and payable not more than 26 weeks during any Disability Period or during any consecutive period of 52 weeks.

Puerto Rico

Public Temporary Disability Insurance (TDI) Plan or a “private” Insured or Self-Insured Plan with benefits equal to at least the public plan benefits.  Weekly statutory benefit rate is 65% of weekly earnings. Paid from schedule based on total wages received in Base Year.

• Minimum: $12.00
• Maximum: $113.00 ($55 max for agricultural workers)

Benefits would begin on the 8^th consecutive day of disability or 1^st day of hospitalization.  Benefits are payable not more than 26 weeks during any Disability Period or during any consecutive period of 52 weeks.

Rhode Island

State administered State Temporary Disability Insurance (TDI) ONLY.  Weekly statutory benefit rate is 4.62% of total highest quarter wage in base period.

• Minimum: $89.00
• Maximum: $817.00

NO WAITING PERIOD must be employed for at least 7 days due to non-job related illness or injury.  Benefits are payable 30 weeks in any Benefit Year.

State Disability Insurance Brochure – 2017

ACA Repeal Bill Fails

The Affordable Care Act Remains

 House Speaker Paul Ryan on Friday, March 24, 2017, cancelled a voted on the GOP bill to replace the current Affordable Care Act due to a lack of votes from Republicans in order to pass the legislation.

The Republican bill would have replaced the Affordable Care Act, known informally as Obamacare, which mandated that almost everyone have health insurance, with a system of age-based tax credits to purchase health insurance plans.

The defeat is a major blow to the campaign promise made by Trump and efforts to show what Republicans can accomplish when they control both Congress and the White House, according to USA Today.

House Speaker Paul D. Ryan conceded, “We’re going to be living with Obamacare for the foreseeable future.”

In the end, Republican leaders doomed the bill by agreeing to eliminate federal standards for the minimum benefits that must be provided by certain health insurance policies.

As it stands right now the current provisions and legislation of the Affordable Care Act stands as is with no changes.

CBIS will keep you posted as the GOP leaders move on from health care to tax reform.

ADDITIONAL INFORMATION

Information contained in this Important Update is not intended to render tax or legal advice. Employers should consult with qualified legal and/or tax counsel for guidance with respect to matters of law, tax and related regulations. Creative Benefits & Insurance Solutions provides comprehensive benefits advice and administrative services with respect to all forms of employee benefits, risk management, property & casualty, workers’ compensation, staffing insurance and human resources services. For additional information about our services, please contact us at (586) 992-0404 or email us at service@cbis-lc.com.

ACA “Repeal and Replace” Update

PROPOSED BILL

On March 6, 2017, House Republicans announced a bill to partially repeal and replace the Affordable Care Act (ACA). As of now nothing has yet been passed by Congress or signed into law by President Trump.

 

WHAT THE PROPOSED BILL MEANS

Employer Shared Responsibility

The current proposed bill would reduce any penalties to $0 for Applicable Large Employers (ALEs) who don’t offer adequate and affordable health insurance to full-time employees and their dependents. This reduction could take place retroactive to January 2016.

However, what the proposed bill fails to address is the requirement for Applicable Large Groups (ALE) to furnish and file Forms 1094-C and 1095-C. As the bill currently stands, ALEs would continue to be required to file these forms each year or be subject to significant penalties for filing incorrect returns, late returns, or not filing at all.

Cadillac Tax Delay

The current effective date of the 40% excise tax on high-cost employer-sponsored health coverage (referred to as the “Cadillac Tax”) would be delayed from January 1, 2020, to January 1, 2025.

Elimination of Additional Medicare Taxes

Effective January 2018, the proposed bill would repeal the additional Medicare tax that imposes an additional tax on income of $200,000 or more for individuals, $250,000 or more for joint returns, and $125,000 or more for married taxpayers filing separate returns. This would have payroll implications as employers have been required to withhold an additional 0.9% on Medicare subject wages over $200,000 to support the additional tax.

Affordability and Individual Market Stability Impact

Individual Mandate Not Repealed, but Penalty Reduced to $0.

While the individual mandate would not be repealed under this proposed bill, it would reduce the mandate penalty to $0 for individuals who do not have health insurance coverage for themselves and their dependents, retroactive to January 1, 2016. The proposed bill doesn’t address reporting requirements for individuals.

Premium Tax Credits and Subsidies Repealed

The proposed bill would eliminate premium tax credits for individuals who obtain health insurance through a federal or state health insurance marketplace (exchange) as of January 1, 2020. It would also repeal cost-sharing reductions (and payments to issuers for such reductions) for plan years beginning after December 31, 2019.

Health Insurance Tax Credit

Under the new proposed bill, there would be an advanceable, refundable tax credit for health insurance coverage offered in the individual health insurance market or through unsubsidized COBRA. The amount of the credit ranges from $2,000 to $4,000 based on age.  This amount would be reduced by 10 percent of any excess of the taxpayer’s modified adjusted gross income (MAGI) over $75,000 for individuals and $150,000 in case of a joint return. (These thresholds would be adjusted for inflation.) The maximum credit amount would be $14,000 per family with the five oldest individuals in the family counted in the calculation.

Age Rating Band

For plan years beginning on or after January 1, 2018, the Secretary of Health and Human Services, would be permitted to authorize a variance of 5 to 1 (up from 3 to 1) in premium rates charged by a health insurance issuer for coverage for adults. States would have the flexibility to establish another ratio. This would allow insurers to charge older individuals higher premiums for plans.

Continuous Coverage

To encourage people to buy and keep coverage, insurers would be permitted beginning with the 2019 plan year (or 2018 for special enrollments) to charge a 30 percent penalty to people who let their insurance lapse and then try to buy a new policy.

Elimination of Other ACA Taxes

The proposed bill addresses a list of other ACA related taxes including repealing the tax on prescription and over-the-counter medications, the health insurance tax, and the medical device tax. It would also reduce the level of medical expenses that must be incurred to claim a tax deduction from 10 percent back to the pre- ACA 7.5 percent.

Flexible Spending Accounts and Health Savings Accounts

This proposed bill would modify or repeal many of the current restrictions on health flexible spending accounts (FSAs) and health savings accounts (HSAs), including:

• repealing the FSA contribution limit of $2,500,
• increasing the maximum tax subsidized amounts that can be contributed to HSAs to the amount of the out-of-pocket limit,
• repealing the ACA prohibition against paying for over-the-counter medications with tax subsidized funds from FSAs, HSAs, Archer medical savings accounts (MSAs), or health reimbursement arrangements (HRAs), and
• repealing the penalty for the use of HSA distribution for non-eligible expenses from 20 to 10 percent.

Do not rely on this proposed bill just yet.  It’s a starting point! See: House Speaker Ryan’s Plan: A Better Way and the leaked House Republican discussion draft.  In addition, the Health Savings Act of 2017 has already been introduced in both the House and the Senate.

ADDITIONAL INFORMATION

Information contained in this BLOG is not intended to render tax or legal advice. Employers should consult with qualified legal and/or tax counsel for guidance with respect to matters of law, tax and related regulations. Creative Benefits & Insurance Solutions provides comprehensive benefits advice and administrative services with respect to all forms of employee benefits, risk management, property & casualty, workers’ compensation, staffing insurance and human resources services. For additional information about our services, please contact us at (586) 992-0404 or email us at service@cbis-lc.com