New Regulations, Upcoming Deadlines, and Your Next Steps
Reminder: PCOR Fee Payable by July 31
The new PCOR fee that funds the Patient-centered Outcomes Research Institute is payable by July 31, 2013 for employer-sponsored group health plans with plan years that ended Oct. 1, 2012 through Dec. 31, 2012.
The next due date will be July 31, 2014 and will apply to plan years ending from Jan. 1, 2013 through Dec. 31, 2013. The fee is payable annually, and runs through 2019.
For insured plans, the carrier is responsible for paying the PCOR fee. However, for self-insured plans, the plan sponsor (generally the employer) is responsible. Employers should be aware of any plan they sponsor which is considered self-insured - like most HRAs -for which the fee may be owed. Even if your insured health plan carrier administers your HRA, it is a self-funded plan for which you are responsible for the PCOR fee.
Three methods can be used to determine the number of covered lives under a plan in order to calculate the amount of the PCOR fee. The fee is reported on IRS Form 720 (which has recently been updated for the PCOR fee).
Please contact your Paradigm Group Account Manager for more information about counting methods.
HIPAA Compliance Deadline is Approaching
The September 23, 2013 deadline for complying with the Health Information Technology for Economic and Clinical Health Act (HITECH) is just around the corner. HITECH is an update of the HIPAA Security Rule that outlines how health plans that work with electronic protected health information (ePHI) manage that data.
Updating your Business Associate (BA) Agreements to include HITECH provisions is one of the key compliance targets. Normally, employers ask their BA’s to sign a document they present to the BA. For your convenience, we can provide you with an executed compliant BA Agreement. We want to help you meet the deadline but anticipate a large number of requests, so please let your Account Manager know as soon as you can if you want us to provide this document.
What Does the U.S. Supreme Court Same-sex Marriage Decision Mean to Your Benefit Plans?
On June 26, 2013, the U.S. Supreme Court let stand a lower court ruling overturning California’s Proposition 8 and struck down Section 3 of the Defense of Marriage Act (DOMA). While the decision results in significant uncertainty for employer-sponsored employee benefit plans, federal agencies have announced guidance is forthcoming.
For purposes of federal law, DOMA Section 3 defines marriage as between only a man and a woman. In the second decision, United States v. Windsor, the court ruled that Section 3 is unconstitutional. By overturning Section 3, the court opens up to same-sex spouses more than 1,100 federal benefits, rights and burdens linked to marital status.
Section 2 of DOMA, which allows states to refuse to recognize same-sex marriages from other states, was not before the court as part of this case. Therefore, states still have the option of refusing to recognize out-of-state unions. Ultimately, the Windsor decision means that same-sex couples who are legally married must now be treated the same under federal law as married opposite-sex couples. Tax issues relating to domestic partnership remain unchanged by the Windsor decision.
Implications for Employer-sponsored Employee Benefit Plans
The Supreme Court rulings have major implications for employer-sponsored employee benefit plans. Specifically, for all purposes under ERISA and the Internal Revenue Code, employers and plans will now be required to recognize a same-sex spouse as a spouse, at least in states that allow same-sex marriage. Those states are: CA, CT, DE, IA, MA, MD, ME, MN (8/1/2013), NH, NY, RI (8/1/2013), VT, WA and DC. This generally means that employers in these states will no longer be required to impute income for coverage or benefits provided to a same-sex spouse. This is because a same-sex spouse may be covered on a tax-free basis the same as any opposite-sex spouse, although IRS guidance would be welcomed on this point (specifically on when an employer should discontinue the practice of imputing income: prospectively or retroactively).
Some states specifically prohibit the recognition of same-sex marriages performed in other states. Employers in these states will not be required to recognize same-sex marriages, although employers may choose to do so on a voluntary basis (with the possibility of tax consequences): AK, AL, AR, AZ, FL, GA, HI, ID, IN, KS, KY, LA, MI, MO, MS, MT, NC, ND, NE, NM, OH, OK, PA, SC, SD, TN, TX, UT, VA, WI, WV, WY, and Puerto Rico.
Finally, six states provide spousal-equivalent protections for same-sex civil unions or domestic partnerships, which may include same-sex couples married in other states. These states are CO, HI, IL, NV, NJ and OR.
From a health and welfare benefits perspective, there will be implications regarding pretax eligibility such as allowing a qualifying event under Section 125 for mid-year enrollment in the health plan, COBRA rights, FMLA, HIPAA, HRAs, FSAs, and dependent care flexible spending accounts, and use of HSA funds to pay qualified medical expenses of a same-sex spouse. Self-insured plans that currently define a “spouse” as defined under federal law will need to revise the plan eligibility language. We will let our fully insured clients know what action if any, fully insured plans need to take.
Both the IRS and HHS announced they are working with the Department of the Treasury and Department of Justice to provide revised guidance in the near future. Federal agencies are offering health coverage to the spouses and children of married same-sex employees immediately. Private employers should wait for further guidance prior to implementing plan changes and revising payroll practices.
What Does Delay of the Employer Mandate Mean?
The Internal Revenue Service (IRS) has released Notice 2013-45 to provide a one-year delay for employers subject to the employer mandate (that is employers of 50 or more FTEs) and information reporting requirements under the Patient Protection and Affordable Care Act (PPACA), initially scheduled to be implemented in 2014.
The guidance includes the following important points:
- “Applicable large employers” will not be liable for pay or play penalties until 2015.
- Employers and carriers are not required to file informational reports for 2014. The guidance encourages employers and insurers to comply voluntarily with informational reporting requirements in 2014, with reporting becoming mandatory for 2015. Proposed rules on informational reporting are not yet available, but are expected late summer 2013.
- Employees will be able to receive premium tax credits through an exchange if they are otherwise eligible; the delay does not affect an individual’s ability to qualify for such a credit.
- Individuals who have an offer of employer-sponsored affordable and minimum value coverage will not qualify for exchange-based individual subsidies to begin on Jan. 1, 2014. Therefore, education of employees will be critical.
- All employers subject to the Fair Labor Standards Act are required to send an Exchange Notice to all employees by Oct. 1, 2013. COBRA election notices must also be reworded to include information about the exchanges.