I Want to Know, Have You Ever Seen…your plan documents?

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by Ben Gibbons

Owners and employees of smaller organizations often find themselves stretched in many directions.  With all of the demands on one’s time associated with operating a business, it is not uncommon to see attention to the organization’s medical and other benefit plans pushed to the back burner.  As a result, smaller organizations tend to rely heavily on their benefits broker for their employee benefit plan documentation.  While brokers can be an excellent resource, plan sponsors need to be aware that the services provided by a broker can vary widely from one broker to the next.

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A Little Less Conversation, a Little More Action: Major retirement plan legislation is finally signed into law

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by Brenda Berg

After being on the verge of enactment last spring but failing to pass, the SECURE Act will become law after all. Congress included the Setting Every Community Up for Retirement Enhancement Act of 2019 (H.R. 1994) (the SECURE Act) in the year-end spending legislation needed to keep the government running. The House passed the Further Consolidated Appropriations Act, 2020 (H.R. 1865) – which included the SECURE Act provisions – on December 17, 2019. The Senate followed on December 19, 2019, and President Trump signed it on the last day possible for the spending bill – December 20, 2019.

For a summary of the major SECURE Act provisions that impact retirement plans, see our previous article. In addition to including the SECURE Act provisions, the year-end legislation adds a few other provisions impacting retirement plans and other benefits. Defined benefit plans such as cash balance plans can now allow in-service withdrawals once a participant reaches age 59-1/2, instead of age 62. The minimum age for in-service withdrawals from 457(b) plans is also lowered to 59-1/2.

For welfare benefits, the year-end legislation repeals the “Cadillac Tax” which would have otherwise taken effect in 2022. The Cadillac Tax was part of the Affordable Care Act (ACA) and would have imposed a 40% excise tax on the insurer or employer for any “high cost” employer-provided health plan coverage.

Many of the benefits provisions are effective in 2020, although some are optional. The legislation generally provides time to amend retirement plans until the last day of the plan year that begins in 2022, and some governmental plans and collectively bargained plans have later deadlines until as late as 2024.

We will be covering many of the specific changes in more detail in upcoming blog posts. Sign up to regularly receive our blog posts (which come more often and on more varied topics than our Alerts).

Time keeps on slippin’, slippin’, slippin’… into the future with an extended deadline for Form 1095-C and Form 1095-B reporting

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by Becky Achten and Bret Busacker

The Internal Revenue Service has extended the due date for providing the 2019 Form 1095-C (applicable to large employers as explained below) and the Form 1095-B (generally applicable to insurance carriers) to participants from January 31, 2020 to March 2, 2020.  The deadlines for filing the 2019 Forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS remain at February 28, 2020, for paper submissions, or March 31, 2020, if filing electronically.

In addition, the IRS has issued relief for insurance carriers generally required to provide the Form 1095-B.  Because there is no individual penalty for not having minimum essential coverage in 2019, individuals don’t need the 1095-B in order to calculate a tax penalty or file an income tax return.  Therefore, the IRS will not assess a penalty to entities that do not provide a Form 1095-B if they meet the following conditions:

  • The reporting entity must post a prominent notice on its website stating that individuals may receive a copy of their 2019 Form 1095-B upon request, along with contact information to make such a request; and
  • The reporting entity must furnish the 2019 Form 1095-B within 30 days of a request.
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It’s HIP(AA) to be square… making sure you are HIPAA compliant

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by Hector A Beason

The Health Insurance Portability and Accountability Act (“HIPAA”) was created for one specific reason – evolution of technology. Today, health care providers are using online clinical applications and electronic health records; also, health plans are offering online access to claims and care management. This evolution of technology, while incredible and appropriate, raises several security risks that could, if not appropriately addressed, lead to HIPAA penalties.

Health care providers and group health plans (“covered entities”) deal with highly sensitive and protected health information (“PHI”). The HIPAA privacy, security, and breach rules were adopted to make sure covered entities protect and safeguard PHI. Although employers/plan sponsors are not directly subject to the HIPAA rules; if the covered entity is a self-funded group health plan, complying with the myriad of HIPAA rules will likely fall on the plan sponsor.

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Wake me up when September ends

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by Lyn Domenick

Final rules released by the Departments of Labor, Health and Human Services and Treasury on June 13, 2019 have the potential to transform how employers pay for health care coverage for employees.  The rules permit the use of a new type of health plan called an individual coverage health reimbursement arrangement (“ICHRA”).   Under an ICHRA, the employer provides an amount that can be used by the workers to pay for all or some of health coverage obtained in the individual market.  These plans will presumably be utilized by employers that want to offer a health benefit to employees without maintaining a full (major medical) group health plan.  However, an important notice deadline is approaching.   Employers that want to adopt an ICHRA for 2020 (effective January 1, 2020) must provide a notice to employees by no later than October 3, 2019.  The new ICHRA guidance is complex and includes rules related to enrollment, classes of employees, opting out, substantiation of expenses and the annual notice requirement described above.   Given the short time frame to analyze whether to proceed under the new rules, work out the details and issue the required notice, many employers may take a wait and see approach and defer this decision to the 2021 plan year or beyond.  Early adopters, however, need to act soon if this is on their agenda for 2020. 

If you have questions about the new ICHRA health plans, reach out to a member of the Benefits Law Group and we will be glad to assist. 

I can’t drive 55 – or classify my workers

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by John Ludlum

Making correct classifications between independent contractors and employees is not getting simpler with flexible, geographically-distributed workforces.  For those with long memories, a key case in the area of worker classification was issued by the Ninth Circuit in Vizcaino v. Microsoft Corporation, 97F.3d 1187 (CA-9, 1996).  Vizcaino v. Microsoft held that certain workers, originally hired as independent contractors, were actually employees who were entitled to benefits under Microsoft’s 401(k) plan and Microsoft’s Employee Stock Purchase Plan.  Determinations like this can lead to substantial corrections costs to fix tax-qualified benefit plans as well as to make the contributions required under plan terms to the improperly excluded employees. 

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Sunshine … on my controlled group makes me happy

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by John Ludlum

The controlled group rules under the IRC are possibly one of the driest and most technical areas in benefits practice, but mistakes in controlled group status can be very expensive and complicated to correct.  The problem we are seeing is that in too many cases, it is not clear whether the plan sponsor or the plan’s service providers have responsibility for monitoring which entities are in the plan sponsor’s controlled group.

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Somebody get me a (juris) doctor . . . increased IRS activity on healthcare reform

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by Kevin Selzer

You may be hearing from the IRS soon on penalties related to the Affordable Care Act (“ACA”). 

We have seen increased ACA-related enforcement activity from the IRS, particularly with respect to taxes owed under the employer mandate (which requires large employers to provide group health coverage meeting certain requirements to full-time employees). In our experience, the employer mandate assessments often contain errors in calculating the penalty and/or originate from inadvertent mistakes made by the taxpayer on the Form 1094-C or Form 1095-C and can often be eliminated or reduced.

The IRS is also assessing penalties on large employers that fail to file ACA-related tax forms.  We recently helped a large employer obtain full abatement of a proposed penalty exceeding $200,000 for failure to file and transmit Forms 1094-C and 1095-C. In this case, we were able to show that the failure was due to reasonable cause and persuade the IRS to abate the entire penalty. If you receive proposed ACA-related taxes or penalties, please reach out to a member of the Holland & Hart Benefits Law Group.

Ch-ch-ch-changes . . . cafeteria plan change in status rules are sometimes surprisingly restrictive

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by Beth Nedrow

The IRS issued a ruling earlier this summer that serves as a reminder of how important it is to maintain the distinction between an election for health plan coverage and an election on how to pay for such coverage.

In practice, virtually all employees (and frankly, many employers) forget there is a distinction between electing coverage and electing how to pay for it. It is usually automatically assumed that when an employee elects medical coverage, they will pay for that coverage pre-tax under a Section 125 cafeteria plan. Indeed, IRS guidance and proposed regulations permit the employer to default an employee into paying for medical coverage pre-tax under a cafeteria plan. But if an employee makes this election (either affirmatively or by default), they may come to regret it, as demonstrated in the IRS Chief Counsel letter issued May 8, 2019.

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