Posted December 21, 2015 by PHaynes
Chalk this up to – we all saw this coming, but had to prepare for it anyway. You may recall that the so-called Cadillac Tax was due to hit all employers and plan sponsors as part of their 2014 renewals. Many special interest groups, including big-labor pressed for a delay and the administration provided a delay until 2018.
This past Friday, Congress passed a two-year delay of the 40% excise tax on high-cost employer-sponsored health plans, also known as the “Cadillac Tax.” This delay was part of a year-end tax extender and government funding package, the Consolidated Appropriations Act, 2016, known as the “Omnibus.” President Obama is expected to sign these changes into law.
The Omnibus includes several key changes pertaining to the Affordable Care Act:
- Implementation of the 40 percent excise tax is delayed from 2018 to 2020. While the tax was originally non-tax deductible, the Omnibus changes that treatment and makes the tax deductible.
- The 40 percent excise tax applies to the cost of employer health plan coverage exceeding certain threshold amounts, which were originally set for 2018 at $10,200 for individuals or $27,500 for families. These thresholds are indexed and will be higher on the delayed effective date in 2020. The Omnibus also calls for a study on how to determine adjustments to these thresholds to reflect age and gender differences between businesses.
Many employers, unions, insurers and industry groups have opposed the tax based on concerns around administrative and financial burdens for employers and adverse outcomes for employees.
- The delay allows the government additional time to propose regulations. It also provides opportunity for stakeholders to provide comments, as well as prepare their long-term health benefits strategies.
Links to prior Cadillac Tax guidance:
- May 2015 Webinar: The Cadillac Tax – Repeal or Comply? How Employers Should Prepare.
- Sept 2012 Webinar: PPACAs Cadillac Tax
Posted December 21, 2015 by PHaynes
Departments change their minds on opt-out guidance: Until future guidance is issued, opt-out payments under existing opt-out arrangements (as defined in the Notice) are not added to the stated cost of the employer’s lowest cost self-only health coverage for ACA affordability test purposes.
As you may recall from prior meetings, webinars and other presentations, beginning in 2014 the regulators began to state that Section 125 Cafeteria Plan benefit dollars, payments to participants who opt-out of medical benefits, Service Contract Act and Davis-Bacon cash-in-lieu-of-fringe payments, cash options required under Union contracts, and similar types of payments create issues under the “affordability test” of the Affordable Care Act.
The typical example provided by the regulators was as follows:
An employer charges $250 per month for its lowest cost self-only medical benefits coverage. The employer offers a $125 opt-out bonus if the employee waives coverage (or simply pays the employee $100 as cash-in-lieu of coverage). The employer is treated, for ACA affordability purposes, as “charging” the employee $375 for its lowest cost self-only coverage. (The regulators’ rationale is that an employee wishing to enjoy coverage must pay $250 plus “forego $125” to have coverage, and therefore the coverage “costs” the employee $375.)
Numerous commentators challenged the regulators’ logic on this point and requested that they withdraw this position. (The AFL-CIO, for example, held an in-person meeting with the regulators formally requesting that they withdraw their position on including the opt-out-credits in their calculations.)
Last week the Departments (HHS, IRS, DOL) issued Notice 2015-87 which, although it does not withdraw the position, provides additional time for employers to comply with it in some cases (and, perhaps, is intended to provide additional time for the regulators to consider withdrawing their position).
The following are some of the most important points made in this extremely complex Notice:
- For plan years beginning before 2017 (as defined in the Notice), employer “benefit dollars” or “flex contributions” that can be used by Section 125 plan participants for health, other benefits or cash are not added to the stated cost of the employer’s lowest cost self-only health coverage for ACA affordability test purposes.
- Until future guidance is issued, opt-out payments under existing opt-out arrangements (as defined in the Notice) are not added to the stated cost of the employer’s lowest cost self-only health coverage for ACA affordability test purposes.
- Until future guidance is issued, cash-in-lieu payments under the SCA or Davis-Bacon Act are not added to the stated cost of the employer’s lowest cost self-only health coverage for ACA affordability test purposes.
The Departments hinted in the Notice that they would consider further relief for opt-out payments that are “conditioned on the employee meeting certain conditions such as demonstrating that the employee has other coverage,” and hinted that they may consider further unspecified relief for SCA and Davis-Bacon employers.
The Departments’ prior position was effective January 1, 2015. This Notice provides retroactive, limited and highly technical relief that at least will provide some breathing room to some employers who found themselves struggling to comply with the regulators’ position.
Department also update the payments due under ACA’s Shared Responsibility Structure
- Question 13: Under § 4980H(c)(5), in the case of any calendar year after 2014, the applicable dollar amounts of $2,000 and $3,000 under § 4980H(c)(1) and (b)(1) are increased based on the premium adjustment percentage as defined in § 1302(c)(4) of the Affordable Care Act (4.213431463 for 2015* and 8.316047520 for 2016**) rounded to the lowest multiple of $10. What are those amounts for calendar years 2015 and 2016?
- Answer 13: For calendar year 2015, the adjusted $2,000 amount in §4980H(c)(1) is $2,080 ($2,000 x .04213431463 = $84.27 plus $2,000 rounded down to $2,080), and the adjusted $3,000 amount in §4980H(b)(1) is $3,120 ($3,000 x .04213431463 = $126.40 plus $3,000 rounded down to $3,120). For calendar year 2016, the adjusted $2,000 amount in §4980H(c)(1) is $2,160 ($2,000 x .08316047520 = $166.32 plus $2,000 rounded down to $2,160), and the adjusted $3,000 amount in §4980H(b)(1) is $3,240 ($3,000 x .08316047520 = $249.48 plus $3,000 rounded down to $3,240). Treasury and IRS anticipate that adjustments for future years will be posted on the IRS.gov website.
- 2015 Sledge-hammer fine $2,080
- 2015 Tack-hammer fine $3,120 ($260/month)
- 2016 Sledge-hammer fine $2,160
- 2016 Tack-hammer fine $3,240 ($270/month)
*See 79 FR 13744, 13802 (Mar. 11, 2014).
**See 80 FR 10750, 10825 (Feb. 27, 2015)
Posted December 17, 2015 by PHaynes
The U.S. Department of Labor has released the 2015 Form 5500 and related instructions. Modifications to Form 5500 as well as schedules and instructions for plan year 2015 are described under “Changes to Note” in the 2015 instructions. Examples of these changes include:
IRS Electronic Filing Requirements. On September 29, 2014, the Treasury Department issued final regulations providing that certain filers must electronically file the Form 5500 series returns/reports (including actuarial schedules. Under the regulations, you are required to file a Form 5500 series return/report electronically if you are required to file at least 250 returns of all types during the calendar year that includes the first day of the applicable plan year. Because the IRS may now require certain filers to electronically file the Form 5500 series returns/reports, the IRS is adding questions to the Form 5500 and its Schedules relating solely to IRS compliance issues. However, these new IRS compliance questions are optional for the 2015 plan year.
IRS Compliance Questions (optional for the 2015 plan year)
- New Lines 4o, 4p 6c, and 6d were added to Schedules H and I. You are encouraged to answer these questions relating to unrelated business taxable income, in-service distributions, and trust information.
- New Part VII (IRS Compliance Questions) was added to Schedule R (applicable to pension plans) for purposes of satisfying the reporting requirements of section 6058 of the Code. You are encouraged to answer these questions though they are optional for the 2015 plan year.
Schedule MB (applicable to pension plans). The instructions are modified to add RP-2000 and RP-2000 (with Blue Collar Adjustment) to the list of mortality tables for non-disabled lives that plans may report in line 6c. The Schedule MB and instructions are also modified to add a new question in line 8b that would require large multiemployer plans (500 or more total participants as of the valuation date) to provide in an attachment a projection of expected benefit payments to be paid for the entire plan (not including expected expenses) for each of the next ten plan years starting with the plan year to which the filing relates. The Schedule MB is modified to require all multiemployer plans to report the funded percentage for monitoring the plan’s status in line 4. Previously, only plans in critical or endangered status were required to report this information. As a result of the Multiemployer Pension Reform Act of 2014, the Schedule MB and instructions are further modified to extend the reporting requirements in line 4 for multiemployer plans in critical status to plans in critical and declining status and require that additional information to be reported by plans that have been partitioned or have had benefits suspended.
Schedule SB (applicable to pension plans). The instructions are modified to simplify the alternative age/service scatters that cash balance plans with 1,000 or more active participants have an option to report on an attachment to line 26.
Form 5500 Final Return/Report for Plans Trusteed by PBGC (applicable to pension plans). The instructions for “Final Return/Report” are modified to add a statement that a filer for a terminated defined benefit plan for which PBGC has been appointed trustee may contact DOL at PBGCTrusteedPlan@dol.gov for further information.
Pension and welfare benefit plans that are required to electronically file an annual return regarding their financial conditions, investments and operations generally satisfy that requirement by filing the Form 5500 or Form 5500-SF and any required attachments.
Form 5500 Automatic Extension Remains at 2 ½ Months
On December 4, 2015, Congress repealed the Form 5500 extension period that had been increased back in July of this year. In July, the automatic extension of 2 ½ months was increased to 3 ½ months for plan years beginning in 2016. This increased extension period has now been repealed and will remain at 2 ½ months.
Under ERISA and the Internal Revenue Code employee benefit plans generally are required to file the Form 5500, ‘‘Annual Return/ Report of Employee Benefit Plan,’’ together with any required attachments and schedules. The Form 5500 is not a tax return. It is an informational return, required by and filed with, the Department of Labor (DOL). It also serves as a disclosure document for plan participants and beneficiaries, and an important source of information and data for use by other Federal agencies.
- 2015 Form 5500
- 2015 Form 5500 – Instructions
- 2015 – Form 5558 – Request for Extension of Time to file Form 5500
- Congress repealed the Form 5500 extension period (from 3.5 months back to 2.5 months)
Posted December 1, 2015 by Megan DiMartino
Join AP Benefit Advisors’ General Counsel and Vice President – Compliance, Patrick Haynes, for a complimentary webinar as he reviews PPACA Final Regulations on 2010 Provisions on Tuesday, December 8, from 12:00pm to 12:35pm EDT.
Many employers are struggling to understand how these changes to their health plans will be implemented, what cost changes they might bring and what administrative hurdles they should be prepared to face. Employers seeking to better understand the nuances of these requirements should attend this complimentary webinar. Topics will include the following, many of which were part of your plan’s changes for the first plan year on or after 9/22/2010, but now must be reassessed and revised, again:
- Appeals and Review
- Dependent Coverage
- Designating a Primary Care Physician
- Emergency Care
- Grandfathered Plans
- Implications for Expatriate Plans
- Lifetime and Annual Limits
- Preexisting Condition Exclusions
- Rescissions (Cancellation of Coverage)
Tuesday, December 8, 2015
12:00pm – 12:35pm EDT
No cost to attend – This webinar is open to all HR and Finance Professionals, but not to brokers, agents, TPAs and PEOs.