ACA’s Affordability Threshold Rises in 2019

Applicable Large Employers (ALE) should not overlook the Affordable Care Act's (ACA's) annual inflation-adjusted shift in cost-sharing limits for group health plan coverage, as they could face steep penalties for failing to provide affordable coverage under the ACA's shared-responsibility provisions.

On May 21, the IRS announced in Revenue Procedure 2018-34 the 2019 shared-responsibility affordability percentage. Based on the ACA's affordability standard as adjusted for inflation, health coverage will satisfy the requirement to be affordable if the lowest-cost self-only coverage option available to employees does not exceed 9.86 percent of an employee's household income, up from 9.56 percent in 2018.

For 2019 calendar-year plans using the federal poverty level (FPL) safe harbor to determine affordability, an employee's premium payment can't exceed $99.75 per month, up from $96.08 per month in 2018.


An Annual Adjustment

The affordability standard is the highest percentage of household income an employee can be required to pay for monthly plan premiums, based on the least-expensive employer-sponsored plan offered that meets the ACA's minimum essential coverage requirements.

Employers should consider the affordability standard in developing their 2019 health care plan cost-sharing strategies, since pricing at least one plan option below the threshold will avoid triggering employer-shared responsibility penalties under Section 4980H(b), which the ACA added to the tax code, said Ryan Moulder, a Los Angeles-based partner at Health Care Attorneys PC and general counsel at Accord Systems LLC, an ACA compliance software firm.

"An employer is in control as to whether the plan it is offering meets the affordability threshold," Moulder explained. "The significant increase [for 2019] compared to 2018 provides an employer that is toeing the line of the affordability threshold an opportunity to increase the price of its health insurance while continuing to provide affordable coverage."

Excerpt from SHRM article dated May 30, 2018 by Stephen Miller, CEBS

What to do if the IRS sends an ACA non-compliance notice in error

The Internal Revenue Service is beginning to send out Employer Shared Responsibility Payment notices to employers that it believes failed to comply with the ACA coverage requirements in 2015 calendar year.

Some employers receiving these notices actually complied with the ACA requirements in 2015, but the IRS received inaccurate or incomplete information and has thus incorrectly identified these employers as failing to satisfy the ACA coverage requirements.

If an employer receives an ESRP notice, the employer must dispute the IRS penalty within 30 days of the date of the notice.

We have seen employers receiving very large fines for periods in which they actually complied with the ACA coverage requirements. Accordingly, all employers that were subject to the ACA coverage requirements in 2015 should review their 2015 ACA filings (on Form 1094-C) to determine who at the company will receive the ESRP notice from the IRS; and make sure the contact address is correct. For reference, see Part 1; Lines 1 thru 8 of Form 1094-C).

If any of the contact information on the Form 1094-C is inaccurate or if the contact person is no longer employed by the company, the employer should consider updating its contact information with the IRS.

Bret Busacker
Busacker is a partner at Holland & Hart LLP.

HSA Contribution Limits Stay at $6900 After All

The IRS on April 26 announced relief for taxpayers with family coverage under a high-deductible health plan (HDHP) and who contribute to a health savings account (HSA).

For 2018, taxpayers with family coverage under an HDHP may treat $6,900 as the maximum deductible HSA contribution, up from $6,750 in 2017. The relief follows a confusing series of IRS actions:

• In May 2017, the IRS announced in Revenue Procedure 2017-37 that the 2018 family-coverage contribution limit for HSAs would be $6,900.

• In March 2018, the IRS announced in Internal Revenue Bulletin No. 2018–10 that a change in the inflation-adjustment calculations for 2018, under the Tax Cuts and Jobs Act, lowered the maximum deductible HSA contribution for taxpayers with family coverage through an HDHP by $50, to $6,850.

• Now, in Revenue Procedure 2018-27, the IRS has granted relief for affected taxpayers by allowing the originally announced $6,900 family-coverage HSA contribution cap to remain in effect for 2018. The IRS cited “numerous unanticipated administrative and financial burdens” in response to the $50 reduction.

For 2018, the HSA contribution limit for account holders with self-only coverage through an HDHP will be $3,450, as announced in May 2017 and not adjusted since. 

-From SHRM Article Dated 4-27-18 by Stephen Miller 

Maryland Sick and Safe Leave Law-FAQ and Model Policy Notice Guidance

Maryland Healthy Working Families Act Additional Guidance: Model Policies and Updated FAQs small.business@maryland.gov On February 11, 2018, the Maryland Healthy Working Families Act went into effect. To date, the Office of Small Business Regulatory Assistance has received more than 2,000 emails from employers and employees with specific questions about complying with the law. The most common of these questions have been compiled into a Frequently Asked Questions (FAQs) document, available at www.dllr.maryland.gov/paidleave. As employers delve deeper into implementation, new questions are being asked. Today’s revised FAQ provides answers to these questions, as well as revisions to the previous FAQ document. In addition to the updated FAQs, the department has provided an updated employee notice poster for your place of business, and model policies for your employee handbook or other employee benefits documents. These resources are also available on the paid leave website. Today's documents will assist employers with compliance as well as facilitating a discussion with employees regarding their rights under the law. Responses are preliminary and subject to change. Please note that the department cannot provide legal advice regarding specific employer leave policies or employee exemptions under the law. These documents are for informational purposes and are intended to provide general guidance to employers and employees about the requirements of the law. The Department of Labor continues to encourage stakeholders to provide input on these documents. Final guidance documents will be released based on your continued feedback, as well as changes to the law during the General Assembly session. Governor Larry Hogan issued Executive Order 01.01.2018.04 creating the Office of Small Business Regulatory Assistance to assist small businesses in complying with the Maryland Healthy Working Families Act. Questions can be sent to this office at small.business@maryland.gov.

Transition Relief for Non-Qualifying HSA's

As you know, the state of Maryland passed legislation adding Male Sterilization as part of preventive care.  In doing so it disqualified ALL HSA participants in funding their HSA's for 2018.  Scrambling to get this corrected the Maryland Insurance Administration contacted the IRS for determination and relief.  Finally the IRS has offered transition relief until 2020.  Therefore, you are free to fund your HSA's for 2018.  Please see below and highlighted area at the end:

Notice of Transition Relief Regarding the Application of Section 223 to Certain Health Plans Providing Benefits for Male Sterilization or Male Contraceptives

Notice 2018-12

PURPOSE

This notice clarifies that a health plan providing benefits for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for a high deductible health plan (HDHP) under section 223(c)(2)(A) of the Internal Revenue Code (Code), is not an HDHP under current guidance interpreting the requirements of section 223(c)(2) of the Code. This notice further provides transition relief for periods before 2020 during which coverage has been provided for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for an HDHP.

BACKGROUND

Section 223 of the Code permits eligible individuals to deduct contributions to Health Savings Accounts (HSAs).[1] Among the requirements for an individual to qualify as an eligible individual under section 223(c)(1) is that the individual be covered under an HDHP and have no disqualifying health coverage. As defined in section 223(c)(2), an HDHP is a health plan that satisfies certain requirements, including requirements with respect to minimum deductibles and maximum out-of-pocket expenses.

Generally, under section 223(c)(2)(A), an HDHP may not provide benefits for any year until the minimum deductible for that year is satisfied. However, section 223(c)(2)(C) provides that “[a] plan shall not fail to be treated as a high deductible health plan by reason of failing to have a deductible for preventive care (within the meaning of section 1871 of the Social Security Act, except as otherwise provided by the Secretary).”[2] Therefore, an HDHP may provide preventive care benefits as defined for purposes of section 223 without a deductible, or with a deductible below the minimum annual deductible otherwise required by section 223(c)(2)(A) of the Code. To be a preventive care benefit as defined for purposes of section 223, the benefit must either be described as preventive care for purposes of the SSA or be determined to be preventive care in guidance issued by the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS).

Notice 2004-23 (2004-15 I.R.B. 725) and Q&As 26 and 27 of Notice 2004-50 (2004-33 I.R.B. 196) provide guidance issued by the Treasury Department and the IRS regarding preventive care benefits that an HDHP may provide without satisfying the minimum deductible requirement of section 223(c)(2)(A). Notice 2004-23 clarifies that preventive care generally does not include any service or benefit intended to treat an existing illness, injury, or condition.

Notice 2004-23 also explains that state law requirements do not determine whether health care constitutes preventive care under section 223(c)(2)(C). State insurance laws often require health insurance policies and similar arrangements subject to state regulation to provide certain health care benefits without regard to a deductible or on terms no less favorable than other care provided by the health insurance policy or arrangement. However, the determination whether a health care benefit that is required by state law to be provided by an HDHP without regard to a deductible is “preventive” for purposes of the exception for preventive care under section 223(c)(2)(C) is based on the standards set forth in guidance issued by the Treasury Department and the IRS, rather than on how that care is characterized by state law.

Notice 2004-23 further indicates that the Treasury Department and the IRS are considering the appropriate standard for determining preventive care under section 223(c)(2)(C) and, in particular, whether any benefit or service should be added to the list of preventive care benefits and services set forth in Notice 2004-23 or other guidance.

Notice 2004-50, Q&A 27, provides that drugs or medications are preventive care when taken by a person who has developed risk factors for a disease that has not manifested itself or become clinically apparent, or to prevent the reoccurrence of a disease from which a person has recovered.

Section 1001 of the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010) (Affordable Care Act), added section 2713 to the Public Health Service Act (PHS Act) requiring non-grandfathered group health plans and health insurance issuers offering group and individual health insurance coverage to provide benefits for certain preventive health services without imposing cost-sharing requirements.[3] The Affordable Care Act also added section 715(a)(1) to the Employee Retirement Income Security Act of 1974 (ERISA) and section 9815(a)(1) to the Code to incorporate the provisions of part A of title XXVII of the PHS Act, including section 2713 of the PHS Act, into ERISA and the Code. Guidance under section 2713 of the PHS Act is published jointly by the Treasury Department and the Departments of Labor and Health and Human Services.

Under section 2713(a)(1) of the PHS Act, evidence-based items or services constitute preventive health services if they have in effect a rating of A or B in the current recommendations of the United States Preventive Services Task Force (USPSTF) with respect to the individual involved. Also, preventive health services under section 2713(a)(4) of the PHS Act include, “with respect to women, such additional preventive care and screenings not described in paragraph (1) [concerning the USPSTF A or B rated recommendations] as provided for in comprehensive guidelines supported by the Health Resources and Services Administration” (HRSA). HRSA guidelines generally provide for coverage of all Food and Drug Administration approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity. The guidelines, however, do not provide for coverage of benefits or services relating to a man’s reproductive capacity, such as vasectomies and condoms. (78 FR 8456 (Feb. 6, 2013) at 8458 n. 3.)

Notice 2013-57 (2013-40 I.R.B. 293) provides that any item that is a preventive service under section 2713 of the PHS Act will also be treated as preventive care under section 223(c)(2)(C) of the Code.

The Treasury Department and the IRS are aware that several states have recently adopted laws that require certain health insurance policies and arrangements to provide benefits for male sterilization or male contraceptives without cost sharing.[4] Some individuals in those states are participants or beneficiaries in insured health plans or other arrangements subject to the state’s insurance laws. Certain stakeholders have asked the Treasury Department and the IRS whether benefits for male sterilization or male contraceptives constitute preventive care for purposes of section 223(c)(2)(C).

ANALYSIS

Under section 223(c)(2)(C), “preventive care” means (1) preventive care within the meaning of section 1871 of the SSA, and (2) preventive care as otherwise provided for by the Treasury Department and the IRS. Benefits for male sterilization or male contraceptives are not preventive care under the SSA, and no applicable guidance issued by the Treasury Department and the IRS provides for the treatment of these benefits as preventive care within the meaning of section 223(c)(2)(C). Accordingly, under current guidance, a health plan that provides benefits for male sterilization or male contraceptives before satisfying the minimum deductible for an HDHP under section 223(c)(2)(A) does not constitute an HDHP, regardless of whether the coverage of such benefits is required by state law. An individual who is not covered by an HDHP with respect to a month is not an eligible individual under section 223(c)(1) and, consequently, may not deduct contributions to an HSA for that month. Similarly, HSA contributions made by an employer on behalf of the individual are not excludible from income and wages.

TRANSITION RELIEF

The Treasury Department and the IRS are aware that certain states require benefits for male sterilization or male contraceptives to be provided without a deductible, and that individuals have enrolled in health insurance policies and other arrangements that otherwise would qualify as HDHPs with the understanding that coverage for male sterilization or male contraceptives without a deductible did not disqualify the policies or arrangements from being HDHPs. The Treasury Department and IRS also understand that certain states may wish to change their laws that require benefits for male sterilization or male contraceptives to be provided without a deductible in response to this notice, but may be unable to do so in 2018 because of limitations on their legislative calendars or for other reasons. Until these states are able to change their laws, residents of these states may be unable to purchase health insurance coverage that qualifies as an HDHP and would be unable to deduct contributions to an HSA.

Accordingly, this notice provides transition relief for periods before 2020 (including periods before the issuance of this notice), to individuals who are, have been, or become participants in or beneficiaries of a health insurance policy or arrangement that provides benefits for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for an HDHP. For these periods, an individual will not be treated as failing to qualify as an eligible individual under section 223(c)(1) merely because the individual is covered by a health insurance policy or arrangement that fails to qualify as an HDHP under section 223(c)(2) solely because it provides (or provided) coverage for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for an HDHP.

REQUEST FOR COMMENTS

The Treasury Department and the IRS continue to consider ways to expand the use and flexibility of HSAs and HDHPs consistent with the provisions of section 223. Accordingly, the Treasury Department and the IRS request comments on the appropriate standards for preventive care under section 223(c)(2)(C) (in particular, the appropriate standards for differentiating between benefits and services that would be considered preventive care and those that would not be considered preventive care) and other issues related to the provision of preventive care under an HDHP.

Comments should include a reference to Notice 2018-12. Send submissions to CC:PA:LPD:PR (Notice 2018-12), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 54 Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR 

Efforts to Delay Maryland Paid Sick Leave Law Fail

Attempts to delay the Maryland Sick and Safe Leave Lay failed.  Efforts were being made to delay the law until July to give employers more time to prepare.  However those efforts failed in the General Assembly.  Many Democrats were not in favor of this delay as they believe it would give Republicans more time to have the law amended.  

The Maryland Department of Labor, Licensing and Regulation on Friday issued a draft sample employee notice poster to be displayed in workplaces across the state. The agency said it is also developing sample policies that will be available on its website at www.dllr.maryland.gov.  A copy of the poster can be found here.  

Maryland Sick and Safe Leave Law Compliance Update

From: Maryland Healthy Working Families Act (House Bill 1) - Enforcement and Implementation small.business@maryland.gov, February 5, 2018

Maryland Employers and Employees:

Governor Larry Hogan understands the business community has many questions regarding the Maryland Healthy Working Families Act, so he established the Office of Small Business Regulatory Assistance (OSBRA) within the Department of Labor, Licensing and Regulation to assist small businesses in complying with the law, as well as an email address where employers may direct specific questions: small.business@maryland.gov. 

To assist employers with compliance, the department is developing draft guidance documents and model policies, including an extensive Q&A document based on questions received through small.business@maryland.gov, and will continue to provide answers to specific questions upon request. These documents will be emailed to stakeholders and published to DLLR’s paid leave website at www.dllr.maryland.gov/paidleave. 

Before promulgating official guidance documents, the department encourages stakeholder input to be certain that the draft guidance documents address all concerns. Comments on these draft guidance documents and specific implementation questions should be directed to small.business@maryland.gov. Following a public comment period, the department will finalize the policies based on stakeholder input and include any amendments to the Maryland Healthy Working Families Act from this General Assembly session.

The General Assembly is in session until April 9, 2018, and there are several bills that could affect this legislation. Although HB1 goes into effect on February 11, 2018, bills have been introduced that would substantially impact the law.

February 11, 2018 Effective Day: What you need to know

Emergency legislation to delay implementation of this law until July 1, 2018, is moving in the Maryland Senate. On Friday, February 2, it passed the Senate Finance Committee and will next be considered by the full Senate. After that, it would go to the House of Delegates for consideration. If this bill should pass before February 11, 2018, the Department of Labor will notify employers. However, in the event implementation is not delayed, employers should be prepared to begin tracking sick and safe leave accrual on February 11, 2018.