New Whistleblower Protections Under Taxpayer First Act
|
09/09/2019
|
By: Morgan Hammes
|
On
July
1,
President
Trump
signed
the
Taxpayer
First
Act,
giving
new
protections
to
IRS
whistleblowers.
Before
this
act,
the
IRS
could
only
protect
whistleblowers
by
concealing
their
identity.
Even
without
protections
against
retaliation,
the
Whistleblower
Office
of
the
IRS
has
still
been
able
to
collect
over
$5
billion
in
unpaid
taxes
under
the
program.
This
may
have
something
to
do
with
the
requirement
that
the
IRS
award
the
whistleblower
a
percentage
of
the
unpaid
taxes
collected
by
the
IRS.
For
2018,
the
Whistleblower
Office
reported
that
it
paid
217
awards
to
whistleblowers,
totaling
more
than
$300
million.
The
IRS
pushed
for
additional
protections
for
employers
in
an
effort
to
incentivize
more
employees
to
come
forward.
The
Act
creates
a
private
right
of
action
for
whistleblowers
to
sue
their
employers
for
retaliation.
Employers
can
no
longer
discharge,
demote,
suspend,
threaten,
harass,
or
in
any
other
manner
discriminate
against
an
employee
for
assisting
the
IRS
without
risk
of
liability.
Not
only
does
the
private
right
of
action
apply
to
the
employer,
but
it
applies
to
individuals
as
well,
such
as
officers,
employees,
contractors,
subcontractors,
or
agents
of
the
company.
Employees
are
free
to
report
a
company,
provide
information,
or
assist
a
government
agency
in
an
investigation
for
tax
underpayments
and
tax
fraud.
The
employee
is
also
protected
from
retaliation
for
reporting
anything
else
the
employee
reasonably
believes
is
a
violation
of
the
IRS
tax
laws.
Remedies
for
violations
include:
reinstatement;
200
percent
of
back
pay
and
all
lost
benefits;
Continue Reading...
|
|
ACA Penalty Assessments Place Focus on ACA Reporting
|
03/08/2018
|
By: Jason Lacey
|
Late
last
year,
the
IRS
began
issuing
“226J”
letters
to
employers
with
proposed
ACA
penalty
assessments
for
2015.
Employers
that
received
these
letters
often
saw
eye-popping
penalty
amounts.
Most
assessments
were
at
least
$100,000,
with
reports
of
assessments
well
into
seven
figures.
But
the
news
has
not
been
all
bad.
Employers
who
have
engaged
with
the
IRS
have
generally
found
the
IRS
willing
to
work
with
them
to
provide
additional
time
to
evaluate
the
assessments
and
prepare
a
response.
Some
employers
have
succeeded
in
securing
significant
reductions
in
the
assessed
penalties.
A
consistent
theme
among
employers
who
received
penalty
assessment
letters
has
been
a
problem
with
their
reporting
on
Forms
1094-C
and
1095-C.
Many
of
the
proposed
penalty
assessments
can
be
traced
directly
to
errors
in
the
forms
that
were
filed
for
2015.
For
example,
employers
who
failed
to
answer
the
question
on
Form
1094-C
about
whether
they
offered
coverage
to
enough
of
their
full-time
employees
were
presumed
not
to
be
offering
coverage.
Problems
with
the
month-by-month
codes
used
on
Form
1095-C,
such
as
for
months
during
which
an
individual
was
not
employed,
also
have
been
a
source
of
issues.
All
of
these
notifications
point
to
at
least
one
clear
conclusion:
Getting
the
ACA
reporting
correct
makes
a
difference.
Reporting
is
not
just
an
academic
exercise.
The
IRS
Continue Reading...
|
|
IRS Provides Favorable New Guidance on Safe-Harbor 401(k) Plans
|
02/01/2016
|
By: Jason Lacey
|
The
IRS
has
provided
much-anticipated
(and
welcome)
guidance
on
mid-year
amendments
to
safe-harbor
401(k)
plans.
This
is
favorable
guidance
that
provides
greater
flexibility
to
employers
that
sponsor
safe-harbor
plans.
Brief
Background
Safe-harbor
401(k)
plans
are
excused
from
performing
some
nondiscrimination
tests
in
exchange
for
meeting
specified
criteria,
including
providing
a
minimum
employer
contribution
(either
a
matching
contribution
or
nonelective
contribution)
and
providing
eligible
employees
with
a
notice
each
year.
Prior
guidance
from
the
IRS
(mostly
informal)
has
indicated
that
employers
generally
could
not
make
mid-year
amendments
to
safe-harbor
plans
(unless
expressly
authorized
by
the
IRS)
or
would
risk
losing
safe-harbor
status
for
that
year.
This
presumption
against
mid-year
amendments
appeared
to
include
amendments
to
plan
provisions
that
did
not
relate
specifically
to
safe-harbor
status.
A
Change
in
the
Presumption
New
guidance
from
the
IRS
reverses
the
prior
presumption
that
any
mid-year
amendment
to
a
safe-harbor
plan
was
prohibited
unless
expressly
permitted.
Instead
the
guidance
says
that
most
mid-year
amendments
are
permissible,
so
long
as
notice
and
election
requirements
are
met
in
cases
where
the
change
affects
the
required
content
of
the
safe-harbor
notice.
Specifically,
the
guidance
provides:
“A
change
made
to
a
safe
harbor
plan
or
to
a
plan’s
required
safe
harbor
notice
content
does
not
violate
the
requirements
of
[the
safe-harbor
rules]
merely
because
the
change
is
a
mid-year
change,
provided
that
(i)
if
it
is
a
mid-year
change
to
a
plan’s
required
safe
harbor
notice
content,
the
notice
and
election
opportunity
conditions
[described
in
the
guidance]
are
satisfied,
and
(ii)
the
mid-year
change
Continue Reading...
|
|
Supreme Court Upholds ACA Tax Credits in Federal Exchanges
|
06/25/2015
|
By: Jason Lacey
|
In
its
much-anticipated
decision
in
King
v.
Burwell,
the
Supreme
Court
has
upheld
the
availability
of
the
ACA's
premium
assistance
tax
credits
for
individuals
purchasing
insurance
through
a
federally
facilitated
exchange,
including
the
exchanges
maintained
for
residents
of
Kansas
and
Missouri.
Background.
This
case
addressed
a
seemingly
simple
proposition:
Whether
the
phrase
"an
Exchange
established
by
the
State"
meant
only
exchanges
actually
established
and
operated
by
one
of
the
50
states
or
the
District
of
Columbia
or
whether
it
also
included
exchanges
operated
by
the
federal
government
in
states
that
declined
to
establish
their
own
exchanges.
If
the
language
meant
only
exchanges
actually
established
and
operated
by
one
of
the
50
states
or
the
District
of
Columbia,
the
ACA's
premium
assistance
tax
credits
would
not
be
available
to
the
residents
of
the
34
states
that
did
not
establish
their
own
exchanges.
This
would
have
a
ripple
effect
under
the
ACA
by
potentially
limiting
the
impact
of
the
individual
mandate
and
the
employer
mandate
and
impairing
the
operation
of
the
individual
insurance
market.
The
Court's
Analysis. The
Supreme
Court
concluded
that
the
statutory
language (“an
Exchange
established
by
the
State”)
was
ambiguous
and
that
its
meaning
should
be
interpreted
in
the
context
of
the
broader
structure
of
the
ACA.
It
then
held
that
the
overall
statutory
scheme
of
the
ACA
compelled
the
conclusion
that
the
tax
credits
should
be
available
to
individuals
purchasing
coverage
through
federally
facilitated
exchanges.
Otherwise
the
individual
insurance
market
would
be
destabilized
in
states
with
federally
facilitated
exchanges,
likely
leading
to
Continue Reading...
|
|
New IRS Q&As Clarify ACA Reporting Issues
|
05/29/2015
|
By: Jason Lacey
|
The
IRS
has
updated
two
sets
of
Q&As
on
its
website
to
clarify
a
variety
of
issues
related
to
ACA
reporting
on
Forms
1094-C
and
1095-C.
Here
are
some
highlights:
- ALE
With
No
Full-Time
Employees.
An
employer
that
qualifies
as
an
"ALE
member"
does
not
have
to
report
under
Code
Section
6056
if
the
employer
does
not
have
any
full-time
employees
for
any
month
of
the
year.
This
might
happen,
for
example,
if
an
entity
is
part
of
a
larger
group
of
entities
that
collectively
employ
50
or
more
FTEs,
but
the
particular
entity
in
question
has
no
full-time
employees.
This
clarification
would
allow
the
employer
to
avoid
filing
Forms
1094-C
and
1095-C,
unless
the
employer
actually
provides
coverage
to
one
or
more
part-time
employees
under
a
self-insured
plan
sponsored
by
the
employer.
- Hand
Delivery
of
Form
1095-C.
An
employer
that
is
required
to
distribute
Form
1095-C
to
an
employee
may
hand
deliver
the
Form
1095-C.
It
was
unclear
under
prior
guidance
whether
the
only
permitted
distribution
methods
were
first
class
mail
and
electronic
delivery
(with
consent).
- Employee's
SSN
Required
for
Form
1095-C.
When
reporting
individuals
to
whom
coverage
is
provided
(either
on
Form
1095-B
or
Part
III
of
Form
1095-C),
there
is
an
option
to
use
an
individual's
date
of
birth
if
the
individual
has
not
provided
an
SSN.
However,
when
providing
Form
1095-C
to
an
employee,
the
employer
must
Continue Reading...
|
|
2016 Inflation Adjusted Amounts for HSAs and HDHPs
|
05/08/2015
|
By: Jason Lacey
|
The
IRS
has
released
the
2016
inflation-adjusted
amounts
for
health
savings
accounts
(HSAs)
and
high-deductible
health
plans
(HDHPs).
HDHP
Minimums
and
Maximums.
The
minimum
annual
deductible
for
an
HDHP
will
be
$1,300
for
self-only
coverage
and
$2,600
for
family
coverage.
These
amounts
have
not
changed
from
the
2015
amounts.
The
maximum
annual
out-of-pocket
for
an
HDHP
will
increase
to
$6,550
for
self-only
coverage
and
$13,100
for
family
coverage.
"Embedded"
ACA
Out-of-Pocket
Maximum.
The
Affordable
Care
Act
also
sets
out-of-pocket
maximums
for
non-grandfathered
plans.
For
2016,
the
ACA
maximum
will
be
$6,850
for
self-only
coverage
and
$13,700
for
family
coverage
(compared
to
$6,550
and
$13,100
for
HDHPs).
In
addition,
recent
HHS
guidance
provides
that,
beginning
in
2016,
the
self-only
ACA
out-of-pocket
maximum
must
be
"embedded"
within
the
family
ACA
out-of-pocket
maximum,
meaning
that
no
individual
may
be
subject
to
out-of-pocket
expenses
in
excess
of
the
self-only
maximum.
In
the
case
of
a
plan
intended
to
be
an
HDHP,
this
means
that
(1)
the
out-of-pocket
maximum
cannot
exceed
the
lower
maximum
applicable
to
HDHPs,
and
(2)
the
out-of-pocket
maximum
for
an
individual
covered
under
a
family
plan
cannot
exceed
the
ACA
maximum
for
self-only
coverage.
Example.
An
HDHP
for
2016
has
a
family
deductible
of
$13,100,
with
no
other
cost
sharing.
This
is
permissible
because
it
does
not
exceed
either
the
ACA
out-of-pocket
maximum
limit
($13,700)
or
the
lower
HDHP
out-of-pocket
maximum
limit
($13,100).
However,
the
plan
must
further
provide
that
no
member
of
the
family
will
be
required
to
contribute
more
than
$6,850
toward
Continue Reading...
|
|
ACA Back in Front of the Supreme Court
|
03/06/2015
|
By: Jason Lacey
|
The
Supreme
Court
heard
oral
arguments
this
week
in
King
v.
Burwell,
the
latest
challenge
to
the
Affordable
Care
Act.
At
issue
in
the
case
is
whether
the
tax
credits
that
are
available
to
subsidize
the
cost
of
health
insurance
coverage
are
available
in
all
of
the
public
exchanges
or
just
exchanges
that
are
operated
by
states.
If
the
credits
are
only
available
in
state-based
exchanges,
that
would
severely
limit
access
to
the
credits,
because
most
states
(37
of
them)
have
some
form
of
an
exchange
operated
by
the
federal
government.
This
could
have
an
impact
beyond
individual
access
to
the
tax
credits.
For
example,
whether
and
to
what
extent
large
employers
may
be
subject
to
penalty
under
the
"play-or-pay"
rules
depends
on
whether
and
to
what
extent
employees
of
those
employers
are
able
to
qualify
for
tax
credits.
If
tax
credits
aren't
available
to
employees
because
the
exchange
in
their
state
is
a
federally
operated
exchange
(as
in
Kansas),
the
employer
might
avoid
penalties,
even
if
it
is
not
offering
the
type
of
coverage
required
by
the
play-or-pay
rules.
It's
hard
to
predict
how
the
case
will
come
out.
The
court
is
expected
to
break
along
the
typical
ideological
lines,
with
the
result
depending
on
how
the
"swing"
votes
go.
We
should
have
an
answer
sometime
this
summer.
A
transcript
of
the
oral
arguments
is
here.
|
|
IRS Provides Preliminary Cadillac Tax Guidance
|
02/28/2015
|
By: Jason Lacey
|
The
IRS
recently
issued
Notice
2015-16,
which
represents
the
first
step
in
yet
another
significant
ACA
guidance
project
that
will
unfold
over
the
next
two
years.
This
project
will
flesh
out
the
scope
and
mechanics
of
so-called
“Cadillac”
tax
enacted
as
part
of
the
ACA.
Here
is
an
overview
of
the
initial
guidance.
Background
Beginning
in
2018,
a
40%
excise
tax
will
be
imposed
on
the
value
of
“applicable
employer-sponsored
coverage”
provided
to
an
employee
each
year,
to
the
extent
that
value
exceeds
a
threshold
amount.
The
statutory
thresholds
are
$10,200
for
self-only
coverage
and
$27,500
for
other-than-self-only
coverage.
There
are
some
potential
upward
adjustments
to
the
threshold
amounts,
including
for
cost
of
living,
although
the
thresholds
are
not
anticipated
to
adjust
as
quickly
as
the
growth
in
healthcare
costs.
Items
Included
in
Applicable
Coverage
Notice
2015-16
begins
to
clarify
the
coverage
that
will
(and
will
not)
be
included
in
“applicable
employer-sponsored
coverage”
for
purposes
of
the
Cadillac
tax,
in
addition
to
major
medical
coverage.
- Executive
Physicals
and
HRAs.
Executive
physical
programs
and
HRAs
will
be
included.
- HSAs.
Employer
contributions
to
HSAs
and
employee
salary-reduction
contributions
to
HSAs
will
be
included.
Employee
after-tax
contributions
(i.e.,
employee
contributions
made
outside
a
cafeteria
plan)
will
not
be
included.
- On-Site
Clinics.
Coverage
through
on-site
clinics
generally
will
be
included,
but
the
IRS
is
considering
an
exception
for
on-site
clinics
that
offer
only
“de
Continue Reading...
|
|
DOL Continues to Add States to Employee Misclassification Initiative
|
01/26/2015
|
By: Donald Berner
|
With
the
addition
of
Wisconsin
last
week,
the
Department
of
Labor
(DOL)
now
has
19
states
participating
in
the
collaborative
effort
to
reduce
the
misclassification
of
employees
as
contractors.
The
DOL's
initiative is
a
concerted
effort
to
investigate
and
pursue
companies
that
misclassify
employees
as
contractors
to
avoid
various
tax
and/or
benefit
burdens.
Over
the last
three
to
four
years,
the initiative
has
resulted
in a
significant number of
companies
being
investigated
by
the
DOL (or
a
state
partner)
and
the payment
of
significant
back pay
amounts
to
employees.
If
your
company
makes use
of
independent
contractors
(contract
labor),
you
should
carefully
review
these
arrangements
to
ensure they
are
truly
contractors
and
not
employees.
Correcting
these
issues before
a
government
investigation
is
almost
certain
to
be
better
for
your
company.
|
|
IRS Releases 2015 COLAs for Benefit Plans
|
12/02/2014
|
By: Jason Lacey
|
The
IRS
has
released
the
annual
cost
of
living
adjustments
for
various
benefit-plan
limits.
The
adjusted
amounts
will
apply
for
2015.
Here
are
the
highlights:
- Retirement
plan
elective
deferrals
(402(g)
limit)
-
$18,000
($500
increase)
- Retirement
plan
catch-up
contributions
-
$6,000
($500)
- Annual
additions
to
a
defined
contribution
plan
(415
limit)
-
$53,000
($1,000
increase)
- Definition
of
highly
compensated
employee
-
$120,000
($5,000
increase)
- Annual
compensation
limit
(401(a)(17)
limit)
-
$265,000
($5,000
increase)
For
individuals
age
50
and
older,
these
increased
limits
represent
the
ability
to
electively
contribute
up
to
$24,000
to
a
401(k)
plan,
403(b)
plan,
or
governmental
457(b)
plan
during
2015.
Inflation-adjusted
amounts
for
high
deductible
health
plans
(HDHPs)
and
health
savings
accounts
(HSAs)
were
released
earlier
this
year
(see
prior
post here).
|
|
IRS and HHS Rein in Minimum Value Plans
|
11/05/2014
|
By: Jason Lacey
|
New
guidance
from
the
IRS
and
HHS
aims
to
quickly
scuttle
the
use
of
health
plans
designed
to
push
the
limits
of
minimum
value.
These
plans
(sometimes
referred
to
in
the
market
simply
as
“minimum
value
plans,”
“MVPs,”
or
“MV
lite”)
aimed
to
reduce
cost
by
excluding
coverage
for
key
benefits,
such
as
physician
services
or
inpatient
hospitalization,
but
were
nonetheless
said
to
provide
minimum
value
because
they
qualified
under
the
MV
calculator.
The
Concept.
The
idea
behind
MVPs
was
to
create
a
plan
that
would
allow
a
large
employer
to
avoid
all
penalties
under
the
ACA’s
employer
shared
responsibility
mandate
at
relatively
low
cost.
As
minimum
essential
coverage
that
provided
minimum
value,
an
MVP
would
allow
a
large
employer
to
avoid
all
penalties,
so
long
as
the
plan
was
affordable.
And
due
to
the
relatively
low
cost,
employers
could
make
MVPs
affordable
with
little
or
no
premium
subsidy.
But
the
effect
of
MVPs
was
not
limited
to
penalty
avoidance
by
employers.
Employees
who
are
offered
coverage
under
an
affordable,
minimum
value
plan
are
ineligible
for
premium
tax
credits
(PTCs)
through
state
and
federal
exchanges,
even
if
they
turn
down
the
employer-sponsored
coverage.
And
with
MVPs,
this
meant
employees
could
be
knocked
out
of
PTC
eligibility
with
an
offer
of
coverage
under
a
plan
that
intentionally
excluded
a
significant
category
of
benefits
(e.g.,
inpatient
hospitalization).
This
may
well
have
been
their
undoing.
MV
Calculator.
Why
did
this
seem
to
work?
It
all
came
down
to
the
MV
calculator.
Final
HHS
regulations
and
Continue Reading...
|
|
New 125 Plan Election Change Addresses Key ACA Concern
|
09/29/2014
|
By: Jason Lacey
|
Employers
considering
the
look-back
measurement
method
to
identify
full-time
employees
for
purposes
of
the
ACA’s
employer
shared
responsibility
mandate
have
expressed
concern
about
the
impact
on
employees
who
are
treated
as
full-time
for
a
stability
period
but
experience
a
reduction
in
actual
hours
of
service.
Locked-In
Status.
Employers
recognize
that
these
employees
may
prefer
to
drop
employer-sponsored
coverage
upon
the
reduction
in
hours.
But
employers
that
want
to
avoid
penalty
exposure
under
the
ACA
must
continue
to
make
these
employees
eligible
for
coverage,
because
they
are
recognized
as
full-time.
And
because
there
is
no
loss
of
eligibility,
the
employees
cannot
make
a
voluntary
decision
to
drop
coverage
in
the
middle
of
the
year.
There
is
no
change
in
status
that
will
support
an
election
change
under
the
existing
125
plan
regulations.
The
employees
are
locked-in.
New
Election
Change.
A
recent
notice
from
the
IRS
provides
important
relief
from
this
problem
by
adding
a
new
election-change
event
to
the
cafeteria-plan
rules.
An
employee
can
now
make
a
mid-year
election
to
revoke
health
plan
coverage
(not
including
health
FSA
coverage)
upon
a
reduction
in
hours
of
service,
if
the
following
conditions
are
satisfied:
- The
employee
has
been
in
a
full-time
position
and
changes
to
a
position
that
is
reasonably
expected
to
average
less
than
30
hours
of
service
per
week,
even
if
that
change
does
not
result
in
a
loss
of
health
plan
eligibility.
- The
employee
represents
to
the
employer
that
the
employee
Continue Reading...
|
|
PCORI Fee Increases Slightly
|
09/20/2014
|
By: Jason Lacey
|
The
IRS
has
announced
that,
for
plan
years
ending
on
or
after
October
1,
2014
and
before
October
1,
2015,
the
Patient
Centered
Outcomes
Research
Institute
Trust
Fund
tax
(or
"PCORI fee")
will
be
$2.08
per
covered
life,
up
slightly
from
the
rate
of
$2.00
per
covered
life
that
applied
for
plan
years
ending
on
or
after
October
1,
2013
and
before
October
1,
2014.
For
insured
plans,
the
PCORI fee
is
paid
by
the
insurance
carrier,
but
for
self-insured
plans,
the
plan
sponsor
(typically
the
employer)
is
responsible
for
calculating
and
paying
the
fee.
Payment
of
the
fee
is
due
by
July
31
of
the
year
following
the
calendar
year
in
which
the
plan
year
ends.
Thus,
for
example,
for
plan
years
ending
in
2014,
the
PCORI fee
is
due
by
July
31,
2015.
IRS Form
720
must
be
filed
along
with
payment
of
the
fee.
The
announcement
(Notice
2014-56)
is
available
here.
|
|
IRS Issues Key Regulations on Cash-Balance Pension Plans
|
09/18/2014
|
By: Jason Lacey
|
The
IRS
released
two
new
regulation
packages
today
dealing
with
"cash
balance"
and
other
"hybrid"
pension
plans.They
provide
some
important
clarifications
on
implementation
of
the
"market
rate"
requirement
enacted
in
2006
as
part
of
the
Pension
Protection
Act.
The
market-rate
requirement
ensures
that
cash-balance
plans
do
not
discriminate
against
older
workers
by
crediting
interest
at
an
unreasonably
high
rate.
Final
Regulations.
One
package
of
rules
finalizes
(at
long
last)
market-rate-of-return
regulations
under
Code
Section
411(b)(5)
that
were
proposed
in
2010.
Among
other
things,
the
regulations
identify
the
types
of
interest-crediting
rates
that
will
be
considered
market
rates
of
return,
including:
- the
430(h)(2)(C)
segment
rates
(adjusted
or
unadjusted),
- the
actual
rate
of
return
on
plan
assets
(if
conditions
are
satisfied),
- the
rate
of
return
on
certain
regulated
investment
companies
(RICs),
and
- a
fixed
rate
of
up
to
6%
(increased
from
5%
in
the
proposed
regulations).
Interest
Rate
Floors.
The
final
regulations
address
the
use
of
an
annual
or
cumulative
floor
on
a
variable
interest-crediting
rate
and
allow
for
a
floor
of
up
to
5%
annually
(increased
from
4%
in
the
proposed
regulations)
in
connection
with
any
Notice
96-8
rate
(e.g.,
the
yield
on
30-year
Treasury
Constant
Maturities)
and
a
floor
of
up
to
4%
annually
in
connection
with
any
of
the
430(h)(2)(C)
segment
rates.
An
investment-based
interest-crediting
rate
(including
the
rate
of
return
on
plan
assets)
cannot
be
subject
to
an
annual
floor,
but
may
be
subject
to
a
cumulative
floor
Continue Reading...
|
|
Halbig Decision Shouldn't Change Employer Planning for ACA Implementation
|
08/15/2014
|
By: Jason Lacey
|
The
recent
decision
by
the
Court
of
Appeals
for
the
D.C.
Circuit
in
Halbig
v.
Burwell
(here)
is
certainly
a
major
development
in
the
ongoing
saga
of
health
care
reform
implementation.
If
it
holds
up,
it
would
have
a
significant
impact
on
the
ACA
as
a
whole,
since
both
the
employer
and
individual
mandates
are
affected
by
the
presence
(or
absence)
of
premium-assistance
tax
credits.
But
this
likely
isn't
the
end
of
the
line
for
tax
credits
in
federally
facilitated
exchanges
(which
currently
includes
the
Kansas
exchange).
The
result
in
the
case
was
not
unexpected,
given
the
makeup
of
the
3-judge
panel.
And
there
is
a
further
expectation
that
the
case
will
be
given
reconsideration
by
the
full
D.C.
Circuit,
which
may
lean
the
other
way.
(The
government's
lawyers
have
already
requested
such
reconsideration.)
So
the
decision
could
be
short-lived.
Even
if
the
decision
stands,
the
Fourth
Circuit's
opposing
decision
in
King
v.
Burwell
( here)
creates
a
"circuit
split"
on
the
issue,
making
the
issue
ripe
for
Supreme
Court
review.
And
we
know
the
Supreme
Court
has
been
creative
in
its
interpretation
of
things
related
to
the
ACA,
like
what
is
or
isn’t
a
“tax."
Concluding
that
the
statutory
reference
to
state-based
exchanges
really
means
either
a
state-based
exchange
or
a
federally
facilitated
exchange
might
not
be
a
big
stretch.
It's
also
unclear
what
immediate
precedential
impact
(if
any)
the
case
has.
The
ruling
would
be
controlling
in
the
D.C.
Circuit,
but
it
may
have
limited
impact
outside
of
the
circuit,
Continue Reading...
|
|
2015 Inflation Adjusted Amounts for HSAs and HDHPs
|
06/20/2014
|
By: Jason Lacey
|
The
IRS
has
released
the
2015
inflation-adjusted
amounts
for
health
savings
accounts
(HSAs)
and
high-deductible
health
plans
(HDHPs).
HDHP
Minimums
and
Maximums.
The
minimum
annual
deductible
for
an
HDHP
will
increase
to
$1,300
for
self-only
coverage
and
$2,600
for
family
coverage.
The
maximum
annual
out-of-pocket
for
an
HDHP
will
increase
to
$6,450
for
self-only
coverage
and
$12,900
for
family
coverage.
Relationship
to
ACA
Maximum
Out-of-Pocket.
The
Affordable
Care
Act
also
sets
out-of-pocket
maximums
for
non-grandfathered
plans.
For
2014,
the
ACA
maximum
and
the
HDHP
maximum
are
the
same.
But
the
amounts
are
indexed
at
different
rates,
and
for
2015
they
will
be
different.
The
ACA
maximum
will
be
$6,600
for
self-only
coverage
and
$13,200
for
family
coverage
(compared
to
$6,450
and
$12,900
for
HDHPs).
What
does
this
mean?
A
plan
designed
to
satisfy
the
ACA
maximums
will
not
necessarily
qualify
as
an
HDHP.
It
will
need
to
satisfy
the
lower
maximum
applicable
to
HDHPs.
Maximum
HSA
Contribution.
The
maximum
annual
contribution
to
an
HSA
for
2015
will
increase
slightly
to
$3,350
for
an
individual
with
self-only
HDHP
coverage
and
$6,650
for
an
individual
with
family
HDHP
coverage.
Catch-up
contributions
for
individuals
age
55
and
older
are
not
inflation-adjusted
and
remain
at
$1,000
per
year.
Recall
that
these
annual
maximums
are
prorated
on
a
monthly
basis
for
an
individual
who
is
covered
under
an
HDHP
for
less
than
the
full
year.
Also,
special
rules
apply
when
one
or
both
spouses
have
HDHP
coverage,
with
the
general
effect
of
limiting
the
household
to
a
single
family-level
Continue Reading...
|
|
IRS Clarifies Impact of Health FSA Carryover on HSA Eligibility
|
04/10/2014
|
By: Jason Lacey
|
An
internal
IRS memorandum
has
provided
much-needed
clarification
on
the
interaction
between
the
new
$500
carryover
rule
for
health
FSA
plans
and
eligibility
to
make
contributions
to
a
health
savings
account
(HSA).
The
conclusions
in
the
memo
are
generally
favorable,
but
employers
wanting
to
both
offer
the
carryover
rule
in
a
health
FSA
and
allow
employees
to
be
HSA-eligible
will
need
to
carefully
design
their
health
FSA
plans
to
take
advantage.
Background.
In
guidance
issued
last
year,
the
IRS
provided
limited
relief
from
the
use-it-or-lose-it
rule
that
applies
to
health
FSA
plans
by
allowing
for
a
carryover
of
up
to
$500
of
unused
amounts
each
year.
(See
my
post
here.)
Among
the
open
questions
was
how
this
carryover
would
affect
an
individual's
eligibility
to
make
HSA
contributions
and
what
steps,
if
any,
could
be
taken
to
ensure
an
individual
would
be
HSA-eligible
if
the
individual
had
a
carryover
amount.
In
general,
to
be
HSA-eligible,
an
individual
cannot
have
any
low-deductible
health
coverage,
including
coverage
under
a
general-purpose
health
FSA.
Carryover
Affects
HSA Eligibility
for
Entire
Year.
In
this
recent
memorandum,
the
IRS
confirmed
that
an
individual
who
has
a
carryover
amount
in
a
general-purpose
health
FSA
is
ineligible
to
contribute
to
an
HSA
for
the
entire
carryover
year,
even
after
the
individual
exhausts
the
balance
in
the
health
FSA.
For
example,
if
at
the
end
of
2014
an
individual
has
$400
remaining
in
a
general-purpose
health
FSA
and
that
amount
carries
over
to
a
general
purpose
health
FSA
for
2015,
the
individual
will
Continue Reading...
|
|
IRS Provides Guidance on Treatment of Same-Sex Spouses In Retirement Plans
|
04/04/2014
|
By: Jason Lacey
|
The
IRS
released
its
long-anticipated
guidance
today
on
the
impact
of
the
Windsor
case
to
qualified
retirement
plans.
The
guidance
resolves
a
potentially
thorny
issue
on
retroactive
recognition
of
same-sex
marriages
and
clarifies
when
plans
must
adopt
any
amendments
required
to
comply
with
Windsor.
Here
are
the
highlights:
Retroactivity
Permitted
But
Not
Required.
Plans
are
not
required
to
recognize
same-sex
marriages
for
any
period
before
June
26,
2013
(the
date
of
the
Windsor
decision).
They
are
permitted
to
designate
an
earlier
date
as
of
which
same-sex
marriages
will
be
recognized
for
plan
purposes,
although
the
guidance
observes
that
recognizing
same-sex
marriages
for
all
purposes
as
of
a
date
earlier
than
June
26,
2013 may
trigger
requirements
that
are
difficult
to
implement
retroactively
and
may
create
unintended
consequences,
so
caution
must
be
exercised.
Amendments
May
Not
Be
Necessary.
A
plan
must
be
amended
to
reflect
the
outcome
in
Windsor
only
if
the
plan
terms
are
inconsistent
with
Windsor.
For
example,
a
plan
that
defines
a
spouse
as
only
a
person
of
the
opposite
sex
would
be
inconsistent
with
the
outcome
in
Windsor.
But
a
plan
that
merely
uses
the
term
"spouse"
or
"lawful
spouse"
without
limiting
it
to
persons
of
the
opposite
sex
may
be
ok.
Amendment
Timing.
To
the
extent
an
amendment
is
required,
it
generally
must
be
adopted
by
December
31,
2014.
(Special
rules
may
apply
for
non-calendar-year
plans
and
governmental
plans.)
Health
and
Welfare
Plans
Unaffected.
This
guidance
addresses
only
retirement
plans
and
does
not
impact
health
and
welfare
plans.
The
IRS's
notice
(Notice
Continue Reading...
|
|
IRS Provides Final Guidance on Play-or-Pay Requirements
|
02/15/2014
|
By: Jason Lacey
|
On
February
12,
2014,
the
IRS
published
its
long-awaited
final
regulations
on
the
employer
play-or-pay
mandate
under
health
care
reform
(here).
Although
the
final
regulations
do
not
make
significant
wholesale
changes
to
the
proposed
regulations,
they
do
provide
some
important
clarifying
rules
and
transitional
guidance
that
will
help
smooth
the
path
to
full
implementation
of
the
employer
shared
responsibility
mandate.
Background.
By
way
of
brief
background,
the
employer
shared
responsibility
(pay-or-play)
mandate
under
health
care
reform
requires
an
"applicable
large
employer"
(generally
an
employer
with
50
or
more
full-time-equivalent
employees)
to
offer
affordable,
minimum
value
health
insurance
coverage
to
its
full-time
employees
(defined
as
employees
working
an
average
of
30
or
more
hours
per
week).
Applicable
large
employers
that
fail
to
offer
minimum
essential
coverage
to
at
least
95%
of
their
full-time
employees
generally
face
an
annual
penalty
of
$2,000
per
full-time
employee,
if
at
least
one
of
the
employer's
full-time
employees
obtains
subsidized
coverage
through
the
public
insurance
exchange.
Applicable
large
employers
that
offer
minimum
essential
coverage
to
at
least
95%
of
their
full-time
employees
but
do
not
ensure
that
the
coverage
is
both
affordable
and
provides
minimum
value
generally
face
a
penalty
of
$3,000
per
full-time
employee
that
obtains
subsidized
coverage
through
the
public
exchange.
Key
issues
under
these
rules
include
determining
who
is
an
applicable
large
employer,
who
is
a
full-time
employee,
and
whether
coverage
offered
to
an
employee
is
affordable.
Details,
Details.
The
specific
provisions
of
the
final
regulations
touch
on
many
different
areas
to
a
degree
Continue Reading...
|
|
IRS Finalizes Amendments to 401(k) Safe Harbor Regulations
|
11/22/2013
|
By: Jason Lacey
|
In
new
final
amendments
to
the
401(k)
safe
harbor
regulations
(here),
the
IRS
has
provided
some
additional
flexibility
on
mid-year
reductions
or
suspensions
of
safe
harbor
contributions
but
also
has
added
some
new
requirements.
The
regulations
apply
to
amendments
adopted
after
May
18,
2009,
except
that
the
additional
requirements
for
mid-year
reductions
or
suspensions
of
safe
harbor
matching
contributions
apply
for
plan
years
beginning
on
or
after
January
1,
2015.
Background.
Safe
harbor
401(k)
plans
are
exempt
from
certain
nondiscrimination
testing
requirements
but
must
meet
specific
requirements
related
to
employer
contributions
and
vesting
and
must
provide
an
annual
notice.
The
employer
contribution
requirement
is
satisfied
through
either
a
matching
contribution
or
a
"nonelective"
contribution.
Safe
harbor
plan
provisions
generally
must
be
adopted
at
or
before
the
beginning
of
a
plan
year
and
must
remain
in
effect
for
the
entire
plan
year.
Because
safe
harbor
plan
provisions
must
remain
in
effect
for
the
entire
plan
year,
employers
generally
have
been
prohibited
from
reducing
or
suspending
safe
harbor
contributions
in
the
middle
of
a
plan
year.
A
limited
exception
has
been
available
for
safe
harbor
matching
contributions,
which
could
be
reduced
or
suspended
with
at
least
30
days
advance
notice,
so
long
as
participants
were
given
an
opportunity
to
change
their
deferral
elections.
Before
2009,
however,
safe
harbor
nonelective
contributions
could
not
be
reduced
or
suspended
during
the
plan
year.
Proposed
regulations
issued
in
2009
permitted
a
narrow
exception
allowing
for
reduction
or
suspension
of
safe
harbor
nonelective
contributions
in
cases
of
substantial
Continue Reading...
|
|
IRS Modifies Health FSA Use-It-or-Lose-It Rule
|
11/04/2013
|
By: Jason Lacey
|
In
new
guidance
issued
late
last
week
(here),
the
IRS
tackled
a
long-standing
issue
with
cafeteria
plans:
the
requirement
that
all
dollars
be
used
by
the
end
of
the
plan
year
or
be
forfeited.
Employees
can
now
be
allowed
to
carryover
up
to
$500
remaining
in
a
health
FSA
account
at
the
end
of
the
year
and
use
it
at
any
time
during
the
following
year.
But
there
are
some
conditions
and
limitations,
and
it's
not
clear
that
this
approach
will
be
ideal
for
all
plans.
Here's
what
you
need
to
know.
Optional.
Employers
are
not
required
to
add
the
carryover
option
to
their
health
FSA
plans.
But
if
they
do
want
to
add
the
option,
they
must
timely
amend
their
plans
and
make
sure
they
meet
the
other
conditions
for
offering
the
carryover.
Also,
employers
are
not
required
to
allow
carryover
of
the
full
$500.
They
could
specify
a
lower
carryover
amount.
Relationship
to
$2,500
Cap.
Amounts
carried
over
from
one
plan
year
to
the
next
under
this
guidance
do
not
count
against
the
$2,500
cap
on
salary
reduction
contributions
for
the
carryover
year.
So,
for
example,
an
employee
could
carryover
$500
from
the
2014
plan
year
into
the
2015
plan
year
and
make
a
$2,500
salary
reduction
election
for
the
2015
plan
year,
giving
the
employee
a
total
of
$3,000
available
during
the
2015
plan
year.
Grace
Period.
A
plan
cannot
offer
both
the
carryover
option
and
a
grace
period
option.
It
must
be
one
or
the
other.
This
leads
Continue Reading...
|
|
IRS Releases 2014 COLAs for Benefit Plans
|
11/02/2013
|
By: Jason Lacey
|
The
IRS
has
released
the
annual
cost
of
living
adjustments
for
various
tax-related
items,
including
benefit
plan
limits
(see
here, here,
and
here).
The
adjusted
amounts
will
apply
for
2014.
For
the
most
part
they
reflect
no
increase
or
only
a
modest
increase
over
2013
levels.
Here
are
the
highlights:
- Retirement
plan
elective
deferrals
(402(g)
limit)
-
$17,500
(unchanged)
- Retirement
plan
catch-up
contributions
-
$5,500
(unchanged)
- Annual
additions
to
a
defined
contribution
plan
(415
limit)
-
$52,000
($1,000
increase)
- Definition
of
highly
compensated
employee
-
$115,000
(unchanged)
- Annual
compensation
limit
(401(a)(17)
limit)
-
$260,000
($5,000
increase)
- Social
security
taxable
wage
base
-
$117,000
($3,300
increase)
Inflation-adjusted
amounts
for
high
deductible
health
plans
(HDHPs)
and
health
savings
accounts
(HSAs)
were
released
earlier
this
year
(see
prior
post here).
|
|
Post-Windsor Guidance Addresses Employment Tax Refunds
|
09/25/2013
|
By: Jason Lacey
|
In
another
round
of
post-Windsor
guidance
(here),
the
IRS
has
provided
some
alternative
processes
for
obtaining
refunds
of
employment
taxes
(FICA
tax
and
withheld
income
tax)
paid
with
respect
to
same-sex
spouses
prior
to
the
Supreme
Court's
decision
in
Windsor (e.g.,
for
coverage
under
a
cafeteria
or
health
plan).
Overpayments
for
2013.
With
respect
to
taxes
paid
in
2013,
there
are
two
alternative
procedures
for
claiming
a
refund:
(1)
the
employer
may
true-up
the
entire
year's
withholding
on
its
fourth
quarter
2013
employment
tax
return
(Form
941);
or
(2)
the
employer
may
file
a
single
amended
employment
tax
return
(Form
941-X)
for
the
fourth
quarter
of
2013
to
reflect
the
correct
withholding
amounts
for
the
entire
year.
Both
of
these
approaches
allow
employers
to
avoid
filing
amended
returns
for
each
quarter
of
the
year
to
correct
the
withholding
for
that
quarter.
For
the
third
quarter
of
2013
(July-September),
employers
should
report
on
the
employment
tax
return
for
that
quarter
the
amount
of
taxes
actually
withheld
and
not
refunded
by
the
end
of
the
quarter.
For
example,
if
an
employer
adjusted
its
withholding
system
effective
August
1,
2013
and
also
refunded
any
taxes
withheld
in
July
2013,
then
it
would
not
report
any
of
those
withheld
amounts
on
its
Form
941
for
the
third
quarter.
But
if
it
did
not
refund
the
July
taxes
by
the
end
of
the
third
quarter,
then
those
taxes
should
be
reported
on
the
third
quarter
return
and
a
refund
claimed
by
way
of
one
of
the
methods
Continue Reading...
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|
New Guidance Will Limit HRAs and Employer Use of Individual Market Coverage
|
09/16/2013
|
By: Jason Lacey
|
A
continuing
area
of
uncertainty
under
health
care
reform
has
been
the
treatment
of
health
reimbursement
arrangements
(HRAs)
and
other
arrangements
that
might
be
used
to
allow
employees
to
purchase
health
insurance
through
individual
policies
with
the
employer
subsidizing
some
or
all
of
the
cost.
A
new
notice
from
the
IRS,
HHS,
and
DOL
(here)
provides
some
clarity
on
these
-
and
some
related
-
issues.
Employer
Payment
Plans.
As
a
preliminary
matter,
this
guidance
gives
us
a
new
term:
"employer
payment
plan."
This
refers
to
an
arrangement
by
which
an
employer
provides
payment
or
reimbursement
of
individual
market
insurance
premiums
in
the
manner
described
in
an
old
Revenue
Ruling
(Rev.
Rul.
61-146).
Historically,
these
employer
payment
plans
have
been
permissible
and
have
allowed
employers
to
provide
pre-tax
subsidies
of
individual
market
coverage.
Integration
of
Plans
with
Individual
Market
Coverage.
A
concern
with
HRAs
and
employer
payment
plans
is
that
they
may
be
treated
as
violating
two
key
health
care
reform
mandates:
the
prohibition
on
annual
limits
and
the
requirement
to
provide
no-cost
preventive
care
services.
Previous
FAQ
guidance
(see
coverage
here)
said
that
HRAs
would
be
treated
as
satisfying
the
annual
limit
rule
if
they
were
"integrated"
with
other
coverage
that
satisfies
the
annual
limit
rule.
This
guidance
effectively
confirms
that
treatment
and
provides
a
similar
rule
for
preventive
care.
But
the
guidance
goes
on
to
say
that
HRAs
and
employer
payment
plans
may
not
be
treated
as
integrated
with
individual
market
coverage.
Thus,
an
HRA
or
employer
payment
plan
Continue Reading...
|
|
IRS Clarifies Impact of Preventive Care Services on HDHPs
|
09/09/2013
|
By: Jason Lacey
|
The
IRS
has
provided
an
expected,
but
welcome,
clarification
(see
Notice
here)
regarding
the
impact
of
providing
no-cost
preventive
care
services
under
a
high-deductible
health
plan.
Background.
To
be
eligible
to
contribute
to
a
health
savings
account
(HSA),
an
individual
must
be
covered
under
a
qualifying
high-deductible
health
plan
(HDHP)
and
must
not be
covered
under
any
low-deductible
coverage,
other
than
permitted
coverage.
Permitted
coverage
incudes
coverage
for
preventive
care
services
within
the
meaning
of
Internal
Revenue
Code
Section
223(c)(2)(C).
Health
Care
Reform.
Under
health
care
reform,
non-grandfathered
health
plans
are
required
to
offer
specified
preventive
care
services
without
cost
sharing.
This
rule
applies
to
non-grandfathered
plans
that
otherwise
meet
the
requirements
to
be
an
HDHP.
But
the
preventive
care
services
required
under
health
care
reform
are
not
quite
the
same
as
preventive
care
services
described
in
guidance
under
Code
Section
223(c)(2)(C).
And,
of
course,
there
cannot
be
a
deductible.
So
we
have
wondered:
Will
compliance
with
the
preventive
care
mandate
under
health
care
reform
risk
causing
a
plan
to
no
longer
qualify
as
an
HDHP?
Guidance.
The
assumption
has
been
that
the
IRS
would
not
view
preventive
care
services
provided
in
accordance
with
health
care
reform
as
impermissible
low-deductible
coverage.
Otherwise
HDHPs
could
effectively
no
longer
exist,
unless
they
remained
grandfathered.
That
assumption
has
now
been
confirmed:
"[A] health
plan
will
not
fail
to
qualify
as
an
HDHP
under
section
223(c)(2)
of
the
Code
merely
because
it
provides
without
a
deductible
the
preventive
care
health
services
required
under
section
2713
of
the
PHS Act
to
Continue Reading...
|
|
IRS Releases Initial Guidance on Same-Sex Spouses
|
08/29/2013
|
By: Jason Lacey
|
We
have
been
anticipating
guidance
from
the
IRS
on
the
treatment
of
same-sex
spouses
for
tax
and
benefit
purposes
in
light
of
the
Supreme
Court's
overturning
of
DOMA,
and
here
it
is.
Married
Anywhere.
Rev.
Rul.
2013-17
(here)
says
that
a same-sex
couple
validly
married
anywhere
(including
in
a
foreign
country)
will
be
recognized
as
married
for
federal
tax
purposes,
even
if
their
marriage
is
not
recognized
under
the
law
of
their
home
state.
In
other
words,
it’s
a
state-of-celebration
rule,
not
a
state-of-residence
rule.
All
Tax
Purposes.
The
rule
applies
for
all
tax
purposes,
including
employee
benefits.
So
in
addition
to
filing
joint
tax
returns,
same-sex
spouses
may
obtain
tax-free
coverage
for
each
other
under
health
or
cafeteria
plans
and
are
entitled
to
spousal
rights
under
401(k)
and
other
qualified
retirement
plans.
Also,
medical
expenses
incurred
by
one
spouse
in
a
same-sex
marriage
will
qualify
for
reimbursement
from
a
flexible
spending
account
or
health
savings
account
maintained
by
the
other
spouse.
Recognition
of
the
same-sex
marriage
may
present
an
issue
for
participants
in
dependent
care
assistance
plans,
because
the
spouse's
income
and
employment
must
now
be
taken
into
account.
Retroactivity.
Individuals
in
existing same-sex
marriages
may
go
back
and
claim
a
refund
for
taxes
on
any
imputed
income
that
resulted
from
coverage
of
a
same-sex
spouse
or
children
of
a
same-sex
spouse
under
a
health
or
cafeteria
plan.
Employers
may
also
be
able
to
obtain
refunds
of
employment
taxes
imposed
on
imputed
income.
The
refunds
are
limited
to
years
for
which
the
statute
Continue Reading...
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|
Final Regs Make Few Changes to Contraception Mandate
|
07/10/2013
|
By: Jason Lacey
|
Final
tri-agency
regulations
were
released
recently
on
the
religious
employer
exemption
from
health
care
reform's
contraception
mandate,
and
there
is
little
change
from
the
approach
outlined
in
the
proposed
regulations
(see
discussion
here).
In
short,
the
regulations
finalize
a
moderate
expansion
of
the
definition
of
"religious
employer,"
but
continue
to
require
religiously
affiliated
nonprofit
organizations
to
seek
an
"accommodation"
that
allows
individuals
covered
under
their
plans
to
obtain
contraception
coverage
at
no
cost
through
an
insurance
carrier.
Applicability
Date.
A
key
piece
of
the
final
regulations
is
the
effective-date
provision,
which
provides
nonprofit
organizations
some
additional
time
to
comply
with
the
accommodation
requirement.
The
regulations
generally
apply
for
plan
years
beginning
on
or
after
January
1,
2014,
rather
than
applying
for
plan
years
beginning
on
or
after
August
1,
2013,
as
previously
expected.
Nonprofit
organizations
that
had
been
relying
on
a
one-year
safe
harbor
from
application
of
the
mandate
(see
description
here
and
here)
may
continue
relying
on
the
safe
harbor
until
the
first
plan
year
beginning
on
or
after
January
1,
2014.
CMS
has
updated
its
guidance
on
the
nonenforcement
safe
harbor
(here).
Definition
of
Religious
Employer.
The
definition
of
religious
employer
is
unchanged
from
the
proposed
regulations.
Although
not
intended
to
expand
the
number
of
organizations
that
qualify
as
religious
employers,
the
change
is
intended
to
clarify
that
religious
employers
providing
educational,
charitable,
and
social
services
may
qualify
for
the
exemption
even
though
some
of
their
constituents
or
employees
may
not
be
of
the
same
Continue Reading...
|
|
Play-or-Pay Delayed
|
07/02/2013
|
By: Jason Lacey
|
It’s
been
a
big
week
for
employee
benefits
law,
starting
with
the
Supreme
Court’s
Windsor
decision
on
DOMA
last
Wednesday,
the
administration’s
release
of
a
final
rule
on
the
religious
employer
exemption
to
the
contraception
mandate,
and
now
a
surprise
temporary
reprieve
for
employers
from
the
play-or-pay
penalties
that
were
scheduled
to
take
effect
in
2014.
Transition
Relief.
In
a
blog
post
published
quietly
on
Tuesday
afternoon,
a
senior
Treasury
Department
official
said
that
the
administration
had
been
listening
to
concerns
raised
by
employers
about
the
time
needed
to
implement
various
aspects
of
the
health
care
reform
law
and
would
be
publishing
formal
guidance
within
the
next
week
delaying
enforcement
of
the
employer
shared
responsibility
(or
“play-or-pay”)
mandates
until
2015.
However,
the
post
affirmed
that
qualifying
individuals
purchasing
health
insurance
coverage
through
exchanges
in
2014
would
continue
to
have
access
to
premium
assistance
tax
credits.
And
a
related
post
on
the
White
House
Blog
asserted
that
exchange
implementation
is
proceeding
"full
steam
ahead"
and
is
"on
target."
What
Does
the
Delay
Mean?
We
won’t
know
all
the
specifics
until
the
formal
guidance
is
released
(and
even
then
there
are
likely
to
be
questions).
But
in
broad
terms,
it
appears
that
large
employers
will
not
need
to
be
ready
to
comply
with
the
play-or-pay
requirements
until
at
least
January
1,
2015.
So,
for
example
-
- It
may
not
be
necessary
to
implement
the
look-back
measurement
period
regime
until
later
this
year,
or
perhaps
even
2014.
Continue Reading...
|
|
PCORI Trust Fund Tax is Deductible
|
06/12/2013
|
By: Jason Lacey
|
An
internal
IRS
memorandum
released
this
week
provides
informal
guidance
clarifying
that
the
PCORI
trust
fund
tax
is
generally
deductible
for
income-tax
purposes
when
paid
by
an
insurer
or
the
sponsor
of
a
self-insured
plan.
By
way
of
brief
background,
the
PCORI
trust
fund
tax
is
a
$1
(increasing
to
$2)
tax
on
the
average
number
of
covered
lives
under
a
health
insurance
policy
or
self-insured
health
plan.
It
funds
the
Patient
Centered
Outcomes
Research
Institute,
which
studies
the
comparative
effectiveness
of
medical
treatment
options.
Given
the
relatively
small
dollar
amount
of
the
tax
when
calculated
for
a
single
employer,
the
ability
to
deduct
the
tax
will
not
make
a
huge
difference.
But
it
is
a
welcome
clarification
just
the
same.
Reminder. For
plans
with
plan
years
ending
after
October
1,
2012
and
on
or
before
December
31,
2012,
the
tax
must
be
paid
and
a
return
filed
by
July
31,
2013.
The
IRS
recently
published
drafts
of
the
Form
720
and
related
instructions
that
must
be
used
to
pay
the
tax.
|
|
2014 Inflation Adjusted Amounts for HSAs and HDHPs
|
05/24/2013
|
By: Jason Lacey
|
The
IRS
has
released
the
2014
inflation-adjusted
amounts
for
health
savings
accounts
(HSAs)
and
high-deductible
health
plans
(HDHPs).
The
changes
are
not
large,
but
most
of
the
key
metrics
will
see
some
increase.
HDHP
Minimums
and
Maximums.
The
minimum
annual
deductible
for
an
HDHP
will
remain
unchanged
at
$1,250
for
self-only
coverage
and
$2,500
for
family
coverage.
The
maximum
annual
out-of-pocket
for
an
HDHP
will
increase
to
$6,350
for
self-only
coverage
and
$12,700
for
family
coverage.
>>Why
do
we
care? Whether
health
coverage
qualifies
as
HDHP
coverage
is
important
because
an
individual
must
have
HDHP
coverage
to
be
eligible
to
contribute
to
an
HSA.
>>Interaction
with
health
care
reform.
These
amounts
relate
only
to
compliance
with
the
HSA
requirements.
Health
care
reform
will
impose
further
limits
on
deductibles
and
out-of-pocket
maximums
beginning
in
2014
(see
prior
coverage
here),
and
plans
will
need
to
satisfy
those
requirements
in
addition
to
the
conditions
necessary
to
be
an
HDHP.
Maximum
HSA
Contribution. The
maximum
annual
contribution
to
an
HSA
for
2014
will
be
$3,300
for
an
individual
with
self-only
HDHP
coverage
and
$6,550
for
an
individual
with
family
HDHP
coverage.
Catch-up
contributions
for
individuals
age
55
and
older
are
not
inflation-adjusted
and
remain
at
$1,000
per
year.
Recall
that
these
annual
maximums
are
prorated
on
a
monthly
basis
for
an
individual
who
is
covered
under
an
HDHP
for
less
than
the
full
year.
Also,
special
rules
apply
when
one
or
both
spouses
have
HDHP
coverage,
with
the
general
effect
of
limiting
the
household
to
a
single
family-level
HSA
Continue Reading...
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|
Minimum Value Regulations Clarify Treatment of Wellness Incentives
|
05/04/2013
|
By: Jason Lacey
|
Buried
deep
within
new
regulations
on
the
arcane
"minimum
value"
requirement
is
important
new
guidance
on
how
employer
wellness
incentives
will
impact
both
the
minimum
value
and
affordability
analysis
with
respect
to
employer-provided
health
coverage.
Most
Wellness
Impact
is
Disregarded.
The
rule
described
in
the
regulation
is
fairly
simple,
although
not
favorable
to
employers.
For
purposes
of
determining
whether
health
coverage
is
affordable
to
employees,
any
reward
associated
with
participation
in
a
wellness
program
(other
than
related
to
tobacco
use)
is
ignored.
This
generally
has
the
effect
of
increasing
the
amount
the
employee
is
treated
as
contributing
toward
the
cost
of
coverage,
thereby
making
the
coverage
less
affordable.
Example.
Assume,
employees
generally
are
required
to
pay
$200
per
month
for
employee-only
coverage.
But
if
the
employees
participate
in
a
health
risk
assessment
and
basic
biometric
screening,
they
receive
a
discount
of
$50
per
month
(making
the
monthly
cost
$150).
For
purposes
of
determining
whether
the
coverage
is
affordable,
the
employees
are
treated
as
having
to
pay
$200
per
month
for
coverage,
even
though
they
may
actually
qualify
to
pay
only
$150
per
month.
There
is
a
similar
rule
for
minimum
value,
to
the
extent
the
wellness
incentive
impacts
the
cost-sharing
structure
of
the
plan
(deductible,
coinsurance,
or
copayments).
Non-tobacco
wellness
programs
are
ignored
in
determining
the
plan's
cost
sharing,
which
impacts
the
determination
whether
the
plan
provides
minimum
value.
For
example,
if
a
plan
has
a
$2,000
deductible
but
provides
a
$500
reduction
for
participating
in
a
non-tobacco-related
wellness
plan,
the
plan
Continue Reading...
|
|
More ACA FAQs: Mini-Med Plans and Clinical Trials
|
05/01/2013
|
By: Jason Lacey
|
We
are
now
up
to
Part
XV
of
the
tri-agency
FAQs
providing
guidance
on
various
ACA-related
issues.
The
most
important
guidance
in
these
FAQs
relates
to
the
treatment
of
mini-med
plans
that
obtained
a
waiver
from
the
prohibition
on
annual
limits.
But
the
FAQs
also
acknowledge,
in
so
many
words,
that
there
are
some
issues
on
which
further
guidance
simply
will
not
be
provided
before
2014,
so
we're
going
to
have
to
use
our
best
judgment.
Changing
the
Plan
Year
on
Mini-Med
Plans.
Employers
and
insurance
carriers
offering
mini-med
plans
were
required
to
obtain
a
waiver
from
the
prohibition
on
annual
limits.
Under
the
waiver
program,
plans
were
allowed
to
continue
until
the
end
of
the
plan
year
ending
in
2014.
Creative
employers
and
carriers
began
exploring
whether
they
could
change
their
plan
years
now
and
effectively
extend
waiver
through
most
of
2014.
For
example,
a
plan
with
a
plan
year
ending
June
30
might
change
to
a
plan
year
ending
November
30
and
rely
on
the
waiver
until
November
30.
These
FAQs
provide,
unequivocally,
that
a
change
in
the
plan
year
will
not
be
effective
to
extend
a
plan's
waiver.
The
waiver
only
applies
until
the
end
of
the
plan
year
ending
in
2014,
based
on
the
plan
year
the
plan
was
using
when
it
applied
for
the
waiver.
In
other
words,
nice
try.
Why
would
this
matter?
Well,
it
now
appears
that
mini-med
coverage
extending
into
2014
will
be
sufficient
to
allow
employers
with
fiscal
year
plans
to
avoid
some
of
the
Continue Reading...
|
|
New SBC Guidance and Templates
|
04/24/2013
|
By: Jason Lacey
|
The
latest
set
of
Affordable
Care
Act
FAQs
(Part
XIV)
announces
the
release
of
updated
templates
for
the
SBC
and
uniform
glossary.
The
updated
templates
are
designed
to
provide
employers
and
insurers
with
tools
to
comply
with
the
SBC
requirement
for
the
second
year
of
applicability.
Note
that
many
fiscal-year
plans
may
not
yet
have
begun
their
first
year
of
applicability
for
the
SBC
requirement,
which
essentially
begins
with
the
first
open-enrollment
period
beginning
on
or
after
September
23,
2012.
Limited
Template
Changes.
The
updated
templates
reflect
only
two
significant
changes.
They
add
language
for
describing
whether
the
coverage
does
(or
does
not)
provide
minimum
essential
coverage
(MEC),
and
they
add
language
for
describing
whether
the
coverage
does
(or
does
not)
provide
minimum
value
(MV).
There
is
no
change
in
the
language
describing
whether
benefits
are
(or
are
not)
subject
to
annual
limits,
and
the
template
keeps
the
same
two
coverage
examples
(childbirth
and
diabetes).
Extended
Enforcement
Relief.
Perhaps
the
most
significant
guidance
in
the
FAQs
is
an
extension
of
much
of
the
helpful
enforcement
relief
that
was
provided
through
previous
FAQs.
For
example:
- Compliance
emphasis.
IRS,
DOL,
and
HHS
will
continue
to
emphasize
"assisting
(rather
than
imposing
penalties
on)
plans,
issuers
and
others
that
are
working
diligently
and
in
good
faith
to
understand
and
come
into
compliance
with
the
new
law"
(Part
VIII,
Q2)
and
"will
not
impose
penalties
on
plans
and
issuers
that
are
working
diligently
and
in
good
faith
to
comply"
(Part
IX,
Q8).
Continue Reading...
|
|
PPACA Waiting Period Rules: 90 Days Means 90 Days
|
03/27/2013
|
By: Jason Lacey
|
HHS,
DOL,
and
IRS
recently
proposed
regulations
interpreting
the
health
care
reform
mandate
limiting
health
plan
waiting
periods
to
no
more
than
90
days.
The
guidance
is
fairly
straightforward,
but
does
not
include
one
clarification
we
were
anticipating:
3
months
cannot
be
used
as
a
substitute
for
90
days.
90
days
means
90
days.
Period.
What
is
a
waiting
period?
Under
the
rules,
a
waiting
period
is
any
period
of
time
that
must
pass
before
coverage
may
become
effective
for
anyone
who
has
otherwise
satisfied
the
plan's
eligibility
criteria.
Eligibility
criteria
that
are
based
solely
on
the
lapse
of
a
time
period
count
as
part
of
the
waiting
period.
So,
for
example,
if
a
plan
requires
employees
to
work
in
a
particular
job
classification
to
be
eligible
for
coverage,
time
spent
working
in
an
ineligible
job
classification
does
not
count
as
a
waiting
period,
and
the
90-day
period
may
be
imposed
once
an
employee
moves
to
an
eligible
job
classification.
But
if
a
plan
merely
requires
60
days
of
full-time
employment
to
become
eligible,
those
60
days
of
employment
count
toward
the
waiting
period,
so
another
90
days
may
not
be
imposed.
Variable-hour
employees. We
know
from
the
regulations
on
the
look-back
measurement
method
(see
coverage here)
that
we
may
need
some
time
(up
to
12
months
or
so)
to
determine
whether
a
variable-hour
employee
meets
an
eligibility
requirement
relating
to
average
hours
worked.
These
proposed
regulations
clarify
that
the
period
during
which
a
variable-hour
employee's
hours
of
service
are
being
measured
Continue Reading...
|
|
Something to Marvell At: An Actual Case Involving Section 409A
|
03/16/2013
|
By: Jason Lacey
|
We
have
been
thinking
and
talking
about
Section
409A
for
more
than
8
years
now,
but
most
of
that
discussion
has
been
hypothetical.
We
have
pursued
compliance
with
Section
409A,
but
have
been
left
to
wonder:
What
would
actually
happen
if
an
arrangement
violated
Section
409A?
Is
the
IRS
monitoring
compliance
or
enforcing
these
requirements?
Well
now
we
have
some
answers.
A
federal
court
recently
issued
a
ruling
(here)
dealing
with
the
consequences
under
Section
409A
of
a
discounted
stock
option
arrangement.
In
addition
to
providing
some
specific
legal
analysis
on
Section
409A
issues,
the
court’s
decision
provides
some
insights
into
how
a
case
like
this
might
arise.
Background.
The
case
involves
a
founder
and
senior
executive
of
a
technology
company
(Marvell
Semiconductor)
who
was
granted
stock
options
in
2003.
In
the
wake
of
the
various
stock
option
backdating
scandals,
the
company
reviewed
its
option
program
and
repriced
the
2003
option
grant.
As
a
result,
the
executive
paid
over
$5,000,000
in
additional
exercise
price,
presumably
reflecting
that
the
options
had
been
substantially
discounted
when
awarded.
The
IRS
Takes
Notice.
Disclosures
regarding
this
repricing
must
have
caught
the
IRS’s
attention.
In
2010,
it
issued
the
executive
a
notice
of
deficiency
to
the
executive
assessing
additional
taxes
and
penalties
under
Section
409A
in
excess
of
$3,000,000.
The
executive
paid
the
assessed
amounts
and
then
sued
to
obtain
a
refund,
arguing
that
the
option
arrangement
was
not
governed
by
Section
409A.
The
Court’s
Analysis.
The
court
made
several
important
rulings
regarding
the
impact
of
Section
409A
for
Continue Reading...
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|
New ACA FAQ Guidance Addresses Cost Sharing, Preventive Care, and Expatriate Plans
|
03/10/2013
|
By: Jason Lacey
|
Two
more
sets
of
tri-agency
FAQs
have
been
released,
providing
additional
interpretive
guidance
on
the
Affordable
Care
Act.
They
are
Part
XII
and
Part
XIII
in
the
series.
Cost-Sharing
Limitations.
Part
XII
includes
two
important
clarifications
on
the
cost-sharing
limitations
that
will
apply
to
group
health
plans
beginning
in
2014.
(1)
Deductible.
The
rule
that
limits
the
annual
deductible
under
a
plan
to
$2,000
for
self-only
coverage
and
$4,000
for
family
coverage
will
apply
only
to
non-grandfathered
plans
in
the
individual
and
small-group
markets.
Grandfathered
plans
and
large-group
plans
will
be
permitted
to
impose
higher
deductibles.
This
may
be
important
for
large-group
plans
that
want
to
offer
an
option
with
a
high
deductible
that
meets
the
minimum
requirements
for
a
60%
actuarial
value
plan.
(2)
Out-of-pocket
maximum.
The
rule
that
limits
overall
cost-sharing
under
a
plan
to
$5,000
for
self-only
coverage
and
$10,000
for
family
coverage
will
apply
to
all
non-grandfathered
plans.
So
even
large-group
plans
will
be
limited.
Preventive
Care.
Part
XII
also
provides
detailed
guidance
on
miscellaneous
issues
related
to
the
requirement
for
non-grandfathered
plans
to
offer
preventive-care
services
without
cost-sharing.
Some
highlights:
(1)
Out-of-network
services.
Plans
generally
are
permitted
to
impose
cost-sharing
with
respect
to
preventive-care
services
obtained
out
of
network.
However,
if
a
service
that
is
required
to
be
covered
by
the
plan
is
not
available
through
any
in-network
provider,
the
plan
must
cover
the
out-of-network
service
without
cost-sharing.
(2)
Over-the-counter
items.
Some
of
the
covered
preventive-care
items
include
over-the-counter
drugs
and
devices,
such
as
aspirin.
A
plan
is
only
Continue Reading...
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|
Health Care Reform and Full-Time Employees - Part 8: Putting It All Together
|
02/18/2013
|
By: Jason Lacey
|
Note:
This
is
one
in
a
series
of
posts
addressing
new
rules
from
the
IRS
that
may
be
used
to
determine
which
employees
are
full-time
employees
for
purposes
of
applying
the
play-or-pay
penalties
under
health
care
reform.
Although
the
penalties
do
not
become
effective
until
2014,
it
may
be
necessary
to
begin
collecting
data
on
employees
soon,
so
it's
a
good
time
to
begin
thinking
about
these
rules.
Let's
review
what
we
know
from
the
previous
posts
in
this
series.
(1)
It's
important
to
identify
full-time
employees,
because
if
we
want
to
avoid
the
play-or-pay
penalties,
we
have
to
make
sure
all
full-time
employees
are
offered
appropriate
coverage.
(2)
In
many
cases,
we
can
determine
whether
an
employee
is
full-time
or
not
by
looking
at
hours
worked
over
a
prior
period,
known
as
the
measurement
period.
(3)
An
employee's
status
for
a
measurement
period
remains
the
same
during
a
stability
period
associated
with
that
measurement
period.
(4)
We
can
utilize
a
brief
administrative
period
between
a
measurement
period
and
a
stability
period
to
allow
time
for
such
things
as
making
enrollment
elections
and
allowing
coverage
to
become
effective
at
the
beginning
of
a
month
or
year.
(5)
When
applying
the
look-back
measurement
method,
it's
useful
to
distinguish
between
new
hires
and
ongoing
employees.
New
hires
that
are
reasonably
expected
to
be
full
time
upon
hire
must
be
offered
coverage
within
3
months.
New
hires
that
are
variable
hour
or
seasonal
employees
do
not
have
to
be
offered
coverage
until
the
end
of
an
initial
measurement
period,
Continue Reading...
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|
Do You Have a Written Plan Document for Your 403(b) Plan?
|
02/14/2013
|
By: Jason Lacey
|
If
you
sponsor
a
403(b)
retirement
plan
-
which
might
be
the
case
if
you
are
a
501(c)(3)
organization
or
a
governmental
educational
agency
-
you
are
required
to
maintain
a
written
plan
document
for
the
plan.
This
hasn't
always
been
the
law,
however.
The
plan-document
requirement
began
in
2009
when
the
current
403(b)
regulations
went
into
effect.
Some
plans
have
yet
to
come
into
compliance
with
this
rule.
In
most
cases
this
is
not
due
to
willful
disregard
of
the
law.
Rather,
plan
sponsors
may
not
understand
the
requirement
or
-
more
likely
-
they
may
think
they
have
a
plan
document,
because
they
have
entered
into
an
annuity
contract
or
custodial
agreement
with
the
investment
provider
for
the
plan.
But
that
contract
typically
will
not
satisfy
all
the
requirements
of
a
plan
document.
Well,
if
you
happen
to
sponsor
a
403(b)
plan
that
hasn't
yet
fully
complied
with
the
plan-document
requirement,
the
IRS
has
a
deal
for
you.
Under
a
recently
released
update
to
its
Employee
Plans
Compliance
Resolution
System
or
"EPCRS"
(see
here),
the
IRS
has
outlined
a
specific
procedure
for
correcting
this
problem.
It
requires
filing
an
application
with
the
IRS
and
paying
a
fee.
But
the
relief
and
peace
of
mind
it
provides
is
nearly
priceless.
And
there's
even
better
news:
If
you
file
your
application
to
correct
this
problem
by
December
31,
2013,
the
required
fee
is
half
of
what
it
would
be
normally.
For
example,
a
plan
with
51
to
100
participants
would
typically
pay
Continue Reading...
|
|
Agencies Propose Changes to Contraception Mandate for Religious Employers
|
02/06/2013
|
By: Jason Lacey
|
The
IRS,
DOL,
and
HHS
have
proposed
two
key
changes
in
the
rules
that
exempt
certain
religious
employers
from
complying
with
the
mandate
to
cover
all
FDA-approved
contraception
and
sterilization
procedures
for
women
(see
proposed
rules
here).
1.
Definition
of
Religious
Employer
Employers
that
are
"religious
employers"
are
wholly
exempt
from
compliance
with
the
mandate.
The
new
rules
would
modify
the
definition
of
religious
employer
slightly.
The
definition
would
still
be
limited
to
houses
of
worship
(churches,
synagogues,
mosques,
and
the
like)
and
religious
orders.
But
the
change
would
clarify
that
those
organizations
will
not
fail
to
be
religious
employers
even
if
they
also
provide
educational,
charitable,
or
social
services,
without
regard
to
whether
the
persons
served
share
the
same
religious
values.
Example.
A
church
with
a
parochial
school
that
employs
teachers
or
serves
students
who
are
not
necessarily
of
the
same
religious
faith
may
still
qualify
as
a
religious
employer.
2.
Broader
Accommodation
for
Non-Profit
Religious
Organizations
A
non-profit
organization
that
is
not
a
church
or
religious
order
but
that
meets
specified
criteria
would
be
provided
an
"accommodation"
exempting
the
organization
from
directly
providing
contraceptive
coverage.
The
criteria
are:
- The
organization
opposes
some
or
all
of
the
required
contraceptive
coverage
on
religious
grounds
- The
organization
is
a
non-profit
entity
- The
organization
holds
itself
out
as
a
religious
organization
- The
organization
self-certifies
that
it
meets
the
first
three
criteria
This
change
is
intended
to
exempt
organizations
such
as
religious-affiliated
non-profit
institutional
health
care
Continue Reading...
|
|
New Health Care Reform FAQs Answer Some Questions and Raise Others
|
02/01/2013
|
By: Jason Lacey
|
The
IRS,
DOL,
and
HHS
have
released
their
11th
series
of
FAQs
(here)
addressing
various
issues
related
to
health
care
reform
implementation.
Exchange
Notice
Requirement.
In
a
helpful
clarification,
the
agencies
confirmed
that
employers
will
not
have
to
provide
a
notice
to
employees
regarding
insurance
exchanges
until
“regulations
are
issued
and
become
applicable.”
By
statute,
the
notice
is
required
to
be
distributed
by
March
1,
2013.
This
guidance
effectively
allows
employers
to
delay
compliance
until
further
notice.
Stand-Alone
HRAs.
Three
of
the
FAQs
address
issues
related
to
health
reimbursement
arrangements
(HRAs).
The
technical
clarifications
are
as
follows:
(1)
An
HRA
cannot
be
treated
as
“integrated”
with
individual
insurance
coverage.
(2)
An
HRA
can
only
be
treated
as
“integrated”
with
major-medical
coverage
if
participation
in
the
HRA
is
conditioned
on
being
enrolled
in
that
major-medical
coverage.
(3)
Most
amounts
credited
to
an
HRA
before
January
1,
2014,
will
continue
to
be
available
for
reimbursements
on
and
after
January
1,
2014
without
causing
the
HRA
to
violate
the
annual-limit
rules
under
Section
2711
of
the
Public
Health
Service
Act.
While
all
of
this
seems
straightforward
enough,
the
proverbial
elephant
in
the
room
is
the
fundamental
question
whether
stand-alone
HRAs
will
be
deemed
to
violate
the
prohibition
against
annual
and
lifetime
limits
under
Section
2711
of
the
Public
Health
Service
Act.
These
FAQs
are
the
strongest
indication
yet
that
future
guidance
will
say
they
do
violate
the
prohibition,
effectively
eliminating
stand-alone
HRAs.
Plan
sponsors
that
maintain
stand-alone
HRAs
-
or
are
considering
implementing
one
for
2014
-
will
want
Continue Reading...
|
|
Health Care Reform and Full-Time Employees - Part 7: Rehires and Changes in Job Classification
|
01/30/2013
|
By: Jason Lacey
|
Note:
This
is
one
in
a
series
of
posts
addressing
new
rules
from
the
IRS
that
may
be
used
to
determine
which
employees
are
full-time
employees
for
purposes
of
applying
the
play-or-pay
penalties
under
health
care
reform.
Although
the
penalties
do
not
become
effective
until
2014,
it
may
be
necessary
to
begin
collecting
data
on
employees
soon,
so
it's
a
good
time
to
begin
thinking
about
these
rules.
Now
that
we’ve
got
a
handle
on
the
general
rules
-
measurement
periods,
stability
periods,
new
hires,
and
ongoing
employees
-
let’s
look
at
a
couple
of
nuanced
points:
rehired
employees
and
employees
who
change
job
classifications.
Rehires
-
General
Rule.
Here’s
the
basic
question
with
a
rehired
employee:
Should
the
employee
be
treated
as
a
new
hire
(meaning
she
starts
over
on
plan
eligibility)
or
should
the
employee
retain
the
classification
she
had
when
she
terminated?
For
better
or
worse,
the
rule
on
this
is
pretty
clear.
If
the
period
of
time
between
termination
and
rehire
is
at
least
26
weeks,
then
the
employee
is
treated
as
a
new
hire.
If
not,
then
the
employee
generally
retains
the
same
classification
she
had
when
she
terminated,
at
least
for
the
remainder
of
that
stability
period.
Example
1.
A
long-term
employee
terminates
employment
on
February
10,
2014.
At
the
time
of
termination,
the
employee
was
being
treated
as
a
full-time
employee
for
a
12-month
standard
stability
period
that
began
January
1,
2014.
The
employee
is
then
rehired
on
June
30,
2014.
Because
the
rehire
date
is
less
Continue Reading...
|
|
Health Care Reform and Full-Time Employees - Part 6: Ongoing Employees
|
01/12/2013
|
By: Jason Lacey
|
Note:
This
is
one
in
a
series
of
posts
addressing
new
rules
from
the
IRS
that
may
be
used
to
determine
which
employees
are
full-time
employees
for
purposes
of
applying
the
play-or-pay
penalties
under
health
care
reform.
Although
the
penalties
do
not
become
effective
until
2014,
it
may
be
necessary
to
begin
collecting
data
on
employees
soon,
so
it's
a
good
time
to
begin
thinking
about
these
rules.
As
we’ve
noted,
these
rules
on
full-time
employees
apply
differently
depending
on
whether
the
employee
in
question
is
a
new
hire
or
an
“ongoing
employee,”
and
we've
looked
previously
at
the
impact
on
new
hires.
So
let’s
look
at
them
in
the
context
of
ongoing
employees.
Here's
the
good
news:
It’s
pretty
straightforward.
Ongoing
Employee
Defined.
We
first
need
to
start
with
a
definition
of
“ongoing
employee,”
so
we
know
how
to
distinguish
them
from
new
hires.
An
ongoing
employee
is
an
employee
who
has
been
employed
for
one
full
standard
measurement
period.
That’s
it.
So
once
you
know
what
your
standard
measurement
period
is,
you
know
how
to
identify
your
ongoing
employees.
Test
Everyone,
Every
Period.
All
ongoing
employees
will
be
tested
for
full-time
status
during
each
standard
measurement
period.
It
doesn’t
matter
whether
they
were
previously
full-time
or
not.
At
the
end
of
each
standard
measurement
period
we’ll
look
back
at
the
hours
worked
by
each
ongoing
employee
during
that
period
and
determine
whether
they
averaged
30
or
more
hours
per
week.
If
so,
they
must
be
treated
as
full-time
for
the
associated
Continue Reading...
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|
IRS Proposes Comprehensive Regulations on PPACA’s Play-or-Pay Penalties
|
01/07/2013
|
By: Jason Lacey
|
The
IRS
has
released
important
new
guidance
on
the
play-or-pay
penalties
under
Internal
Revenue
Code
Section
4980H
in
the
form
of
proposed
regulations
(here)
and
a
set
of
FAQs
(here).
The
guidance
comprehensively
addresses
a
number
of
key
issues
regarding
the
penalties
and
steps
that
may
be
taken
to
avoid
them.
For
the
sake
of
brevity,
only
a
few
highlights
will
be
noted
here.
Covered
Employers.
All
common-law
employers
that
are
“applicable
large
employers”
(generally
50
or
more
FTEs)
are
subject
to
the
penalty
rules,
including
tax-exempt
and
governmental
entities.
Entity
Aggregation.
The
Code's
entity-aggregation
rules
(relating
to
controlled
groups
and
affiliated
service
groups)
apply
for
purposes
of
determining
whether
an
entity
is
an
“applicable
large
employer.”
However,
in
an
important
clarification,
the
regulations
confirm
that
each
member
of
a
controlled
or
affiliated
group
is
allowed
to
determine
separately
whether
it
will
comply
with
the
requirements
of
Section
4980H
or
pay
the
penalty,
and
non-compliance
by
one
group
member
will
not
be
imputed
to
other
group
members.
"All"
Full-Time
Employees
Means
95%.
The
requirement
to
offer
minimum
essential
coverage
to
all
full-time
employees
will
be
satisfied
if
the
employer
offers
coverage
to
at
least
95%
of
its
full-time
employees
(or,
if
less,
all
full-time
employees
but
five).
This
is
a
welcome
interpretation
of
the
statutory
language
that,
at
a
minimum,
will
provide
some
protection
against
inadvertent
failures
to
comply.
Dependents.
The
regulations
confirm
that
Section
4980H
requires
offering
coverage
to
both
full-time
employees
and
their
dependents.
However,
the
rules
define
“dependent”
to
Continue Reading...
|
|
Health Care Reform and Full-Time Employees - Part 5: New Hires
|
01/04/2013
|
By: Jason Lacey
|
Note:
This
is
one
in
a
series
of
posts
addressing
new
rules
from
the
IRS
that
may
be
used
to
determine
which
employees
are
full-time
employees
for
purposes
of
applying
the
play-or-pay
penalties
under
health
care
reform.
Although
the
penalties
do
not
become
effective
until
2014,
it
may
be
necessary
to
begin
collecting
data
on
employees
soon,
so
it's
a
good
time
to
begin
thinking
about
these
rules.
Prior
posts
in
this
series
have
addressed
the
structural
rules
that
will
apply
to
the
process
of
determining
which
employees
are
full-time
employees
-
things
like
measurement,
stability,
and
administrative
periods.
Now
it’s
time
to
start
looking
at
how
these
rules
will
apply
to
some
specific
classifications
of
employees.
Employees
may
be
initially
sorted
into
one
of
two
groups:
new
hires
and
ongoing
employees.
This
post
will
discuss
the
treatment
of
new
hires.
I’ll
discuss
ongoing
employees
in
the
next
post
in
this
series.
New
hires
will
be
treated
one
of
two
ways.
1.
New
Full-Time
Employees.
If,
based
on
the
facts
at
the
time
of
hire,
the
new
employee
is
reasonably
expected
to
work
full
time
right
away
(average
of
30
or
more
hours
per
week)
and
is
not
a
seasonal
employee,
the
employee
must
be
treated
as
a
full-time
employee
immediately.
Employees
hired
as
full-time
employees
must
be
offered
coverage
within
3
months
to
avoid
penalty
exposure.
2.
New
Variable-Hour
Employees.
If,
based
on
the
facts
at
the
time
of
hire,
it
cannot
be
determined
whether
the
employee
will
be
full
time
because
the
employee’s
Continue Reading...
|
|
IRS Provides Guidance on New Medicare Taxes
|
12/15/2012
|
By: Jason Lacey
|
The
IRS
has
released
several
guidance
items
on
the
new
Medicare
taxes
that
take
effect
beginning
January
1,
2013:
- Proposed
regulations
on
0.9%
additional
Medicare
tax
on
earned
income
(here).
- Updated
Questions
and
Answers
for
the
Additional
Medicare
Tax
(here).
- Proposed
regulations
on
the
new
3.8%
Medicare
tax
on
net
investment
income
(here).
- Net
Investment
Income
Tax
FAQs
(here).
There
is
considerable
detail
in
all
of
this,
but
here
are
a
few
highlights:
Additional
Medicare
Tax
on
Wages
- The
employer
must
begin
withholding
the
0.9%
after
$200,000
in
taxable
wages
paid.
The
employee
may
not
opt
out
of
withholding,
even
if
the
employee
will
not
owe
the
tax.
- Withholding
by
an
employer
may
not
be
sufficient
to
cover
all
tax
actually
due
by
an
employee,
so
the
employee
may
be
required
to
make
estimated-tax
payments.
This
can
occur
when,
for
example,
two
married
individuals
have
combined
wages
that
exceed
the
threshold
amount,
but
neither
individual's
wages
exceed
$200,000.
- If
an
employer
employs
two
married
individuals,
the
employer
is
not
required
to
withhold
the
additional
tax
from
either
employee
unless
and
until
that
employee's
wages
exceed
$200,000.
This
is
the
case
even
if
the
combined
wages
paid
to
the
two
employees
exceed
$250,000
(meaning
the
employees
will
be
subject
to
the
tax).
- If
wages
are
paid
to
a
single
employee
by
two
or
more
related
Continue Reading...
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|
Final Regulations Released on PCORI Trust Fund Tax
|
12/10/2012
|
By: Jason Lacey
|
The
IRS
has
released
its
final
rule
on
the
Patient-Centered
Outcomes
Research
Institute
(PCORI)
trust-fund
tax.
Background
on
the
tax
and
the
proposed
regulation
released
earlier
this
year
is
here.
The
final
regulation
does
not
make
significant
changes
to
the
proposed
rule.
It
is
mostly
significant
for
it
is
confirmation
of
certain
positions
that
health
insurers
and
health-plan
sponsors
had
sought
relief
on,
including:
- Retiree-Only
Plans.
The
tax
applies
to
retiree-only
plans,
even
though
those
plans
are
generally
exempt
from
the
group-market
reforms
enacted
as
part
of
the
Affordable
Care
Act.
- COBRA
Coverage.
Individuals
receiving
COBRA
coverage
under
a
plan
are
counted
as
covered
lives
for
purposes
of
the
tax.
- Integrated
Insured
and
Self-Funded
Coverage.
The
tax
applies
to
both
the
insured
and
self-funded
portions
of
a
plan
or
arrangement,
when
the
same
individual
is
covered
under
both
portions.
For
example,
if
a
plan
provides
fully
insured
high-deductible
coverage
integrated
with
a
self-funded
HRA,
the
tax
applies
to
both
the
insured
portion
and
the
self-funded
HRA.
However,
if
a
plan
includes
an
insured
option
and
a
self-funded
option
as
alternatives
(i.e.,
an
individual
may
be
covered
under
one
or
the
other
but
not
both),
the
tax
may
be
calculated
separated
for
each
option
under
the
plan,
meaning
individuals
receiving
only
insured
coverage
do
not
have
to
be
counted
for
purposes
of
calculating
the
tax
on
the
self-funded
coverage.
- HRAs
and
Health
FSAs.
There
is
no
blanket
exclusion
for
Continue Reading...
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|
Agencies Release Joint Proposed Regulation on Wellness Plans
|
12/03/2012
|
By: Jason Lacey
|
The
IRS,
DOL,
and
HHS
have
issued
a
joint
proposed
regulation
addressing
wellness
plans
and
the
wellness
exception
to
the
HIPAA
nondiscrimination
rules.
Background.
Section
2705
of
the
Public
Health
Service
Act,
as
added
by
the
Affordable
Care
Act,
provides
statutory
affirmation
of
the
wellness-plan
rules
that
have
existed
by
regulation
for
several
years
as
part
of
the
HIPAA
nondiscrimination
rules
(rules
that
prohibit,
among
other
things,
discrimination
on
the
basis
of
health
factors).
It
also
gives
the
relevant
governmental
agencies
(IRS,
DOL,
and
HHS)
express
authority
to
issue
further
rules
on
wellness
plans
that
increase
the
permissible
reward
or
penalty
to
as
much
as
50%
of
the
cost
of
associated
heath-plan
coverage.
Proposed
Regulations.
The
proposed
regulations
largely
follow
the
structure
of
the
existing
wellness-plan
regulations,
requiring,
among
other
things,
that
wellness
programs
requiring
a
particular
health
outcome
(e.g.,
smoking
cessation,
biometric
screening
results,
minimum
BMI,
etc.)
provide
reasonable
alternatives
and
limit
the
reward
or
penalty
offered
or
imposed
in
connection
with
the
plan.
However,
there
are
a
couple
of
points
worth
highlighting:
- Participation
v.
Health-Contingent.
The
proposed
regulations
label
wellness
programs
as
either
"participatory"
or
"health-contingent."
It
is
only
the
health-contingent
programs
that
are
subject
to
more
rigorous
regulation
under
the
proposed
rules.
Participatory
programs
include
fitness-club
memberships,
general
health
education,
and
other
similar
programs
that
do
not
provide
for
a
reward
or
include
any
conditions
based
on
satisfying
a
standard
related
to
a
health
factor.
- Size
of
Reward.
The
requirements
that
must
Continue Reading...
|
|
Health Care Reform and Full-Time Employees - Part 4: Administrative Periods
|
11/24/2012
|
By: Jason Lacey
|
Note:
This
is
one
in
a
series
of
posts
addressing
new
rules
from
the
IRS
that
may
be
used
to
determine
which
employees
are
full-time
employees
for
purposes
of
applying
the
play-or-pay
penalties
under
health
care
reform.
Although
the
penalties
do
not
become
effective
until
2014,
it
may
be
necessary
to
begin
collecting
data
on
employees
soon,
so
it's
a
good
time
to
begin
thinking
about
these
rules.
As
we
have
already
seen,
an
employer
may
use
a
measurement
period
to
determine
whether
an
employee
is
a
full-time
employee,
and
any
such
full-time
employee
must
be
offered
health-plan
coverage
during
the
following
stability
period,
if
the
employer
wants
to
avoid
an
automatic
penalty
for
that
employee.
But,
of
course,
enrollment
can
take
some
time.
The
employee
may
have
multiple
coverage
options
to
consider
and
enrollment
forms
to
fill
out.
And
the
employer
will
almost
certainly
need
time
to
calculate
the
employee's
hours
of
service
during
the
measurement
period.
So
it
wouldn't
work
very
well
if
the
stability
period
had
to
begin
immediately
after
the
measurement
period.
A
Time
For
Transition.
Recognizing
this,
the
IRS’s
guidance
allows
employers
to
use
an
"administrative
period"
in
connection
with
their
measurement
and
stability
periods.
This
allows
for
a
reasonable
transition
period
between
the
measurement
and
stability
periods.
It
also
allows
the
initial
measurement
period
to
begin
at
a
convenient
time,
such
as
at
the
beginning
of
a
month
or
payroll
cycle.
Ground
Rules. Like
the
measurement
and
stability
periods,
employers
have
flexibility
in
defining
the
administrative
period,
but
Continue Reading...
|
|
Hurricane Sandy Relief for Retirement Plan Loans and Hardship Distributions
|
11/21/2012
|
By: Jason Lacey
|
The
IRS
has
issued
guidance
temporarily
relaxing
certain
requirements
related
to
loans
and
hardship
distributions
from
401(k),
403(b),
and
governmental
457(b)
plans,
in
an
effort
to
make
those
funds
more
readily
available
to
individuals
affected
by
Hurricane
Sandy.
The
new
rules
apply
to
loans
and
hardship
distributions
made
between
October
26,
2012
and
February
1,
2013,
if
they
are
made
for
the
purpose
of
assisting
plan
participants
or
their
family
members
who
live
or
work
in
a
Sandy-related
federally
declared
disaster
area.
As
described
in
an
IRS
news
release:
“This
broad-based
relief
means
that
a
retirement
plan
can
allow
a
Sandy
victim
to
take
a
hardship
distribution
or
borrow
up
to
the
specified
statutory
limits
from
the
victim’s
retirement
plan.
It
also
means
that
a
person
who
lives
outside
the
disaster
area
can
take
out
a
retirement
plan
loan
or
hardship
distribution
and
use
it
to
assist
a
son,
daughter,
parent,
grandparent
or
other
dependent
who
lived
or
worked
in
the
disaster
area.”
Highlights
of
the
specific
relief
provided:
Plan
Amendment.
Plans
can
make
qualifying
loans
or
hardship
distributions
before
the
plan
document
has
been
formally
amended
to
allow
for
loans
or
hardship
distributions,
so
long
as
an
amendment
is
made
by
the
end
of
the
first
plan
year
beginning
after
December
31,
2012.
Broader
Hardship
Standards.
Hardship
distributions
can
be
made
for
any
Sandy-related
hardship,
not
just
the
“safe
harbor”
hardship
standards
typically
relied
upon.
Relaxed
Documentation
Requirements.
Documentation
and
procedural
requirements
related
to
hardship
distributions
Continue Reading...
|
|
Health Care Reform and Full-Time Employees - Part 3: Stability Periods
|
11/14/2012
|
By: Jason Lacey
|
Note:
This
is
one
in
a
series
of
posts
addressing
new
rules
from
the
IRS
that
may
be
used
to
determine
which
employees
are
full-time
employees
for
purposes
of
applying
the
play-or-pay
penalties
under
health
care
reform.
Although
the
penalties
do
not
become
effective
until
2014,
it
may
be
necessary
to
begin
collecting
data
on
employees
soon,
so
it's
a
good
time
to
begin
thinking
about
these
rules.
So
we
know
it’s
important
to
identify
which
employees
are
full-time
(and
which
are
not),
and
we
know
we
can
use
a
measurement
period
of
up
to
12
months
to
collect
the
data
we
need
to
make
the
determination
about
full-time
status.
The
next
question
then
is
what
that
means
going
forward.
How
long
do
the
determinations
we
make
during
the
measurement
period
last? That’s
where
the
stability
period
comes
in.
Stability
Period
Related
to
Measurement
Period.
Each
measurement
period
(whether
an
initial
measurement
period
or
a
standard
measurement
period)
will
have
an
associated
stability
period.
If
an
employer
determines
that
an
employee
did
not
work
full-time
during
a
measurement
period,
the
employer
is
permitted
to
treat
the
employee
as
a
part-time
employee
during
the
following
stability
period.
Similarly,
employees
determined
to
be
full-time
during
the
measurement
period
are
treated
as
full-time
during
the
following
stability
period.
Actual
Facts
Don't
Change
the
Current
Period.
The
key
is
that
an
employee’s
status
during
the
stability
period
remains
the
same,
regardless
of
how
many
hours
the
employee
actually
works
during
the
stability
period.
For
example,
if
an
employee
Continue Reading...
|
|
IRS Authorizes Leave-Based Donation Programs to Benefit Hurricane Sandy Victims
|
11/08/2012
|
By: Jason Lacey
|
In
new
guidance,
the
IRS
has
provided
tax
relief
for
leave-based
donation
programs
established
to
aid
victims
of
Hurricane
Sandy.
Similar
guidance
was
provided
after
the
September
11,
2001
terrorist
attacks
and
after
Hurricane
Katrina
in
2005.
Under
a
leave-based
donation
program,
an
employer
allows
employees
to
elect
to
forego
paid
leave
time
(e.g.,
vacation,
sick,
or
personal
leave),
and
the
employer
then
donates
the
value
of
the
foregone
leave
to
a
charitable
organization.
The
guidance
clarifies
that
employees
will
not
have
taxable
wage
income
solely
because
they
make,
or
have
the
right
to
make,
an
election
to
donate
leave
under
a
qualifying
leave-based
donation
program.
Employers
are
allowed
a
full
deduction
for
the
donations,
without
regard
to
the
percentage
limitations
on
charitable
contributions.
To
qualify
for
this
treatment,
payments
of
foregone
leave
time
must
be
made:
- To
a
qualifying
charitable
organization.
- For
the
relief
of
victims
of
Hurricane
Sandy.
- Before
January
1,
2014.
Employees
who
elect
to
participate
in
a
leave-based
donation
program
may
not
claim
a
charitable
contribution
deduction
for
the
value
of
the
foregone
leave.
|
|
Health Care Reform and Full-Time Employees - Part 2: Measurement Periods
|
10/31/2012
|
By: Jason Lacey
|
Note:
This
is
one
in
a
series
of
posts
addressing
new
rules
from
the
IRS
that
may
be
used
to
determine
which
employees
are
full-time
employees
for
purposes
of
applying
the
play-or-pay
penalties
under
health
care
reform.
Although
the
penalties
do
not
become
effective
until
2014,
it
may
be
necessary
to
begin
collecting
data
on
employees
soon,
so
it's
a
good
time
to
begin
thinking
about
these
rules.
We
know
a
critical
issue
in
looking
at
the
play-or-pay
penalties
is
determining
which
employees
are
full-time
and
which
are
not.
An
initial
step
in
that
process
is
identifying
the
period
to
be
used
for
making
that
determination.
Looking
Back
vs.
Looking
Forward.
For
employees
who
work
varying
schedules
and
hours,
it
can
be
difficult
to
predict
whether
or
when
those
employees
will
average
30
or
more
hours
per
week.
So
Notice
2012-58
allows
an
employer
to
look
back
over
a
defined
period
to
make
that
determination.
This
look-back
period
is
referred
to
as
a
“measurement
period.”
As
the
name
suggests,
it
is
the
period
over
which
the
employer
will
measure
an
employee’s
hours
worked
and
determine
whether
the
employee
was
above
or
below
the
30-hour
threshold.
Two
Types.
There
are
two
types
of
measurement
periods:
an
“initial
measurement
period”
and
a
“standard
measurement
period.”
They
are
conceptually
similar,
but
operate
differently
and
serve
slightly
different
functions.
Initial
Measurement
Period.
The
initial
measurement
period
applies
to
newly
hired
variable-hour
and
seasonal
employees.
Although
the
length
of
the
initial
measurement
period
must
be
the
same
for
all
Continue Reading...
|
|
Retirement Plan Cost-of-Living Adjustments Released for 2013
|
10/29/2012
|
By: Jason Lacey
|
The
IRS
has
released
its
annual
cost-of-living
adjustments
for
retirement
plans
for
2013.
Among
the
highlights:
- The
annual
limit
on
elective
contributions
(other
than
catch-up
contributions)
to
a
401(k),
403(b),
or
457(b)
plan
has
increased
to
$17,500.
- The
annual
limit
on
catch-up
contributions
(for
plan
participants
age
50
or
older) remains
the
same
at
$5,500.
- The
maximum
amount
of
annual
additions
that
may
be
made
to
a
defined
contribution
plan
(the
"415
limit")
has
increased
to
$51,000.
- The
maximum
amount
of
compensation
that
may
be
taken
into
account
for
the
year
(the
"401(a)(17)
limit")
has
increased
to
$255,000.
- The
compensation
threshold
for
identifying
certain
highly
compensated
employees
remains
the
same
at
$115,000.
Separately,
the
Social
Security
Administration announced
that
the
Social
Security
taxable
wage
base
will
increase
to
$113,700
for
2013
-
up
from
$110,100
in
2012.
In
addition
to
affecting
certain
retirement-plan
contributions,
this
impacts
the
amount
of
wages
and
earned
income
that
are
subject
to
the
Social
Security
portion
of
the
FICA
and
SECA
taxes.
|
|
IRS Releases 403(b) Plan Checklist
|
10/25/2012
|
By: Jason Lacey
|
The
IRS
has
posted
a
new
403(b)
Plan
Checklist
to
its
website. It
is
a
list
of
10
common
operational
problems,
intended as
a
"quick
tool"
to
help
employers
spot
check
for
key
compliance
issues.
Among
the
issues
identified:
- Is
the
employer
eligible
to
sponsor
a
403(b)
plan?
- Is
the
plan
complying
with
the
"universal
availability"
requirement?
- Are
employee
contributions
being
monitored
and
appropriately
limited?
- Are
the
dollar
limits
on
plan
loans
being
monitored
and
repayments
enforced?
- Is
the
plan
obtaining
proper
substantiation
of
hardship
withdrawals?
A
key
issue
that
is
NOT
addressed
on
the
checklist
is
the
written-plan
requirement.
Since
2009,
IRS
regulations
have
required
that
403(b)
plans
be
maintained
under
a
written
plan
document.
Although
it's
a
fairly
simple
requirement
to
comply
with,
it
has
been
often
overlooked.
But
you
can
be
sure
the
IRS
will
check
for
a
written
document
in
every
403(b) examination
it
conducts.
Employers
that
sponsor
403(b)
plans
would
be
well-advised
to
use
this
checklist
to
conduct
a
mini
self-audit
at
least
once
a
year.
Any
issues
that
may
be
identified
are
much
easier
to
resolve
through
voluntary
correction
than
if
the
IRS
discovers
them
on
audit.
|
|
Health Care Reform and Full-Time Employees - Part 1: The Problem
|
10/18/2012
|
By: Jason Lacey
|
Note:
This
is
one
in
a
series
of
posts
addressing
new
rules
from
the
IRS
that
may
be
used
to
determine
which
employees
are
full-time
employees
for
purposes
of
applying
the
play-or-pay
penalties
under
health
care
reform.
Although
the
penalties
do
not
become
effective
until
2014,
it
may
be
necessary
to
begin
collecting
data
on
employees
soon,
so
it's
a
good
time
to
begin
thinking
about
these
rules.
Background.
The
play-or-pay
penalties
essentially
penalize
applicable
large
employers
that
do
not
provide
adequate,
affordable
group
health
coverage
to
full-time
employees.
So
for
employers
that
want
to
either
ensure
they
avoid
penalty
exposure
or
assess
their
potential
exposure
to
penalties,
a
critical
issue
is
determining
which
employees
are
full-time
employees.
The
law
generally
defines
"full
time"
for
this
purpose
as
working
an
average
of
30
or
more
hours
per
week.
Guidance
from
the
IRS
indicates
that
this
may
be
determined
on
a
monthly
basis,
in
which
case
employees
working
an
average
of
130
or
more
hours
per
month
are
treated
as
full
time.
Month-by-Month
Determination.
The
structure
of
the
penalty
rules
contemplates
a
month-by-month
determination
and
calculation.
An
employer
that
decides
to
"pay"
rather
than
"play"
must
calculate
for
each
month
in
the
year
the
number
of
full-time
employees
it
had
for
that
month
and
the
corresponding
penalty
amount
that
is
due.
But
for
employers
that
intend
to
offer
group
health
coverage
to
employees
so
they
can
avoid
most
or
all
of
the
penalties,
making
a
month-by-month
determination
is
largely
impractical.
This
could
literally
result
in
Continue Reading...
|
|
Health FSA Use-It-or-Lose-It Rule to Remain for 2012
|
10/15/2012
|
By: Jason Lacey
|
As
we
have
reported
previously
on
this
blog
(see
here),
the
IRS
is
considering
modifying
or
eliminating
the
so-called
use-it-or-lose-it
rule
for
health
FSAs,
which
is
the
rule
that
requires
participants
to
spend
down
their
entire
account
balances
during
the
plan
year
(and
any
related
grace
period)
or
else
forfeit
the
money.
Legislative
repeal
of
the
rule
has
also
been
proposed.
Tax
Analysts,
which
publishes
tax-industry
news,
is
reporting
today
that
leading
Treasury
and
IRS
officials
have
said
nothing
will
happen
on
this
issue
for
2012,
at
least
as
an
administrative
matter.
(Congress
theoretically
could
still
act
during
the
post-election
lame-duck
session,
but
that
seems
unlikely
too.)
However,
the
government
did
receive
"a
tsunami"
of
letters
and
comments
in
support
of
eliminating
the
rule,
so
we
may
see
further
movement
on
the
issue
in
the
near
future.
With
the
cap
on
health
FSA
contributions
reduced
to
$2,500
for
plan
years
beginning
on
or
after
January
1,
2013,
there
is
very
limited
opportunity
for
tax
avoidance
or
deferral
through
health
FSAs.
So
there
is
a
sense
that
the
use-it-or-lose-it
rule
may
no
longer
serve
a
meaningful
regulatory
function.
|
|
On the Radar: Cycle B Retirement Plan Restatements
|
09/24/2012
|
By: Jason Lacey
|
As
the
crisp
fall
air
settles
in,
our
thoughts
turn
to
pumpkins,
hayrack
rides,
apple
cider
-
and,
of
course,
retirement
plan
restatements.
This
year,
it's
Cycle
B
plans
that
must
be
restated
and
filed
with
the
IRS
for
a
fresh
determination
letter.
If
your
EIN
ends
in
a
2
or
a
7
and
you
sponsor
an
individually
designed
retirement
plan,
you're
up.
The
deadline
to
file
with
the
IRS
is
still
a
few
months
away
(January
31,
2013),
but
it's
a
good
time
to
start
getting
everything
in
order,
so
you
can
beat
the
last-minute
rush.
Not
sure
if
you
have
an
individually
designed
plan?
All
ESOPs
and
cash-balance
pension
plans
are
individually
designed,
and
many
traditional
defined-benefit
pension
plans
are
too.
But
most
plans
maintained
on
a
pre-approved
"prototype"
or
"volume
submitter"
plan
document
are
not
considered
individually
designed
and
do
not
need
to
be
submitted
to
the
IRS
at
this
time.
This
covers
many
(but
not
all)
401(k)
and
profit-sharing
plans.
Your
retirement
plan
service
provider
or
legal
counsel
can
help
you
understand
what
type
of
plan
you
have,
if
you're
not
sure.
|
|
Accountable Plans Cannot Recharacterize Wages as Tax-Free Benefits
|
09/22/2012
|
By: Jason Lacey
|
A
recent
IRS ruling addresses
compensation
arrangements
that
purport
to
provide
employees
with
tax-free
expense
reimbursements
but,
in
fact,
merely
recharacterize
taxable
wages
as
tax-free
income.
The
IRS
treats
these
arrangements
as
failing
to
satisfy
the
requirements
of
an
"accountable
plan,"
making
the
expense
reimbursements
taxable
to
the
employees.
The
ruling
describes
three
examples
of
invalid
accountable
plans:
- Tool
Expense.
A
cable
installation
company
requires
its
installers
to
purchase
their
own
tools.
Each
year
the
installers
tell
the
employer
how
much
they
expect
to
spend
on
tools
for
the
year.
The
employer
divides
this
amount
over
the
total
number
of
hours
the
installers
are
expected
to
work
and
then
treats
a
portion
of
the
wages
paid
for
each
hour
worked
as
a
tax-free
reimbursement
of
this
tool
expense.
For
example,
if
the
installers
would
otherwise
make
$10
per
hour
and
are
treated
as
incurring
$1
of
tool
expense
for
every
hour
worked,
the
installers
are
paid
$9
in
taxable
wages
and
$1
in
tax-free
tool
reimbursement
for
every
hour
worked.
- Meals
and
Lodging.
A
staffing
service
that
places
temporary
nurses
in
hospitals
pays
those
nurses
a
set
hourly
wage,
regardless
of
where
the
nurses
are
working.
But
for
nurses
who
must
travel
away
from
home
for
an
assignment,
the
contractor
treats
a
portion
of
the
hourly
wages
they
would
otherwise
receive
as
a
tax-free
per
diem
allowance
for
food
and
lodging.
- Mileage
Allowance.
A
construction
contractor
that
builds
commercial
buildings
in
various
locations
Continue Reading...
|
|
IRS Will Not Enforce Individual Mandate
|
09/12/2012
|
By: Jason Lacey
|
The
New
York
Times
has
an
article reporting
that
the
IRS
will
not
use
its
agents
or
other
resources
to
enforce
the
individual
mandate
under
health
care
reform
once
it
goes
into
effect
in
2014.
Individuals
who
fail
to
maintain
appropriate
health
coverage
will
be
subject
to
a
penalty
beginning
in
2014.
The
penalty
is
to
be
paid
in
the
same
manner
as
a
tax.
This
presumably
will
require
an
addition
to
the
individual
income
tax
return
(Form
1040)
where
taxpayers
will
certify
whether
they
have
the
required
coverage.
If
they
do
not
have
the
coverage,
the
penalty
will
be
added
to
the
tax
due,
meaning
it
will
either
be
offset
against
any
refund
or
will
need
to
be
paid
along
with
any
other
tax
due
with
the
return.
But
the
law
specifically
exempts
the
penalty
from
the
provisions
of
the
tax
code
relating
to
enforcement
and
collection
-
things
such
as
the
IRS's
ability
to
impose
a
lien
or
levy
to
assist
with
collection.
So
the
IRS
has
apparently
decided
that
it
will
not
even
look
for
non-compliant
taxpayers,
since
it
would
not
have
the
tools
to
compel
payment
of
the
penalty
anyway.
The
Times
article
refers
to
some
projections
that
only
1%
of
Americans
will
even
be
subject
to
the
penalty
for
failing
to
maintain
insurance.
So
on
a
large-scale
basis,
the
IRS
simply
may
not
view
the
risks
of
noncompliance
as
serious
enough
to
warrant
devoting
resources
to
enforcement.
|
|
IRS, DOL, and HHS Issue Joint Guidance on 90-Day Waiting Period Limitation Under PPACA
|
09/04/2012
|
By: Jason Lacey
|
Notice
2012-59
provides
guidance
on
the
requirement
under
Section
2708
of
the
Public
Health
Service
Act
(added
by
PPACA)
that
a
group
health
plan
not
apply
any
waiting
period
that
exceeds
90
days.
The
rule
applies
for
plan
years
beginning
on
or
after
January
1,
2014.
Among
the
clarifications
offered
by
the
guidance:
- Definition
of
Waiting
Period.
A
"waiting
period"
is
defined
as
a
period
of
time
that
must
pass
before
coverage
can
become
effective
for
an
individual
who
is
otherwise
eligible
to
enroll
under
a
plan.
Eligibility
conditions
based
solely
on
the
lapse
of
time
cannot
exceed
90
days,
but
other
eligibility
conditions
(e.g.,
working
full
time
or
working
in
a
covered
job
classification)
are
permissible,
even
if
they
have
the
effect
of
excluding
an
individual
from
coverage
under
the
plan
for
more
than
90
days.
- Determining
Full-Time
Status
for
Variable-Hour
Employees.
If
a
plan
limits
coverage
to
full-time
employees,
it
may
take
a
reasonable
period
of
time
to
determine
whether
a
newly
hired
employee
meets
the
full-time
standard,
if
it
is
not
clear
on
the
date
of
hire
that
the
employee
will
work
the
required
number
of
hours
(e.g.,
30
hours
per
week).
In
general,
this
determination
must
be
made
within
a
year
after
the
employee
is
hired,
and
if
the
employee
satisfies
the
eligibility
requirements,
coverage
must
be
offered
beginning
within
13
months
after
the
date
of
hire.
Otherwise,
the
plan
may
be
treated
as
indirectly
avoiding
the
90-day-waiting-period
requirement.
This
notice
Continue Reading...
|
|
IRS Provides Important Guidance on Full-Time Employees and the Play-or-Pay Penalties
|
09/04/2012
|
By: Jason Lacey
|
Beginning
in
2014,
employers
may
be
subject
to
the
play-or-pay
penalties
under
health
care
reform
if
they
fail
to
offer
health
coverage
to
full-time
employees,
so
it
will
be
important
to
understand
which
employees
are
considered
"full
time"
under
those
rules.
In
general,
"full
time"
means
working
an
average
of
30
or
more
hours
per
week.
In
some
cases
it
will
be
clear
that
an
employee
is
(or
is
not)
a
full-time
employee.
But
in
other
cases,
an
employee's
work
hours
may
be
expected
to
vary
over
time,
making
it
difficult
to
know
whether
the
employee
will
be
working
an
average
of
30
or
more
hours
per
week.
It
would
be
an
administrative
nightmare
to
determine
a
variable-hour
employee's
eligibility
for
health
plan
coverage
on
a
weekly
or
even
monthly
basis,
depending
on
the
hours
worked
by
the
employee
during
that
period.
This
would
also
be
largely
impractical,
since
it
often
would
not
be
known
until
the
end
of
a
period
whether
the
employee
worked
enough
hours
during
that
period
to
have
been
eligible
for
coverage.
Recognizing
this,
IRS
Notice
2012-58
provides
a
framework
for
employers
to
make
eligibility
determinations
for
variable-hour
employees
over
longer
periods
(up
to
12
months)
and
rely
on
those
determinations
for
a
specified
future
period
without
regard
to
actual
hours
worked.
These
determinations
will
be
respected
both
for
purposes
of
plan
eligibility
and
for
purposes
of
applying
the
play-or-pay
penalties.
In
other
words,
by
following
the
framework
established
in
Notice
2012-58,
employers
can
better
quantify
which
employees
Continue Reading...
|
|
IRS Limits Use of Letter-Forwarding Program by Benefit Plans
|
08/31/2012
|
By: Jason Lacey
|
In
updated
guidance
on
its
letter-forwarding
program,
the
IRS
has
announced
it
will
no
longer
offer
the
program
to
benefit-plan
administrators
for
the
purpose
of
locating
missing
individuals
who
may
be
entitled
to
plan
benefits.
"Under
this
revenue
procedure,
the
Service
will
no
longer
provide
letter-forwarding
services
to
locate
a
taxpayer
that
may
be
owed
assets
from
an
individual,
company,
or
organization.
The
letter-forwarding
program
is
now
limited
to
situations
in
which
a
person
is
trying
to
locate
a
taxpayer
to
convey
a
message
for
a
humane
purpose
.
.
.
or
in
an
emergency
situation."
The
IRS's
rationale
appears
to
be
that,
with
the
proliferation
of
locator
services
available
over
the
internet,
use
of
the
letter-forwarding
program
is
no
longer
necessary
for
efficient
and
cost-effective
administration
of
private
benefit
plans.
As
a
result
of
this
guidance,
many
retirement-plan
sponsors
will
need
to
re-visit
plan
provisions
that
direct
the
plan
administrator
to
use,
or
consider
using,
the
IRS's
letter-forwarding
program
when
searching
for
missing
participants
or
beneficiaries.
This
became
a
particularly
popular
approach
after
the
DOL
issued
a
Field
Assistance
Bulletin
in
2004
regarding
the
fiduciary
obligation
to
attempt
to
locate
certain
missing
participants.
That
bulletin
advocated
using
the
IRS's
letter-forwarding
program
as
one
of
several
tools
available
to
search
for
missing
individuals.
|
|
House Committee Pressure IRS Over Health Care Reform Premium Subsidies
|
08/24/2012
|
By: Jason Lacey
|
The
House
Oversight
and
Government
Reform
Committee
has
sent
a
letter
to
IRS
commissioner
Douglas
Shulman
asking
the
IRS
to
produce
background
information
and
analysis
supporting
the
final
premium-tax-credit
regulations
released
in
May.
The
tax
credit
is
the
federal
subsidy
provided
by
PPACA
for
insurance
coverage
purchased
by
qualifying
individuals
through
an
exchange.
The
issue
underlying
this
brouhaha
is
the
IRS's
position
that
the
tax
credit
is
available
to
qualifying
individuals
for
coverage
purchased
through
any
exchange,
including
an
exchange
established
and
operated
by
the
federal
government
in
a
state
that
has
declined
to
establish
its
own
exchange.
(For
a
summary
of
the
different
ways
in
which
exchanges
may
be
established,
click
here.)
Some
have
argued
that
this
position
is
not
supported
by
the
statutory
language
in
PPACA
and
the
Internal
Revenue
Code,
which
says
the
tax
credit
is
available
for
coverage
purchased
through
an
exchange
established
by
a
state.
It
is
unlikely
the
House
Committee's
inquiry
will
amount
to
much
more
than
political
theater.
But
it
will
highlight
what
has
become
a
popular
line
of
attack
on
the
health-care-reform
law
since
it
was
upheld
by
the
Supreme
Court
in
June.
|
|
IRS Posts FAQs on New Medicare-Tax Withholding
|
07/22/2012
|
By: Jason Lacey
|
The
IRS
has
posted
a
set
of
FAQs
to
its
website
that
provide
guidance
on
withholding
the
new
0.9%
Medicare
tax
that
will
apply
beginning
in
2013.
The
new
tax
was
enacted
as
part
of
health
care
reform
and
goes
into
effect
with
respect
to
wages
paid
on
or
after
January
1,
2013.
The
tax
is
an
additional
0.9%
on
all
wages
received
in
excess
of
a
threshold
amount.
The
threshold
amount
is
$200,000
in
the
case
of
a
single
individual
and
$250,000
in
the
case
of
a
married
individual
who
files
a
joint
tax
return.
But
regardless
of
an
employee's
marital
status
or
household
income,
employers
are
required
to
begin
withholding
the
tax
once
they
have
paid
an
employee
$200,000
in
wages
during
a
year.
Example.
An
employee
has
received
$180,000
in
wages
during
2013
and
then
receives
a
bonus
of
$50,000
in
December
2013.
In
addition
to
all
other
required
tax
withholding,
the
employer
must
withhold
the
new
0.9%
Medicare
tax
on
$30,000
of
the
bonus.
Some
of
the
clarifications
provided
in
the
FAQs:
- The
obligation
to
withhold
the
new
tax
only
applies
once
an
employee
has
received
$200,000
in
wages
and
only
to
the
extent
wages
for
the
year
exceed
$200,000.
- Non-cash
taxable
fringe
benefits
provided
to
an
employee
who
has
received
at
least
$200,000
in
other
taxable
wages
are
subject
to
the
new
tax,
even
though
not
paid
in
cash.
- The
withholding
requirement
does
apply
to
tipped
employees
who
Continue Reading...
|
|
Dividends and Dividend-Equivalents as Performance-Based Compensation
|
07/07/2012
|
By: Jason Lacey
|
A
new
ruling
from
the
IRS
(Rev.
Rul.
2012-19)
addresses
when
dividends
and
dividend-equivalents
paid
to
an
employee
in
connection
with
restricted
stock
or
restricted-stock
units
(RSUs)
will
qualify
as
performance-based
compensation
for
purposes
of
the
deduction
limitation
under
Code
Section
162(m).
Note.
This
ruling
is
of
particular
relevance
to
publicly
traded
companies.
They
are
limited
by
Code
Section
162(m)
in
their
ability
to
deduct
compensation
paid
to
a
"covered
employee,"
unless
the
compensation
is
qualifying
performance-based
compensation.
The
ruling
concludes
that
rights
to
dividends
and
dividend-equivalents
must
be
analyzed
separately
from
the
underlying
restricted
stock
or
RSUs
to
determine
whether
they
qualify
as
performance-based
compensation.
For
example,
if
an
employee
is
granted
restricted
stock
that
qualifies
as
performance-based
compensation
but
is
also
given
the
right
to
receive
dividends
with
respect
to
the
restricted
stock
without
regard
to
whether
the
performance
conditions
are
satisfied
with
respect
to
the
restricted
stock,
the
dividends
will
not
qualify
as
performance-based
compensation
and
will
be
subject
to
the
deduction
limitation
under
Section
162(m).
But
if
the
arrangement
provides
that
the
dividends
will
be
accumulated
and
paid
to
the
employee
only
if
and
when
the
performance-based
conditions
on
the
restricted
stock
are
satisfied,
the
dividends
also
will
qualify
as
performance-based
compensation.
|
|
IRS Provides New Guidance on Code Section 83
|
07/05/2012
|
By: Jason Lacey
|
The
IRS
has
provided
two
important
pieces
of
new
guidance
regarding
Code
Section
83,
which
governs
the
taxation
of
property
(e.g.,
stock
and
stock
options)
transferred
in
exchange
for
the
performance
of
services.
First,
new
regulations
have
been
proposed
that
would
revise
or
clarify
the
standards
on
when
property
is
subject
to
a
"substantial
risk
of
forfeiture"
for
purposes
of
Section
83.
(This
is
a
key
consideration,
because
property
transferred
in
connection
with
the
performance
of
services
generally
is
not
taxable
so
long
as
it
is
subject
to
a
substantial
risk
of
forfeiture.)
- Conditions
Other
Than
Service
or
Performance.
The
proposed
regulations
would
clarify
that
a
substantial
risk
of
forfeiture
may
be
established
only
through
a
service
condition
(e.g.,
a
vesting
schedule)
or
a
condition
related
to
the
purpose
of
the
transfer
(e.g.,
a
performance-based
condition).
For
example,
an
obligation
to
sell
property
back
to
the
employer
in
lieu
of
transferring
it
to
a
third
party
would
not
qualify
as
a
substantial
risk
of
forfeiture.
- Likelihood
That
Condition
Will
Occur. The
proposed
regulations
would
clarify
that,
in
determining
whether
a
performance-based
condition
is
a
substantial
risk
of
forfeiture,
the
likelihood
that
the
condition
will
occur
must
be
considered,
in
addition
to
considering
the
likelihood
that
the
condition
will
be
enforced.
For
example,
if
stock
transferred
to
an
employee
will
be
forfeited
if
the
employer's
gross
receipts
fall
by
90%
over
the
three-year
period
after
the
transfer,
the
likelihood
that
gross
receipts
actually
will
fall
by
Continue Reading...
|
|
IRS Updates Guidance on FICA Taxes and Employee Tips
|
06/20/2012
|
By: Jason Lacey
|
The
IRS
recently
released
Revenue
Ruling
2012-18,
which
provides
updated
guidance
for
employers
on
the
treatment
of
employee
tips
for
FICA-tax
purposes.
Tips
are
subject
to
both
the
employer's
and
the
employee's
share
of
the
FICA
tax,
even
though
they
are
not
paid
directly
from
the
employer
to
the
employee.
Special
procedures
govern
how
employees
report
tips
to
employers
and
when
employers
must
withhold
and
pay
the
required
FICA
taxes
on
those
tips.
Among
other
things,
the
new
guidance
clarifies
the
distinction
between
tips
and
service
charges.
Service
charges,
such
as
automatic
gratuities
added
to
a
bill
for
large
parties,
are
not
tips
for
FICA
purposes
and
may
not
be
reported
using
the
special
procedures
that
apply
to
tips.
They
must
be
treated
like
other
wages
paid
by
the
employer.
This
means,
for
example,
that
they
are
subject
to
FICA-tax
withholding
at
the
time
they
are
paid
to
the
employee.
In
a
related
announcement,
the
IRS
has
released
a
memorandum
to
field
agents
providing
instruction
on
audits
of
businesses
where
tipping
of
employees
is
customary.
The
memorandum
says
that,
in
general,
the
principles
in
Revenue
Ruling
2012-18
are
retroactively
effective.
But
in
certain
cases
it
may
be
appropriate
for
auditors
to
apply
the
new
guidance
on
service
charges
prospectively
from
January
1,
2013,
"in
order
to
allow
businesses
not
currently
in
compliance
additional
time
to
amend
their
business
practices
and
make
needed
system
changes."
Although
this
announcement
indicates
the
possibility
of
some
relief
for
employers
that
have
not
handled
service
charges
in
the
Continue Reading...
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IRS Provides Guidance on $2,500 Health FSA Cap
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05/31/2012
|
By: Donald Berner
|
The
IRS issued
Notice
2012-40
yesterday
(click
here
for
the
notice),
providing
a
number
of
important
clarifications
regarding
the
$2,500
cap
on
health
FSA contributions
that
applies
beginning
in
2013.
The
most
surprising
development
is
the
IRS's
interpretation
that
the
cap
applies
on
a
plan-year
basis,
rather
than
a
calendar-year
basis.
This
is
important
for
employers
with
fiscal-year
plans. They
will
be
able
to
wait
until
the
first
plan
year
beginning
after
December
31,
2012,
to
implement
the
cap,
rather
than
using
the
transition
rule
or
early
implementation
of
the
cap
to
ensure
contributions
during
the
2013
calendar
year
do
not
exceed
the
cap,
as
was
previously
thought
necessary.
Other
key
guidance
points
include:
- Clarification
that
unspent
amounts
carried
over
during
a
grace
period
will
not
count
against
the
cap
for
the
plan
year
in
which
the
grace
period
occurs.
- Confirmation
that
the
cap
only
applies
to
employee
salary-reduction
contributions
to
a
health
FSA.
Employer
contributions (e.g.,
flex
credits)
and
salary-reduction
contributions
to
dependent-care
FSAs
do
not
count,
nor
do
amounts
credited
to
HSAs
or
HRAs.
In
addition
to
interpretive
guidance,
the
Notice
provides
a
limited
correction
rule
that
will
allow
fixing
some
good-faith
mistakes.
If
a
mistaken
election
to
contribute
more
than
$2,500
to
a
health
FSA
in
a
year
is
properly
corrected,
the
error
will
not
jeopardize
the
plan's
status
as
a
qualifying
cafeteria
plan.
Of
academic
interest,
the
Notice
also
requests
comments
on
the
use-it-or-lose-it
rule.
The
implication
is
that
the
$2,500
cap
may
be
low
enough
Continue Reading...
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|
IRS Regulations Describe New Health Plan Fee
|
05/04/2012
|
By: Donald Berner
|
Recent
IRS regulations
provide
guidance
to
employers
and
insurers
on
the
calculation
and
payment
of
a
new
fee
on
health
plans.
The
fee
is
part
of
health
care
reform
and
will
be
used
to
fund
the
Patient
Centered
Outcomes
Research
Institute.
The
first
fee
payments
will
be
due
by
July
31,
2013,
and
relate
to
plan
years
ending
on
or
after
October
1,
2012.
Employers
are
responsible
for
calculating
and
paying
this
fee
with
respect
to
any
self-insured
health
plans
they
sponsor.
Insured
plans
are
subject
to
the fee
also,
although
the
insurance
carrier
is
responsible
for
calculating
and
paying
the
fee.
The
fee
is
$1
(increasing
to
$2
in
the
second
year),
multiplied
by
the
average
number
of
lives
covered
under
the
plan
during
the
year.
A
key
issue
in
calculating
the
fee
is
determining
the
average
number
of
lives
covered
by
a
plan
during
a
year.
(Covered
lives
include
not
only
covered
employees,
but
also
spouses,
dependent
children,
COBRA beneficiaries,
retirees,
and
any
other
persons
with
coverage
under
the
plan.)
The
regulations
give
employers
four
options
for
calculating
this
number.
Two
of
the
options
involve
counting
the
actual
number
of
covered
lives
under
the
plan
as
of
certain
dates
during
the
plan
year.
A
third
option
uses
a
formula
based
on
"snapshots"
of
the
number
of
employees
in
the
plan
at
various
points
during
the
plan
year,
and
the
fourth
option
uses
a
formula
based
on
the
number
of
participants
shown
on
the
Form
5500
for
the
plan.
The
fee
applies
to
all
self-insured
Continue Reading...
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Editors
Don Berner, the Labor Law, OSHA, & Immigration Law Guy
Boyd Byers, the General Employment Law Guy
Jason Lacey, the Employee Benefits Guy
Additional Sources

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