Health & Welfare 20-3

Health & Welfare Notes

Vol. 20, Issue 3  May/June  2015 

PCORI Fee Due by July 31, 2015The Patient-Centered Outcomes Research Trust Fund fee is a fee on issuers of health insurance policies and plan sponsors of applicable self-insured health plans that helps to fund the Patient-Centered Outcomes Research Institute (PCORI).The PCORI fee is applicable to plan years ending on or after October 1, 2012, and extends through plan years ending before October 1, 2019. The fee must be paid no later than July 31 of the calendar year immediately following the last day of such plan year. Therefore, plan sponsors of self-insured calendar year plans have already paid PCORI fees for the 2012 and 2013 plan years and must now pay the third round for the 2014 plan year by July 31, 2015. Plan sponsors of self-insured health plans whose 2013 plan year ended after December 31, 2013 will now be paying their second year PCORI fee by July 31, 2015.

The PCORI fee for the first year was equal to $1.00 multiplied by the average number of covered lives in the group health plan. The fee for the second year is $2.00. The fee for the third year is $2.08. Future annual PCORI fees, like the third year, will be indexed for increases in national health expenditures. “Covered lives” include all covered participants and dependents, including retirees and those on COBRA. The IRS allows several different methods for determining the average number of covered lives. You can read more about this and the health plans that are required to pay the PCORI fee at http://www.irs.gov/irb/2012-52_IRB/ar11.html#d0e1733

Form 720 (with a revision date of April 2015), along with related payment voucher Form 720-V, should be used to report and remit the PCORI fee to the IRS (see Part II, lines marked “IRS No. 133″ on the second page of the Form). Although the Form 720 is designed for quarterly payments of certain excise taxes, the PCORI fee is paid only annually. The instructions also note that deposits are not required for PCORI fees (that is, the fees are paid when the Form 720 is filed), so plan sponsors are not required to use the IRS’s electronic tax payment service to pay these fees. Self-insured multiemployer plans may pay the PCORI fee from plan assets.

IRS Releases Preliminary PPACA Cadillac Tax GuidanceThe Affordable Care Act added section 4980I to the Internal Revenue Code, which imposes on insurers (for insured health plans) and employers/administrators (for self-funded plans) an annual excise tax, commonly referred to as the “Cadillac tax,” which is scheduled to go into effect for taxable years beginning after December 31, 2017. The excise (Cadillac) tax is equal to 40% of any “excess benefit” the plan provides to any employee, former employee, or surviving spouse. An excess benefit exists when the applicable cost of coverage exceeds the applicable dollar limit. The applicable dollar limits for 2018 are $10,200 for self-only coverage and $27,500 for other coverage (e.g., employee plus one, or family coverage), subject to a variety of adjustments to account for changes in the cost of health care. Employers are starting to analyze whether their high-end coverage options are likely to create excess benefits that will be subject to the Cadillac tax in 2018, and are taking steps now to moderate the impact of any future coverage reductions. In particular, employers in the midst of negotiating long-term collective bargaining agreements that will run through 2018 are struggling with how they will respond if a health plan coverage option triggers the tax.

The potential breadth of the Cadillac tax has become increasingly controversial as dollar thresholds ($10,200 for individual and $27,500 for family coverage) set in 2010 look increasingly too low for 2018 plan values. How the “applicable coverage” provided to employees should be valued was left to the Internal Revenue Service (IRS), which will collect the tax. In late February 2015, the IRS issued preliminary guidance (IRS Notice 2015-16) addressing the definition of applicable coverage, the method for determining the cost of that coverage, and how the annual dollar limits apply, and asked for comments from the benefit community about how to implement the excise tax. This guidance cannot be relied upon, but does convey details of how the IRS is thinking about these issues. Arriving at final guidance is expected to be a lengthy process. See IRS Notice 2015-16 at http://www.irs.gov/pub/irs-drop/n-15-16.pdf.
[Excerpts from Ballard Spahr Alert, by Brian M. Pinheiro, Edward I. Leeds, Brian D. Pedrow, and Daniel V. Johns, February 24, 2015]

IRS Provides Further Guidance on ACA Reporting.The January/February 2015 issue of Health and Welfare Notes reported the new reporting requirements under Code Section 6055 (to support IRS enforcement of the individual mandate) and Section 6056 (to support IRS enforcement of the employer mandate) and the forms to be used for the first required filing in early 2016 for coverage in 2015.
[See rGa’s website at rgabriel.com/news-events/archived-health-welfare-notes/.]

The IRS recently updated its Affordable Care Act website with new and updated guidance on the reporting requirements for applicable large employers (ALE) under Code Section 6055 and 6056 that will be filing Forms 1094-C and 1095-C. The IRS also issued draft guidance on the communication procedures, transmission formats and other technical requirements for filing ACA information returns electronically.

Questions and Answers on Reporting of Offers of Health Insurance Coverage by Employers (Section 6056) includes updated information on who is required to report, methods of reporting, and how and when to report. See: http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-on-Reporting-of-Offers-of-Health-Insurance-Coverage-by-Employers-Section-6056.

Questions and Answers about Employer Information Reporting on Form 1094-C and Form 1095-C provides employers with more specific information on how to complete Forms 1094-C and 1095-C under various circumstances, including basics of employer reporting, reporting offers of coverage and other enrollment information, reporting for governmental units, and reporting of COBRA coverage. See: http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-about-Employer-Information-Reporting-on-Form-1094-C-and-Form-1095-C.

Guidance on Electronic Requirements. Entities required to file 250 or more Form 1095-Bs or 250 or more Form 1095-Cs with the IRS must do so electronically. In addition, entities not required to submit forms electronically may do so voluntarily. The IRS has developed the Affordable Care Act Information Return System or “AIR” for this purpose; electronic submitters must use the AIR system for filing Form 1094-B, Form 1095-B, Form 1094-C and Form 1095-C. Materials recently released by the IRS provide some guidance on what that will entail including: an “Early Look” draft of Publication 5165 Guide for Electronically Filing Affordable Care Act (ACA) Information Returns (AIR) for Software Developers and Transmitters; and an “Early Look” draft of Publication 5164 Test Package for Electronic Filers of Affordable Care Act (ACA) Information Returns (AIR)

http://www.irs.gov/PUP/for_taxpros/software_developers/information_returns/Draft_Pub_5165_04_2015.pdf; and

http://www.irs.gov/PUP/for_taxpros/software_developers/information_returns/Draft_%20Publication_%205164.pdf.

Employers that intend to file Form 1095-Cs electronically on their own (rather than using a third party) should carefully review this IRS guidance on electronic filing to ensure that they will be able to submit the required forms for 2015 in the mandated format.
[Excerpts from Buck Consultants FYI, June 17, 2015]

Disclaimer – This newsletter’s purpose is to inform our clients and colleagues of recent legislative health care-related developments.  It is not intended, nor should it be used, as a substitute for specific legal advice.

Health and Welfare Notes is prepared four to six times annually and will accompany Retirement News.  If there are questions concerning the information discussed, call richard Gabriel associates and ask for Gabe Zinni, Karen Irwin, Cindy Swartz or Nancy Cunningham.

richard Gabriel associates
Actuarial and Employee Benefits Consultants
601 Dresher Road, Suite 201
Horsham, PA   19044-2203
Phone (215) 773-0900   —   Fax (215) 773-9907   —   Email: rga@rgabriel.com

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