Health & Welfare Notes
Vol. 22, Issue 1 Winter 2017
2016 ACA Reporting Due Dates. In November 2016, the IRS announced limited relief for information reporting extending the due date for furnishing individuals with Forms 1095‑C and 1095‑B. This automatic 30‑day extension is from the original due date of January 31, 2017 to March 2, 2017. However, the IRS did not automatically extend the deadline for employers, insurers and other providers of minimum essential coverage (MEC) to file with the IRS the 2016 Forms 1094‑B and 1094‑C (and accompanying Forms 1095). The deadline for filing these forms with the IRS continues to be February 28, 2017, or March 31, 2017, if filing electronically. (Electronic filing is mandatory for entities required to file 250 or more Forms 1095.) However, filers may obtain an automatic 30‑day extension by filing Form 8809 on or before the regular due date.
Notice 2016‑70 also extends certain good‑faith transition relief to the 2016 information reporting requirements under Code sections 6055 and 6056. Pursuant to the Notice, the IRS will not impose penalties under Code sections 6721 and 6722 on reporting entities that report incorrect or incomplete information, either on statements furnished to individuals or on returns filed with the IRS, if they can show they made good faith efforts to comply with the reporting requirements. This relief applies to missing and inaccurate taxpayer identification numbers and dates of birth, as well as other required information. Penalty relief is not available to entities that fail to furnish statements or file returns, miss an applicable deadline, or are otherwise not making good faith efforts to comply. In determining good faith, the IRS will take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting the required information to the IRS and furnished it to employees and covered individuals, such as gathering and transmitting it to a third party to prepare the required reports, testing the ability to transmit data to the IRS, and taking steps to ensure compliance for 2017.
Those unable to meet the due dates are still encouraged to furnish and file as soon as possible, as the IRS says it will take such furnishing and filing into consideration when determining whether to abate penalties for reasonable cause. (Reasonable cause is distinct from good faith relief and requires, among other things, proof of significant mitigating factors or events beyond the reporting entity’s control.)
[McDermott Will & Emery, Thought Leadership, November 22, 2016; Thomson Reuters EBIA Weekly Newsletter, November 23, 2016]
PCORI Fee for 2017 Announced. IRS Notice 2016‑64 announced that the adjusted applicable dollar amount for PCORI fees for plan and policy years ending on or after October 1, 2016 and before October 1, 2017 (including 2016 calendar year plans) is $2.26. This is a $0.09 increase from the $2.17 amount in effect for plan and policy years ending on or after October 1, 2015 and before October 1, 2016. PCORI fees are payable by insurers and sponsors of self‑insured plans, and are calculated by multiplying the applicable dollar amount for the year by the average number of covered lives. The fee is required to be reported and paid once a year, no later than July 31 of the calendar year immediately following the last day of the plan year.
The fee was created by the Affordable Care Act to pay for research on the clinical effectiveness of medical procedures, and is assessed for each plan year ending after Sept. 30, 2012 and before Oct. 1, 2019. The amount of the fee is adjusted each year for inflation. [Thomson Reuters EBIA Weekly Newsletter, November 10, 2016]
ACA Executive Order and Employers: The Bottom Line. On Inauguration Day, January 20, 2017, President Trump signed an Executive Order directing his administration to take steps to repeal the Affordable Care Act (ACA) and in a Memorandum for the Heads of Executive Departments and Agencies, the White House issued an immediate regulatory freeze. Both actions will affect a wide range of laws, regulations, and functions within the federal government. Issuing Executive Orders and directives to stop the issuance of new regulations are normal practice for transitions between administrations.
Because ACA is law, the executive action itself cannot repeal the law. It essentially just made repealing ACA a priority. Even though it’s on top of the administration’s to‑do list, it doesn’t mean the undoing will be fast.
The Executive Order also gave regulatory agencies direction to do what they can to expedite the law’s unraveling. Regulations can be changed, but these changes must follow the Administrative Procedures Act, which amongst other things, provides notice‑and‑comment periods for proposed regulations. This process normally takes months, sometimes years.
There are, however, other ways regulatory agencies can make changes without going through a lengthy process. For example, federal agencies could extend compliance and enforcement delays. Or agencies could be more lenient in interpreting a hardship that gives an individual an exemption from the mandate to be covered by insurance.
So what does this all mean for the future of the ACA, and the employers and other plan sponsors who have spent the last six years implementing its provisions?
For starters, and most importantly, the Executive Order specifically states that its directives can be carried out only “to the maximum extent permitted by law.” This means that everyone, government agencies, plans, plan sponsors, employers and health insurers, must continue to comply with the ACA’s provisions until new regulations or other regulatory guidance is issued. This also means that the health plans and policies that are currently in effect will likely remain unchanged, at least for the current plan year. Second, the Executive Order directs governmental agencies to stop issuing regulations under the ACA and freeze any pending regulations. This means that unregulated sections of the law, including the extension of nondiscrimination rules to fully insured health plans and the Cadillac Tax, remain dormant, potentially indefinitely.
[IFEBP, WORD on benefits, January 26, 2017; Schulte Roth & Zabel, Alert, January 25, 2017]
DOL Announces Annual Adjustments to Many Employee Benefit Plan Penalties. The DOL has issued the first annual adjustment of civil monetary penalties for a wide range of benefit‑related violations. Congress enacted legislation in 2015 requiring an initial “catch‑up” adjustment to specified penalty amounts, followed by annual adjustments. Regulations issued in 2016 established the catch‑up amounts and called for future adjustments by January 15 of each year, starting in 2017. The adjustments just announced are effective for penalties assessed after January 13, 2017, with respect to violations occurring after November 2, 2015. Highlighted changes include:
- Form 5500. The maximum penalty for failing to file Form 5500 (which must be filed by most ERISA plans) increases from $2,063 to $2,097 per day that the Form 5500 is late.
Group Health Plans. The maximum penalty for failing to provide the Summary of Benefits and Coverage (SBC) increases from $1,087 to $1,105 per failure. Violations of the Genetic Information Nondiscrimination Act (GINA), such as establishing eligibility rules based on genetic information or requesting genetic information for underwriting purposes, and failures relating to disclosures regarding availability of Medicaid or children’s health insurance program (CHIP) assistance may result in penalties of $112 per participant per day, up from $110.
[Thomson Reuters EBIA Weekly Newsletter, January 19, 2017]
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, Cindy Swartz, Nancy Cunningham or Karen Irwin.