This is a rundown on a few compliance issues from 2015 that I haven’t covered in previous columns.
Fixed Indemnity Insurance Plans
Fixed indemnity insurance plans pay a set amount of money for certain injuries or conditions as set forth in the insurance policy. For instance, an indemnity insurance plan might pay policyholders $200 for every day they are hospitalized in an intensive care unit.
While most fixed indemnity plans do not meet the requirements of the Affordable Care Act (ACA) rules, there is a lot to be said about receiving cash when injured or sick. Generally speaking, most people wouldn’t consider an indemnity plan to be all the health insurance they would ever need. However, the Department of Health and Human Services (HHS) stepped in to apply penalties for selling indemnity plans to people without other ACA-compliant health insurance.
In September 2015, a federal judge ruled in favor of insurance carriers selling fixed indemnity plans. The ruling scrapped the ACA requirement for additional health insurance prior to purchasing indemnity plans. More to come from the courts on this—I will keep you updated as events unfold.
New Form 5500 Filing Extended Deadlines—Repealed
Tucked into federal funding legislation, signed into law by President Obama on July 31, 2015, were filing extension deadlines that provided for changes to the Form 5500 for plan years beginning in 2016. All extensions afforded by this law were repealed in the Fixing America’s Surface Transportation (Fast) Act enacted December 4, 2015. The Fast Act restores the extension of time to file Form 5500s to 2 ½ months. For calendar year plans, the extended due date is October 15.
Cost Sharing under the ACA and Embedded Individual Maximum Out-of-Pocket Cost Sharing
The 2016 annual maximum on cost sharing, or out-of-pocket (MOOP), under the ACA for self-only coverage is $6,850. For other than self-only coverage, the 2016 annual MOOP is $13,700.
In conjunction with the MOOP limitations, embedded individual out-of-pocket maximums apply to all health plans in 2016. What does this mean? For health insurance that is other than self-only coverage, the self-only MOOP will apply to each individual covered within the plan. For instance, if a family of four is covered by health insurance with a maximum out-of-pocket of $10,000, the maximum out-of-pocket for any individual covered by this family plan could not exceed $6,850.
Employers should review their Health Savings Account (HSA) compliant health plans to be sure the policy is compliant with HSA deductible rules, MOOP limitations, and the embedded deductible rule for family policies.
This applies to all non-grandfathered small group and large group health plans, including self-insured plans, for plan or policy years beginning on or after January 1, 2016.
Same-Sex Marriage
There’s still cleanup of the federal tax code following the Supreme Court Windsor decision.
Notice 2014-1 provided guidance on the application of rules under section 125 (cafeteria plans) and amplified the previous guidance in Revenue Ruling 2013-17. We now have proposed regulations that will strengthen the previous Notices and Regulations, plus make Revenue Ruling 2013-17 obsolete.
This “Notice of Proposed Rulemaking” is an amendment to regulations incorporating the holdings of Windsor, Obergefell, and Revenue Ruling 2013-17.
In general, for federal tax purposes, the terms spouse, husband, and wife mean an individual lawfully married to another individual. The term husband and wife means two individuals lawfully married to each other and persons who are married for federal tax purposes.
For federal tax purposes, the term “marriage” does not include registered domestic partnerships, civil unions, or other similar relationships recognized under state law that are not denominated as a marriage under that state’s law, and the terms “spouse,” “husband and wife,” “husband,” and “wife” do not include individuals who have entered into such a relationship.
Check with your employers to ensure that their plan documents use the definition of spouses, husbands, and wives to assure they correspond with the definition for federal tax purposes.
Small Group Expansion
The Centers for Medicare and Medicaid Services (CMS) published an FAQ on the Pace Act which revises the definition of small employer for purposes of the market reforms under the ACA. The Pace Act defines a small employer as an employer who employed an average of 1-50 employees on business days during the preceding calendar year. The act also provides states the option of extending the definition of small employer to include employers with up to 100 employees.
There are myriad definitions and employee counts that employers must know. For the definition of “Small Group” for group insurance purposes and state marketplace Small Business Health Options Program (SHOP) offerings, check with an agent or broker in your state to determine employee counts.
Services Provided to Data Breach Victims
In response to data breaches, organizations often provide credit reporting and monitoring services, identity theft insurance policies, identity restoration services, or other identity protection services. In “Announcement 2015-22” the IRS assures individuals that the value of the identity protection services should not be included in individuals’ gross incomes.
This announcement does not apply to cash in lieu of these services or proceeds received under an identity theft policy
Veterans’ Health Coverage
Eligibility to contribute to a Health Savings Account (HSA) is based on the account holder having a qualified high-deductible health plan that does not pay for benefits, with a few exceptions, until the statutory deductible is met. Veteran’s care sometimes provides more than the types of eligible health care allowed prior to meeting the statutory deductible.
After 2015, the new law provides that after receipt of VA hospital care or medical services “for a service-connected disability” a person’s ability to make HSA contributions will not be affected. Still applicable is the rule that an individual is not eligible to make HSA contributions for a month if he has received VA medical benefits at any time during the previous three months.
New Permitted Election Changes for Cafeteria Plans
If your employers allowed for the two new election changes during 2015 outlined in IRS Notice 2014-55, your cafeteria plan must have been amended by December 31, 2015.
And Last, But Certainly Not Least
Employers can amend their plan documents to take advantage of the Carryover Option. Employees’ unused funds from their health care FSA at the end of the plan year may be carried over into the next plan year instead of “losing it.” This gives employees less risk and worry. Employers will get higher employee satisfaction, enrollment and overall tax savings by implementing the carryover option.
The information contained in this article is not intended to be legal, accounting, or other professional advice. We assume no liability whatsoever in connection with its use, nor are these comments directed to specific situations.
