IRS Increases PCORI Fee from $2.00 to $2.08 for Plan Years Ending After October 1, 2014 and Before October 1, 2015

September 19, 2014 at 11:15 am | Posted in HHS, IRS, PCORI | Leave a comment
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In IRS Notice 2014-15, the agency announced an increase in the Patient Centered Outcome Research Institute (PCORI) Fee from $2.00 to $2.08 for policy years and plan years that end on or after October 1, 2014, and before October 1, 2015. The increase will be directly relevant to self insured clients and fully insured clients who have an HRA. The increase was driven by an adjustment to the percentage increase in the projected per capita amount of the National Health Expenditures published by HHS on September 3, 2014.  The PCORI fee is effective for policy and plan years ending after Sept. 30, 2012, and before Oct. 1, 2019.

A link to IRS Notice 2014-15 is here:

Text of IRS Notice 2014-56: Adjusted Applicable Dollar Amount for PCORI Fee (PDF)

IRS Says Employer Payment Plan for Marketplace Individual Coverage Triggers $36,500 per Employee per Year Penalty

May 27, 2014 at 3:25 pm | Posted in Affordable Care Act, Health Insurance Marketplace, IRS | Leave a comment
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Last week the IRS released the FAQS below which are intended to disincent employers from directing employees to a Marketplace/Exchange with the promise of reimbursing the employee for any premiums used for Exchange coverage since the “employer payment plan” is considered a “group health plan” that violates the ACA group health plan reforms.   Note that the first FAQ concludes:

“Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.”

Employer Health Care Arrangements

Q1. What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace)?

Under IRS Notice 2013-54, such arrangements are described as employer payment plans. An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation. As explained in Notice 2013-54, these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing. Notice 2013-54 clarifies that such arrangements cannot be integrated with individual policies to satisfy the market reforms. Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.

Q2. Where can I get more information?

On Sept. 13, 2013, the IRS issued Notice 2013-54, which explains how the Affordable Care Act’s market reforms apply to certain types of group health plans, including health reimbursement arrangements (HRAs), health flexible spending arrangements (health FSAs) and certain other employer healthcare arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy.

DOL has issued a notice in substantially identical form to Notice 2013-54, DOL Technical Release 2013-03, and HHS will shortly issue guidance to reflect that it concurs with Notice 2013-54. On Jan. 24, 2013, DOL and HHS issued FAQs that addressed the application of the Affordable Care Act to HRAs.

IRS Publishes 403(B) Retirement Plan Self Compliance Checklist and Fix It Guide

May 1, 2014 at 3:07 pm | Posted in IRS | Leave a comment
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The IRS has just published (April 2014) a 403(b) “Self” Compliance Checklist and Fix It Guide which can be utilized by (a.) public educational institutions and (b.) 501(c) (3) nonprofit organizations. A 501(c)(3) nonprofit organization is exempt from federal income tax if its activities, generally, have the following purposes: charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur sports competition, or preventing cruelty to children or animals.

A link to the checklist is here: [Guidance Overview] IRS 403(b) Checklist (PDF)
“[E]very year it is important to review the requirements for operating your 403(b) retirement plan. Use this checklist to help you keep your plan in compliance with many of the important rules…. [C]lick on ‘More’ in any of the questions for additional information (including examples) on how to find, fix and avoid each mistake.” (Internal Revenue Service [IRS]) 

Additional Delay in Discrimination Testing for Fully Insured Plans Reported

January 20, 2014 at 10:17 am | Posted in Compliance, Employment Law, Federal Laws, IRS, Regulations | Leave a comment
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According to the New York Times, the IRS will further delay the issuance of regulations that prohibit discrimination of eligibility or benefits “in favor of highly compensated individuals” in fully insured health plans.

Since the IRS has not yet determined how to measure health benefits — or which well-paid employees would be considered “highly compensated” — they plan to hold off on penalties, which are set at $100 per day for each employee negatively impacted. Similar discrimination regulations have been in place for self insured employers for more than 30 years.

“The IRS has not announced any new or additional information on this issue,” IRS spokesperson Michelle Eldridge said in a statement. “The New York Times story refers to IRS Notice 2011-1, which was released to the press on December 22, 2010. That Notice stated that the sanctions under Public Health Service Act Section 2716 will not apply until after generally applicable guidance is issued, because the statute requires regulatory detail in order to operate properly.”

“Work on that guidance continues, taking into consideration comments received from the public. Any suggestion that there is a new delay is misleading,” Eldridge said.

IRS Releases Standard Mileage Rates For 2014

December 11, 2013 at 9:46 am | Posted in IRS | Leave a comment
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The IRS has announced that in 2014:

  1. The standard mileage rate for transportation or travel expenses is 56 cents per mile for all miles of business use (business standard mileage rate).
  2. The standard mileage rate is 14 cents per mile for use of an automobile in rendering gratuitous services to a charitable organization.
  3. The standard mileage rate is 23.5 cents per mile for use of an automobile (1) for medical care described or (2) as part of a move for which the expenses are deductible. 

Click Here for the complete text of IRS Notice 2013-80: Standard Mileage Rates for 2014 (PDF)

IRS Liberalizes Section 125 Election Change Menu for Non-Calendar Year Plans to Allow “Transition Relief” for Participants to Drop Coverage and Elect Coverage Through an Exchange

November 1, 2013 at 11:28 am | Posted in Affordable Care Act, Cafeteria Plans, Compliance, Federal Laws, Flexible Spending Accounts, Health Care, Health Insurance Exchanges, Health Insurance Marketplace, IRS, Medical, PPACA, Regulations | Leave a comment
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The IRS has announced that it will allow, subject to an employer’s amendment of its non-calendar year cafeteria plan, the decision of an employee to change his/her Section 125 Cafeteria Plan health care election to drop coverage from his/her employer and obtain coverage through a health insurance exchange created under the Affordable Care Act.

According to the IRS: “An employer may amend its § 125 cafeteria plan to allow an employee who elected to salary reduce through the § 125 cafeteria plan to pay for accident and health plan coverage under the § 125 cafeteria plan with a non-calendar plan year beginning in 2013 to prospectively revoke or change his or her election with respect to the accident and health plan once, during a limited period (for example, the first month of 2014 only rather than the entire plan year) without regard to whether the employee experienced a change in status event described in Treas. Reg. § 1.125–4.”

Form 5500 Preparer Beware! IRS and DOL Search for Form 5500 Mistakes to Trigger Compliance Audits!

April 1, 2013 at 11:47 am | Posted in Department of Labor, Federal Laws, IRS | Leave a comment
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At a financial services conference last week, an IRS official disclosed how the IRS mines 5500 form responses for blanks and inconsistencies and then uses that mistake as a justification for a full fledged compliance audit. In fact, in 2009, when the DOL mandated electronic filing of the Form 5500, it stated that one of the purposes was to target more accurately and effectively those plan filings that they wished to pursue further. In 2012, within a few months of filing the Form 5500, the DOL sent thousands of letters or emails (DOL correspondence) to plan sponsors requesting amendments or explanations of responses on the 5500 form or attached schedules.

At the conference, and IRS official spoke of a few 5500 “red flags” that may lead to an audit:

  1. Line items that are left blank when the instructions require an answer.
  2. Inconsistencies in the data disclosed on the Form 5500 schedules.
  3. A large drop in the number of participants from one year to the next.

Unofficial: IRS Will Pursue Employers for Shared Responsibility Payments Starting in 2015

March 18, 2013 at 11:04 am | Posted in Affordable Care Act, Employment Law, Federal Laws, Federal Taxes, Health Care, IRS, Medical, PPACA, Regulations | Leave a comment
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From the Bloomberg News Service

Employers who may have a shared responsibility payment under tax code Section 4980H for not offering health care to full-time employees under the Affordable Care Act can expect to hear from the Internal Revenue Service about payments due beginning in 2015, but only if IRS has strong evidence to support its assessment, an IRS official said March 12.

Employers will be able to dispute or explain why the shared responsibility payment assessment may be incorrect, similar to standard IRS notice and demand procedures for assessable payments, Frederick Schindler, director of implementation oversight at the IRS Affordable Care Act Office, told members of the payroll industry at the American Payroll Association 2013 Capital Summit in Washington, D.C.

However, the IRS will make its assessment based on a variety of information provided by employers’ insurers, from the Department of Health and Human Services, and other third-party reporting to which IRS will have access, Schindler said.

“All of that information will be utilized before we go to the employer,” Schindler added.

Beginning Jan. 1, 2014, the shared responsibility payment for large employers, generally those with 50 full-time or full-time equivalent employees, is triggered if at least one employee receives a premium tax credit to help them pay for health coverage, if an employer does not provide a plan that meets minimum coverage requirements. Employees will use the tax credit to help purchase individual coverage on an affordable insurance exchange.

Protector Group Note: The statement of Mr. Schindler constitutes “informal” IRS guidance and should not be construed as a basis for an employer to assure full compliance with Section 4980H in 2014.

New Tax Imposed on Health Insurers (the Self Insured are Spared…), Could Impact Future Premium Increases

March 5, 2013 at 11:17 am | Posted in Affordable Care Act, Federal Laws, Federal Taxes, Health Care, IRS, Medical, Regulations | Leave a comment
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Last Friday, the IRS announced new regulations regarding a new health care tax, authorized under the Affordable Care Act. The tax is tied to health insurance premiums earned by the health insurance industry. A good summary of the new regulations was captured in the March 4th edition of BenefitsPro and is reprinted below:


The Internal Revenue Service on Friday unveiled its proposal to raise billions of dollars through annual fees on health insurers, a “$100 billion health insurance tax rule” that the industry says will significantly drive up costs for consumers. The rule as part of the Patient Protection and Affordable Care Act imposes annual fees on health insurers that start at $8 billion in 2014, increases to $14.3 billion in 2018, and will increase every year after that. The Joint Committee on Taxation estimates the tax will exceed $100 billion over the next ten years.

The proposed rule will be published Monday for public consideration in the Federal Register. The IRS will accept comments for 90 days, beginning Monday.

Not paying on time will result in a $10,000 penalty for insurers, plus $1,000 for every day they miss deadline.

America’s Health Insurance Plans blasted the rule as a tax that will financially drown both employers and consumers. They warn that the costs will have to be passed along to consumers in the form of higher premiums, a claim that the Congressional Budget Office has also verified in its analysis.

“Imposing a new sales tax on health insurance will add a financial burden on families and employers at a time when they can least afford it,” AHIP President and CEO Karen Ignagni said Friday. “This tax alone will mean that next year an individual purchasing coverage on his or her own will pay $110 in higher premiums, small businesses will pay an additional $360 for each family they cover, seniors enrolled in Medicare Advantage will face $220 in reduced benefits and higher out-of-pocket costs, and state Medicaid managed care plans will incur an additional $80 in costs for each person enrolled.”

There is currently legislation to repeal the fees, recently introduced by Reps. Charles Boustany, R-La., and Jim Matheson, D-Utah, which AHIP strongly supports.

A 2011 report by Oliver Wyman found that nationally the health insurance tax alone “will increase premiums in the insured market on average by 1.9 percent to 2.3 percent in 2014,” and by 2023 “will increase premiums 2.8 percent to 3.7 percent.”

IRS Issues FAQ Guidance Concerning Same-Sex Couples Taxpayer Obligations and Allowances

October 30, 2012 at 11:50 am | Posted in Federal Taxes, IRS | Leave a comment
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Last week, the Internal Revenue Service (IRS) issued guidance concerning a variety of frequently asked income tax and deductions questions that they have addressed concerning same-sex couples.

 A copy of the guidance can be found here:

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