The Department of Health and Human Services (“HHS”) has issued additional requirements for covered entities that maintain protected health information or contract with a business associate for health plan-related services.
There are a number of technical changes made by the new guidance. The more significant changes are as follows:
- The extension of the privacy and security rules to vendors employed by business associates.
- Changes to the rule that make it more likely that notice of security breach will need to be provided to plan participants.
- Clarification as to the use of and disclosure of genetic information that will impact wellness programs.
- Agreements with business associates will need to be revised to reflect the obligations required by the new rules. A sample agreement issued by HHS is available for use.
- These new rules take effect on September 23, 2013, with the possibility that business associate agreements will not need to be revised until September 23, 2014.
Takeaways: Employers will need to review and, likely, revise their privacy and security policies and procedures to comply with these new rules. More detailed information will be provided at our April 9th seminar titled, “Safeguarding Employers in 2013.” The seminar invitation can be found here.
What Employers Are Considered “Large Employers” under the Play or Pay Mandate of the Affordable Care Act?
As stated in a previous post to this blog, the Play or Pay mandate under the Affordable Care Act only applies to “large employers.” A large employer for this purpose is an employer that employs on average at least 50 full-time equivalent employees in the preceding calendar year. However, in the case of a new employer, large employer status is based on the reasonable expectation of how many full-time equivalent employees the employer will employ in the current year.
To determine full-time equivalent employees, an employer counts every employee that is reasonably expected to work on average at least 30 hours per week, or 130 hours per month, as one full-time equivalent employee. For every other employee, their full-time equivalent status is based on how many hours they work in a month, as compared to a 120-hour per month standard.
Takeaway: The first step in the Play or Pay analysis for employers is to determine whether it is a large employer under the Affordable Care Act. The analysis is only based on the number of an employer’s full-time equivalent employees. The analysis is not based on whether the employer is a government employer, for-profit employer, or non-profit employer, as all these types of employers are potentially subject to a penalty/tax under the Play or Pay mandate of the Affordable Care Act.
This is a common question raised by employers. Fortunately, the specific answer is fairly straightforward. The Affordable Care Act does not require any employer to provide health insurance to its employees.
However, the Affordable Care Act does provide that generally beginning January 1, 2014, a large employer must provide substantially all of its full-time employees and their dependents the opportunity to enroll in affordable, minimum value health insurance, or the employer may be subject to a tax/penalty. This is commonly referred to as the Employer Shared Responsibility mandate or the Play or Pay mandate under the Affordable Care Act.
Takeaway: Even though the Affordable Care Act does not require any employer to provide health insurance to its employees, the Affordable Care Act does significantly change the analysis a company should perform in deciding whether to provide health insurance to its employees or not. It is a complicated analysis that employees should have already started to perform, or should begin to perform well before January 1, 2014. Future posts to MinnesotaEmployer.com will highlight important aspects of the analysis.
On Tuesday, February 12, 2013, and Tuesday, February 19, 2013, Steve Brunn will present “Understanding New Employer Obligations Under the Affordable Care Act” via webinar.
Heath care reform under the Affordable Care Act (“ACA”) is nothing new to employers, but 2013 could be the busiest year yet. The stakes are high, with potential penalties of $2,000 to $3,000 per employee for employers that do not offer health coverage or offer coverage that is too expensive or does not provide minimum value. These timely webinars will offer insight and practical suggestions to minimize your health insurance costs while keeping you in compliance with the new regulations.
February 12th Webinar: The February 12 webinar will be at 9:00 am CST and is being presented through Minnesota CLE (the continuing legal education affiliate of the Minnesota State Bar Association), as part of its webinar series for the newly issued Deskbook titled “Representing the Ongoing Business.” This webinar will be more focused on what lawyers and other advisors need to know to advise their clients. If you would like information about viewing this webinar or would like to register for it, click here.
February 19th Webinar: The February 19 webinar will be at noon CST and is being presented as a complimentary service to Briggs and Morgan clients and friends. Anyone who is interested may register. This webinar will be more focused on what plan sponsors need to know as they prepare for new obligations under the Affordable Care Act. If you would like information about viewing this webinar or would like to register for it, click here.
On January 2, 2013, President Obama signed the American Taxpayer Relief Act of 2012 into law, avoiding the automatic tax increases and spending cuts that had been referred to as the “fiscal cliff.” The new law primarily affects individual income tax rates, expiring estate tax provisions, and various taxes paid by businesses and investors. However, the new law also makes significant changes to Individual Retirement Accounts (IRAs) and certain employee benefit plans. A summary of the key provisions of the new law, including the provisions relating to IRAs and employee benefit plans, is available here.
Takeaway: IRA owners and employers should familiarize themselves with the new law and consider whether amendments should be made to their employee benefit plan documents or participant communications. Employers will also need to begin using new payroll tax withholding tables as a result of the new law.
A recent case illustrates how following reasonable administrative procedures can help protect ERISA plan sponsors and fiduciaries from liability. In Foster v. PPG Industries (10th Cir. 2012), Mr. Foster, a former employee of PPG Industries (“PPG”), maintained an account in PPG’s 401(k) plan. Mr. Foster and his spouse divorced. Mr. Foster moved out of the marital residence, but did not inform PPG of his change of address until approximately fourteen months later. During this time period, PPG mailed information to the marital residence about how to establish a new user ID and password to gain electronic access to Mr. Foster’s account. The communication was labeled, “To Be Opened by Addressee Only.”
Mr. Foster’s ex-spouse received this letter and took the steps necessary to gain access to Mr. Foster’s account. Over the course of several months, she withdrew all of the funds in Mr. Foster’s account.
Mr. Foster brought suit against PPG and the plan under ERISA. Mr. Foster alleged, in part, that his benefits had been improperly forfeited. The Court concluded that the defendants had taken no steps to forfeit Mr. Foster’s account. Instead the responsibility rested with Mr. Foster for failing to inform the defendant of his new address.
- Plan sponsors and plan fiduciaries that follow reasonable administrative procedures will not be responsible if a third party commits fraud against a plan participant.
- Plan participants can protect themselves against someone taking over their identity if they timely inform the plan sponsor of an address change.
The Supreme Court has ruled and President Obama has been reelected to a second term. For employers, this means there is no time like the present to begin (or continue) planning for full implementation of the Affordable Care Act. The following are some next steps for employers to take with regard to their group health plan.
- New Guidance – There has been very little guidance released over the last couple of months prior to the election. But new guidance is expected regarding several key features of the Affordable Care Act. As the new guidance is released, employers must become familiar with the guidance as quickly as possible.
- 2013 Changes – Several new requirements become effective in 2013, including limits on flexible spending accounts, W-2-reporting requirements, new Medicare payroll tax on high income wage earners, and new notice requirements. Employers must make sure that they are in compliance with these new requirements as soon as possible.
- 2014 Changes – January 1, 2014 marks the effective date of the most significant new requirements under the Affordable Care Act, including the individual mandate, the employer shared-responsibility mandate, and the new health insurance exchanges. It is not too early for employers to begin planning for these 2014 changes.
Takeaway – While the Affordable Care Act still faces discrete legal challenges and questions remain regarding how funding will be handled at both the federal and state levels, the Affordable Care Act has survived the major challenges it has faced. Therefore, employers should be planning for full implementation.
On October 18, 2012, the Internal Revenue Service announced the 2012 cost-of-living adjusted amounts for certain retirement plan limitations. On April 27, 2012, the Internal Revenue Service announced the 2012 cost-of-living adjustments affecting health savings accounts, and on October 16, 2012, the Social Security Administration announced the 2012 cost-of-living adjustments related to Social Security benefits.
A list of the most significant of these cost-of-living adjusted amounts is available here.
Minnesota CLE (the continuing legal education affiliate of the Minnesota State Bar Association) is sponsoring a two-day seminar on October 29 -30 entitled “Representing the Ongoing Business.” The seminar serves as the kick-off to a newly issued Deskbook by the same name. The Deskbook is Minnesota CLE’s 3rd Deskbook in the Business Law Series. The Deskbook and seminar is a guide to representing the small and medium-sized business owner.
Steve Brunn, co-chair of the Briggs and Morgan Employee Benefits and Executive Compensation Practice Group, authored the Employee Benefits chapter in the Deskbook and will be presenting “Employee Benefits Basics” at the seminar on October 29, 2012. Steve’s presentation will cover how recent developments in health care reform, HIPAA, and reporting/disclosure requirements will affect small and medium-sized employers. If you are interested in attending the seminar, you can register online here.
A recurring challenge for employers is trying to locate plan participants that have long since terminated employment, but that are just now entitled to start receiving their retirement plan benefits. Since 1994, the Internal Revenue Service has made available to plan sponsors a letter forwarding service to help locate missing plan participants. The program was fairly simple to use, and was free of charge. It was also reasonably effective in locating missing plan participants.
However, the IRS recently updated its letter-forwarding program, and under the updated program, which went into effect on August 31, 2012, the IRS no longer allows employers to use the service as a means to locate participants entitled to benefits under their retirement plans. While the service has been a helpful tool for retirement plan administrators since 1994, the IRS now reserves this program only for emergency situations.
As a result of this change, employers utilizing this service for locating missing plan participants should evaluate their administrative procedures and determine what alternative methods will be used. The Social Security Administration letter forwarding service, the use of internet search tools, commercial locator services, and credit reporting agencies are examples of acceptable, alternative methods of locating missing plan participants.
Keep in mind, expenses incurred to locate a missing individual may be charged to the participant’s account as long as the amount of the expenses allocated to the account are reasonable and the method of allocation is consistent with the terms of the plan and the plan fiduciary’s duties under ERISA. If the cost of using participant location services will be charged to the missing individual’s account, plan administrators need to consider the size of the participant’s account balance in relation to the cost of the services when deciding whether or not to use the service.
While most of the attention on health care reform has been on the federal government, federal regulatory agencies and federal courts over the past 2 ½ years since the Patient Protection and Affordable Care Act was passed into law in March 2010, focus has started to turn to the states. This is because one of the most significant new features to come out of health care reform is the public exchanges, which the states are tasked with creating and maintaining.
The public exchanges are intended to serve as new marketplaces to purchase qualified health plans, so individuals can satisfy the individual mandate, and certain companies can satisfy the shared-responsibility mandate, both of which become effective in 2014. Individuals and companies alike are beginning to evaluate their current health insurance situation, in light of the new mandates. However, until the new public exchanges are created, it is difficult to do a complete analysis.
In addition, under a new disclosure mandate, effective March 1, 2013, employers will be required to provide notice to its employees of how the public exchanges will work. But again, until the exchanges are created, complying with this new disclosure mandate will be challenging, to say the least.
While some states have said they will not create an exchange (thereby forcing the federal government to establish an exchange for such a state’s residents), and others have said they are just now beginning to look into creating an exchange, Governor Dayton has announced the creation of a new state agency in Minnesota, which will be responsible for creating an exchange in Minnesota. Until now, much of the responsibility fell on the Commerce Department. But now the new agency will be headed up by Minnesota Management and Budget Commissioner James Showalter.
Takeaway: This is an important development for Minnesota’s health care reform efforts, as it shows a definite intent to create an exchange in Minnesota, and it provides a resource for individuals and employers as they try to learn more about how the public exchange option will work in Minnesota. In addition, Minnesota residents and employers can check out a new website that is intended to provide the most updated information on Minnesota’s health care reform efforts. The website can be found at www.mn.gov/health-reform. This website is intended to provide a state resource similar to the resource that is available to keep abreast of the federal government’s health care reform efforts, at http://www.healthcare.gov/.
What Should Plan Administrators Do While Waiting For The Supreme Court To Rule on the Health Care Reform Law?
The speculation as to how the U.S. Supreme Court will decide in the case of the Department of Health and Human Services vs. Florida has begun. At issue, of course, is whether the health care reform law that was enacted in 2010 is constitutional. While many in the United States are anxiously awaiting the Supreme Court’s decision, expected later this summer, group health plan administrators are advised to keep working on provisions of the law that are currently effective, or that will become effective in the near future.
Rather than waiting on the sidelines, plan administrators should continue to work on the following:
- The Summary of Benefits and Coverage requirement is generally effective on or after September 23, 2012.
- W-2 reporting of the cost of employer provided health insurance coverage is required for 2012 Form W-2s.
- The $2,500 health flexible spending account limit becomes effective as of January 1, 2013, which affects plan years beginning after January 1, 2012.
Takeaway: While watching the news and listening to all the coverage surrounding the debate regarding the constitutionality of the health care reform law may be interesting, group health plan administrators are advised to continue implementing its provisions, as they become effective, at least until the U.S. Supreme Court issues its opinion in this landmark case.