Author Archives: Steve Brunn

2017 Cost-of-Living Adjusted Amounts for Employee Benefit Plans

On October 27, 2016, the Internal Revenue Service announced the 2017 cost-of-living adjusted amounts for certain retirement plan and fringe benefit limitations. Earlier in 2016, the Internal Revenue Service announced the 2017 cost-of-living adjustments affecting health savings accounts and high deductible health plans, and on October 18, 2016, the Social Security Administration announced the 2017 cost-of-living adjustments related to Social Security benefits.

A list of the cost-of-living adjusted amounts that most commonly affect employer-sponsored benefit plans is available here.

2016 Cost-of-Living Adjusted Amounts for Employee Benefit Plans

On October 21, 2015, the Internal Revenue Service announced the 2016 cost-of-living adjusted amounts for certain retirement plan and fringe benefit limitations. Earlier in 2015, the Internal Revenue Service announced the 2016 cost-of-living adjustments affecting health savings accounts and high deductible health plans, and on October 15, 2015, the Social Security Administration announced the 2016 cost-of-living adjustments related to Social Security benefits.

A list of the cost-of-living adjusted amounts that most commonly affect employer-sponsored benefit plans is available here.

Significant Changes To IRS Determination Letter Program

 On July 21, 2015, the Internal Revenue Service announced significant changes to the determination letter program for qualified retirement plans.  The IRS, in Announcement 2015-19, made it official that it will be ending its long-standing practice of issuing determination letters for individually-designed qualified plans, except in the case of a plan’s initial determination letter, or upon a plan termination.

This change is effective immediately with respect to “off-cycle” determination letter applications, and is effective January 1, 2017 for all other determination letter applications.  In other words, the IRS will still issue determination letters for individually-designed plans that are in “Cycle E” (plans sponsored by employers whose EIN ends in 0 or 5), provided the application is submitted no later than January 31, 2016, and for individually-designed plans that are in “Cycle A” (plans sponsored by employers whose EIN ends in 1 or 6), provided the application is submitted no earlier than February 1, 2016 and no later than December 31, 2016.  In addition, the IRS will continue to issue determination letters for individually-designed plans upon their initial qualification, or upon their termination.

Prior to this announcement, in order to rely on the protections afforded by a favorable determination letter, individually-designed qualified plans generally were required to be restated and submitted to the IRS for a new determination letter every five years, based on changes made to the determination letter program back in 2007.  However, that program of 5-year remedial amendment cycles will be essentially ended as a result of the most recent announcement.  It should be noted, however, that this announcement does not make any direct changes to the determination letter program with respect to qualified plans that are in the form of a pre-approved plan.  Those plans still are subject to the rules under Revenue Procedure 2007-44.  As such, those plans are generally required to be restated according to a 6-year cycle, with the current 6-year cycle running from May 1, 2014 – April 30, 2016.

There are a number of outstanding issues that still need to be addressed by the IRS regarding this announcement.  Chief among them is how to determine the remedial amendment period for individually-designed plans after December 31, 2016, and how these changes affect the rules under other IRS programs, including the Employee Plans Compliance Resolution Program.  The IRS is requesting comments on these issues and will issue further guidance at a later date.

Takeaway:  As a result of the changes announced by the IRS to its determination letter program, plan sponsors should no longer submit an application for a determination letter for an individually-designed plan, unless it is for the plan’s initial qualification, the plan’s termination, or the “on-cycle” submission for a Cycle E or Cycle A plan.  In addition, sponsors of individually-designed plans may want to consider moving the plan to a pre-approved plan, especially since the IRS recently began allowing certain defined benefit pension plans and employee stock ownership plans to be adopted in the form of a pre-approved plan.

What Does the Anthem Breach Mean For You?

In early February 2015, Anthem, Inc. reported that on January 29, 2015, it had discovered that it was the target of “a very sophisticated external cyber attack.”  Anthem believes the attack happened over the course of several weeks, starting on December 10, 2014.  Accessed information may have included the names, dates of birth, social security numbers, home addresses, email addresses, and income data of current or former members of one of Anthem’s affiliated health plans, or one of the health plans that Anthem provides administrative services to.  Anthem is one of the largest health insurance companies in the United States, and one of the largest service provider to self-funded group health plans and Blue Cross and Blue Shield plans across the country.  Over 300,000 Minnesotans may have been affected by this breach.

What this means for you:

  • If you are one of the individuals that were directly affected by this breach, you should take advantage of the credit monitoring protection offered by Anthem and continue to watch your banking and other financial accounts for any potential suspicious activity. Anthem will contact affected individuals.  However, if you have not yet been contacted by Anthem, but believe you may have been affected by the breach, you can contact Anthem directly by calling (877) 263-7995.
  • If you represent an employer that sponsors a group health plan insured or administered by Anthem, you may need to provide notice to the participants in your plan, and may need to provide notice of the breach to the Department of Health and Human Services (HHS), as required by the Privacy Rule under the Health Insurance Portability and Accountability Act (HIPAA). Some state laws also require notifications in these types of instances.  As a result, you should contact your company’s employee benefits counsel to determine specifically what notice requirements apply in this case.  Anthem may take the lead in fulfilling any notice requirements that apply to your plan, especially if Anthem fully insures the plan.  However, as the plan sponsor, your company is generally ultimately responsible for making sure all HIPAA requirements are met, especially if the plan is self-insured and Anthem only serves as the claims administrator. In addition, you should consult your plan’s HIPAA privacy and security policies to determine if further actions are required due to this breach.  HIPAA generally requires all group health plans have privacy and security policies and procedures.  Therefore, you should make sure you have HIPAA compliant policies and procedures in place for your plan, and that you are following them.  Anthem will contact affected plan sponsors.  However, if you have not yet been contacted by Anthem, but believe your plan may have been affected by the breach, you can contact Anthem directly by calling (877) 263-7995.
  • If you represent an employer that sponsors a group health plan that is not insured or administered by Anthem, you should still familiarize yourself with this breach for two reasons. First, you still may get questions from employees wondering if they are affected.  Second, it can serve as a good test of your HIPAA privacy and security policies and procedures.  HIPAA generally requires all group health plans have privacy and security policies and procedures.  If you do not have such policies and procedures, this serves as a good reminder to implement such policies and procedures as soon as possible.  You can be thankful that your plan was not affected this time.  But you may not be so lucky next time.  In addition, even if your plan is never affected by a breach, HHS has the authority, and regularly exercises such authority, to audit group health plans for HIPAA compliance, and to assess significant fines for noncompliance.  Therefore, you should make sure you have HIPAA compliant policies and procedures in place for your plan, and that you are following them.
  • If your company provides services to another company, and in the course of providing such services, your company receives, transmits, stores, or otherwise has access to certain health information of individuals, your company may be considered a “business associate” under HIPAA. In that case, HIPAA imposes direct liability on your company for certain HIPAA requirements, and your clients will also expect your company to be HIPAA compliant.  As a result of the Anthem breach, your clients may be more interested in your HIPAA policies and procedures, since they do not want to risk being responsible for a HIPAA violation that was caused by your company.  Therefore, you should also make sure you have HIPAA compliant policies and procedures in place for your company, and that you are following them.

Takeaway:  Clearly if you were directly affected by the Anthem breach, either as an individual whose personal data may have been compromised, or as the representative of a company that sponsors a group health plan insured or administered by Anthem, you should take immediate action to obtain credit monitoring (in the case of an individual) or consult with your company’s employee benefits counsel regarding HIPAA notification requirements.  However, even if you were not directly affected by this data breach,  if you represent a company that sponsors a group health plan and/or your company is a “business associate,” this data breach serves as a good reminder to make sure you are in compliance with HIPAA.  At a minimum you should have, and be following, HIPAA compliant policies and procedures.  Two of the most important policies are to conduct a comprehensive security risk assessment and to conduct on-going employee training.  If you do not currently have HIPAA compliant policies and procedures, or you are not sure if they are HIPAA compliant, you should contact your company’s employee benefits counsel as soon as possible.

2015 Cost-of-Living Adjusted Amounts for Employee Benefit Plans

On October 23, 2014, the Internal Revenue Service announced the 2015 cost-of-living adjusted amounts for certain retirement plan limitations. Earlier in 2014, the Internal Revenue Service announced the 2015 cost-of-living adjustments affecting health savings accounts and high deductible health plans, and on October 22, 2014, the Social Security Administration announced the 2015 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.

Is the IRS’s New “Use It or Lose It” Rule a Trick or a Treat?

On October 31, 2013, the Internal Revenue Service got into the Halloween spirit by giving what at first appears to be nothing but a treat to health flexible spending account participants.  The IRS, in Notice 2013-71, modified the “use it or lose it” rule that applies to health flexible spending accounts.  While this change may appear at first to be nothing but good news, an employer must review and understand the new “use it or lose it” rule, to avoid being tricked.

Under the new rule, an employer’s health flexible spending account may allow up to $500 of a participant’s health FSA to be carried over into the next year.  A plan may allow a carryover limit of less than $500, or may not allow any carryover at all.  But if an employer wants to add a carryover feature to its health FSA, there are a few rules that must be followed, including:

  • The carryover cannot exceed $500;
  • The carryover only applies to a health FSA (i.e., not to a dependent care FSA);
  • The carryover does not reduce the maximum amount that generally applies to health FSAs ($2,500 for 2013 and 2014);
  • A carryover may not be permitted with a grace period; a plan may have a carryover feature, or a grace period, but not both;
  • Amounts carried over must be used in the subsequent plan year, or forfeited by the end of the subsequent year;
  • A plan must be amended to allow the carryover before the end of the first year in which the carryover will be allowed, except an employer can administer the plan with a carryover for the 2013 plan year without having to formally amend the plan until 2014; and
  • A carryover in a general-purpose FSA may result in an individual being ineligible to contribute to a health savings account for the entire year that the amounts are carried over to.

Takeaway: The new carryover feature will certainly be welcome news to many employers.  However, considering that the IRS announcement did not occur until most employers were in, or near, their annual enrollment period, it may make sense for an employer to wait until 2014 to implement the new feature, especially if the employer’s plan already has a grace period, which would need to be eliminated if the carryover feature is adopted.  Nonetheless, it is a new feature that every employer with a health FSA should at least consider.

2014 Cost-of-Living Adjusted Amounts for Employee Benefit Plans

On October 31, 2013, the Internal Revenue Service announced the 2014 cost-of-living adjusted amounts for certain retirement plan limitations and limitations affecting certain fringe benefits.  On May 2, 2013, the Internal Revenue Service announced the 2014 cost-of-living adjustments affecting health savings accounts, and on October 31, 2013, the Social Security Administration announced the 2014 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.

Hold Everything: ACA Play or Pay Effective Date is Delayed

Ok, employers don’t need to hold everything.  They should continue to prepare for the August 1 effective date of Minnesota’s new same-sex marriage law, and the September 23 effective date of new requirements under the HIPAA Omnibus Rule.  And employers still need to make sure their wellness programs comply with final regulations issued earlier this year, and still need to make sure they are compliant with many of the other requirements under the Affordable Care Act (ACA) that are effective between now and January 1, 2014.  But at least employers can “put down their pencils” with regard to their planning on how they will comply with the Employer Shared Responsibility mandate (aka the “Play or Pay” mandate), at least for one year.

On July 2, 2013, the U.S. Treasury announced that the Obama Administration will provide an additional year before the Employer Shared Responsibility mandate will be effective.  The Treasury expects to publish formal guidance within the next week or so describing the details of this delayed effective date.  Also, during the summer of 2014, the Treasury expects to issue additional proposed rules on how the various information reporting requirements on the mandate are to be met.  Once these rules have been issued, the Administration will work with employers, insurers, and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015.

Takeaway:  Since penalties under the Employer Shared Responsibility mandate will not apply in 2014, employers can put on hold any changes they were intending to make to their medical plan or business hiring practices, as a result of the mandate, without having to worry about any penalties under the mandate before 2015.  During this 2014 transition period, employers will need to watch for further guidance issued by the Treasury on this issue.  In addition, employers can focus their benefit plan compliance efforts on more immediate concerns, such as the affect on their benefit plans of the partial repeal of DOMA, and the new HIPAA Omnibus Rule.

Changes to HIPAA Privacy Requirements

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.

Does the Affordable Care Act Require Employers to Provide Health Insurance to its Employees?

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.

Upcoming Affordable Care Act Webinar Presentations

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.