On October 29, 2020, the Department of Health and Human Services (HHS), Department of the Treasury (Treasury) and Department of Labor (DOL) issued the final rule on transparency in health plan coverage. The final rule imposes significant new requirements on group health plans, including all issuers of non-grandfathered individual and group health insurance coverage and self-insured plans (that are not account based plans), to disclose information on pricing and cost-sharing under their plans. Grandfathered health plans and excepted benefit health plans are not subject to the transparency rules.
In Notice 2020-76 (Notice), the IRS extended the deadline from January 31, 2021, to March 2, 2021, for furnishing Forms 1095-B and 1095-C to individuals for reporting year 2020. Note that the Notice does not extend the deadline to file Forms 1094-B, 1095-B, 1094-C or 1095-C with the IRS. Those forms must be filed with the IRS by March 1, 2021 or if filed electronically, by March 31, 2021.
The Notice also extends “good-faith” reporting relief for employers that report incomplete or incorrect information on their returns (such as missing taxpayer identification numbers or dates of birth). This relief is available only when the employer can show it made a good-faith effort to comply with the filing requirements, such as gathering and transmitting the necessary data to an agent to prepare the data for submission, or testing its ability to transmit information to the IRS. The IRS has provided this good-faith relief in the past, but the Notice states that the 2020 reporting year will be the final year this type of relief is available.
As of the date of this post, there has been no legislation or IRS guidance allowing plan sponsors to permit cafeteria plan participants to make COVID-19 related mid-year election changes, other than those which also meet the current requirements of the employer’s cafeteria plan and applicable law. However, employers may find themselves faced with an increase in employee requests to change their cafeteria plan elections in response to employees’ rapidly changing circumstances in light of COVID-19.
The table below highlights a few of the mid-year election change requests anticipated as employees and employers respond to the social distancing and economic impact of COVID-19. Plan sponsors should confirm that their plan is not more restrictive than the general mid-year election changes permitted by law which are described here, and as with any mid-year election change request, a change is permitted only when it is consistent with the event and the terms of the plan.
The IRS Office of Chief Counsel recently issued a memorandum (https://www.irs.gov/pub/irs-lafa/20200801f.pdf) that responded with a resounding “No” to the question of whether an employer shared responsibility payment (ESRP) imposed under Internal Revenue Code §4980H is subject to any statute of limitations on assessment.
On March 2, 2020, the U.S. Supreme Court granted two petitions by interested states asking the Court to review the constitutionality of the individual health coverage mandate in the Affordable Care Act (ACA) and, if unconstitutional, determine whether other provisions of the ACA also are invalid.
In 2017, Congress changed the penalty tax associated with the individual mandate to zero as part of the Tax Cuts and Jobs Act of 2017. Following that change, a group of states challenged whether the individual health coverage mandate, with no associated penalty for an individual’s failure to purchase coverage, could still be upheld under the taxing power of Congress. In 2018, a Texas district court agreed and held that the other provisions of the ACA also are invalid as they are so closely linked to the individual mandate that they are inseverable. The recent petitions to the Supreme Court followed a ruling issued by the U.S. Court of Appeals for the Fifth Circuit that upheld the Texas district court’s 2018 finding that the individual mandate is unconstitutional, but sent back for further review the district court’s finding that the rest of the ACA also is invalid. This will be the Supreme Court’s third time reviewing the ACA since its enactment in 2010.
In IRS Notice 2019-63, the IRS extended the deadline to March 2, 2020, for employers and health insurance providers to provide individuals with 2019 Forms 1095-B and 1095-C (previous date was January 31, 2020). Nonetheless, the IRS encourages employers and other coverage providers to furnish 2019 statements as soon as possible.
Below is background on the information reporting requirements added by the Affordable Care Act (“ACA”) under Internal Revenue Code sections 6055 and 6056:
On August 26, 2019, the Internal Revenue Service (IRS), Department of Labor (DOL), and Department of Health and Human Services (HHS), collectively the “Agencies,” issued a joint FAQ announcing their intent to delay enforcement of a recent HHS final rule that would require group health plans and issuers of health insurance coverage to count certain drug manufacturer coupons toward the maximum annual out-of-pocket cost-sharing limit under the Affordable Care Act (the maximum out-of-pocket or MOOP limit). For plan years beginning in 2020, the MOOP limit on cost sharing is $8,150 for self-only coverage and $16,300 for other than self-only coverage. Drug manufacturers’ “coupons” are a form of cost-sharing assistance that offsets the amount of a participant’s copayment or coinsurance for a brand name drug.
The MOOP limit under ERISA and the Internal Revenue Code incorporates the HHS rule, thereby applying it to all non-grandfathered group health plans, self-funded or insured. The HHS rule states that plans and issuers are permitted to exclude the value of such coupons for specific prescription brand drugs from counting toward MOOP limits when a medically appropriate generic equivalent is available. However, based on language in the preamble to the HHS rule, health plans would have to count coupons toward MOOP limits when a medically appropriate generic drug is not available.