As 2014 comes to an end, health plan sponsors most certainly are taking actions to ensure compliance with the Affordable Care Act (“ACA”) employer shared responsibility requirements, which become effective January 1, 2015. However, plan sponsors should not lose sight of other upcoming compliance deadlines for their health and welfare plans. The following is a brief description of some key dates to keep in mind as plan sponsors prepare for year-end.
Deadline to Obtain Health Plan Identifier Number:
November 5, 2014
Generally, large health plans (with annual receipts1 of more than $5 million) must obtain a health plan identifier number (“HPID”) by November 5, 2014 by registering with the Centers for Medicare & Medicaid Services’ Health Insurance Oversight System. Small health plans (with annual receipts of $5 million or less) have until November 5, 2015 to obtain an HPID. Although an insurer will be responsible for obtaining the HPID for a fully-insured plan, sponsors of self-insured plans will need to file for the HPID. Recent guidance has made clear that an HPID is not necessary for health reimbursement accounts (“HRAs”) that only cover deductibles or out-of-pocket costs or healthcare flexible spending accounts (“FSAs”). The HPID process cannot be completed in a single session, so plan sponsors of large health plans should start the process sooner rather than later in order to meet the November 5 deadline.
Deadline to Submit Enrollment Count for Transitional Reinsurance Fee:
November 15, 2014
The ACA establishes a transitional reinsurance program to help stabilize premiums for coverage in the individual market during 2014 through 2016. The contributions made under the transitional reinsurance program are intended to support payments to individual market issuers that cover high-cost individuals. Self-insured group health plans that provide major medical coverage must submit an enrollment count to the Department of Health and Human Services by November 15, 2014. (Standalone dental and vision plans, healthcare FSAs, integrated HRAs and employee assistance programs generally do not provide major medical coverage and thus are excluded.) The enrollment count will be used to calculate the 2014 Transitional Reinsurance Fee, which will be assessed on a per capita basis at $63 for each covered life. (Reinsurance fees also apply to fully-insured health plans, but the insurer is responsible for the fees.) Self-insured health plans that are self-administered may be exempt from the Transitional Reinsurance Fee with respect to 2015 and 2016, but are still required to pay with respect to 2014. The 2014 Transitional Reinsurance Fee (or the first installment of the fee, if the sponsor elects to pay the fee in two installments) must be paid no later than January 15, 2015. Plan sponsors may submit their enrollment counts by going to Pay.gov.
Deadline to Amend Section 125 Cafeteria Plan:
December 31, 2014 (or last day of plan year)
Healthcare FSA Contribution Limit: The ACA imposes a $2,500 limit (as indexed for inflation) on an employee’s annual salary reduction contributions made to a healthcare FSA offered under a cafeteria plan. Although this requirement was effective for plan years commencing on or after January 1, 2013, some cafeteria plans may not have been amended to reflect the $2,500 limit. This amendment must be adopted no later than December 31, 2014.
Healthcare FSA Carryovers: Cafeteria plans may, but are not required to, be amended to provide for a carryover of up to $500 in unused healthcare FSA contributions to be applied to reimburse health expenses in the subsequent plan year. (Previously, all healthcare FSA contributions were subject to a “use-or-lose” rule, which required that all unused contributions as of the end of the plan year or grace period, if applicable, be forfeited.) A plan amendment incorporating a carryover feature must be adopted by the last day of the plan year from which amounts may be carried over (e.g., a calendar year plan must be amended by December 31, 2014 in order for contributions from 2014 to be carried over to 2015). However, a special rule applies to a cafeteria plan that permitted carryovers from 2013 to 2014—in that case, the plan must be amended by the last day of the 2014 plan year (i.e., December 31, 2014 for calendar year plans). The carryover feature is optional, but may not be adopted if the cafeteria plan already provides for a grace period allowing employees to use their FSA funds to cover eligible expenses incurred during a two and one-half month period following the last day of the plan year.
Same-Sex Spouses: In connection with the Supreme Court’s decision in Windsor v. United States2, an employee may be permitted to pay for health coverage of his or her same-sex spouse on a pre-tax basis and be reimbursed from a healthcare FSA for expenses related to his or her same-sex spouse. In addition, a same-sex spouse may be treated as a spouse under a dependent care FSA. Employers that permit coverage of same-sex spouses should confirm that the definition of “spouse” in their cafeteria plans does not restrict coverage to opposite-sex spouses. Although the legal deadline for such an amendment is not entirely clear, we recommend that the amendment be adopted by December 31, 2014.
Additional Mid-Year Election Changes: Section 125 cafeteria plan rules have been modified by the IRS in Notice 2014-55 to allow additional ACA-related mid-year election changes. Cafeteria plans are allowed, but not required, to permit plan participants to revoke their elections of coverage under a group health plan when they (i) reduce their hours of service to below 30 hours of service per week (even if plan eligibility is not impacted) and enroll in other health coverage or (ii) enroll in a qualified health plan through the Health Insurance Marketplace. Employers who wish to permit these election changes generally must amend their plans by the end of the plan year in which the changes are allowed. However, a special rule applies if the changes are permitted in 2014—in that case, the plan must be amended by the last day of the 2015 plan year (i.e., December 31, 2015 for calendar year plans). Accordingly, even though there is not a 2014 amendment deadline for these changes, a plan sponsor may wish to include this amendment with the above-described 2014 amendments. In addition, employers who decide to permit these election changes will need to notify participants of these new rights. These new mid-year election events do not permit changes in coverage under a healthcare FSA or standalone dental or vision plan.
1 A health plan that does not report receipts to the Internal Revenue Service may determine whether it is a large or small health plan by using annual claims (for self-insured plans) or annual premiums (for fully-insured plans) as a proxy for annual receipts.
2 In Windsor v. United States, the Supreme Court held that Section 3 of the Defense of Marriage Act, which defined “marriage” and “spouse” as excluding same-sex partners, was unconstitutional.
For more information regarding these action items or any other issues related to your health and welfare plans, please contact one of the following lawyers:
Melissa K. McGrory
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