Health and Welfare Plans Archives - Page 69 of 128

View From McDermott: Employer Pay-or-Play Mandates Under Health-Care Reform

by Jacob Mattinson | Jan 14, 2014 | Health and Welfare Plans

Open enrollment is well underway for individuals and small employers under the state and federally facilitated marketplace exchanges created by the Affordable Care Act.

As exchange coverage becomes available, many employers are in the process of evaluating whether, or at what level, to continue to offer health insurance benefits to their employees. Some employers are staying the course and offering robust medical plan choices to their employees. Others are turning to private health exchanges for solutions and still others are deciding that their employees may be better off obtaining subsidized coverage in the state or federally facilitated marketplace exchanges.

A large part of this decision turns on whether an employer will incur tax penalties for failure to offer adequate coverage to its employees and whether its employees will, in fact, be better off obtaining coverage elsewhere.

To read the full article, click here.

*Reproduced with permission from Bloomberg BNA Pension & Benefits Daily.

Privacy and Data Protection: 2013 Year in Review

by Daniel F. Gottlieb | Jan 7, 2014 | Health and Welfare Plans, Privacy and Data Security

Privacy and data protection continue to be an exploding area of focus for regulators in the United States and beyond. This report gives in-house counsel and others responsible for privacy and data protection an overview of some of the major developments in this area in 2013 around the globe, as well as a prediction of what is to come in 2014.

Read the full report here.

Employer Obligations for Additional Medicare Tax

by Jeffrey Holdvogt and Ruth Wimer | Dec 10, 2013 | Health and Welfare Plans

The Internal Revenue Service recently released final regulations and updated questions and answers to help employers and taxpayers comply with the new 0.9 percent Medicare payroll tax increase on high-income earners that became effective in 2013. Employers are responsible for withholding and reporting the increased payroll tax and may be liable for amounts that are not withheld. Employers should check with their payroll service providers to make sure they are compliant for 2013 and, if not, make any necessary corrections by the last payroll of 2013 to avoid potential liability or penalties.

The Internal Revenue Service (IRS) recently issued final regulations relating to the additional Hospital Insurance (HI) tax on income above threshold amounts (the Additional Medicare Tax), as added by the Affordable Care Act. The IRS also issued updated Questions and Answers for the Additional Medicare Tax. Employers are responsible for withholding and reporting the 0.9 percent Additional Medicare Tax, which became effective in 2013. If an employer fails to withhold the correct amount from wages it pays to an employee, the employer may be liable for the amount not withheld and subject to applicable penalties.

Background

In general, employees and their employers must each pay a Medicare tax, at a rate of 1.45 percent, on the entire amount of the employees’ wages. Effective for employees beginning in 2013, the 0.9 percent Additional Medicare Tax is imposed on individuals for wages in excess of $250,000 for married taxpayers filing jointly, $125,000 for married taxpayers filing separately and $200,000 for single taxpayers. Thus, for high-wage earners, the employer portion of the Medicare tax remains at 1.45 percent, but the employee portion can be a total of 2.35 percent of wages in excess of the threshold amounts.

Employer Obligations

To comply with the Additional Medicare Tax requirement, employers must withhold the 0.9 percent Additional Medicare Tax from wages it pays to an employee in excess of $200,000 in a calendar year, without regard to the employee’s filing status, wages paid by another employer or income from self-employment. Thus, generally the employer need not obtain additional information from the employee regarding the employee’s expected actual liability to withhold amounts due under the Additional Medicare Tax. Note that the withholding obligation exists even if an employee is not ultimately liable for the Additional Medicare Tax (e.g., if an employee’s wages together with those of his or her spouse do not exceed the $250,000 for married taxpayers filing jointly). On the other hand, an employer is not required to withhold the Additional Medicare Tax so long as the employee’s wages do not exceed $200,000, even if the employer has reason to believe the employee will be liable for the Additional Medicare Tax (e.g., if an employee and his or her spouse each earn $150,000). Employers are required to begin withholding Additional Medicare Tax in the pay period in which the employer pays wages in excess of $200,000 to an employee.

Employers that do not deduct and withhold the Additional Medicare Tax are [...]

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Final Regulations on the Mental Health Parity and Addiction Equity Act of 2008 and New Affordable Care Act FAQs

by McDermott Will & Emery | Nov 22, 2013 | Health and Welfare Plans

Final regulations have been issued implementing the Mental Health Parity and Addiction Equity Act of 2008 (Act). The Act generally requires group health plans (or health insurance coverage offered in connection with such a plan) to provide parity between medical and surgical benefits and mental health and/or substance use disorder benefits. Insurers and employers will be required to evaluate the design of their mental health and substance use disorder benefits to ensure that they comply with the final regulations.

To read the full article, click here.

Modification of “Use It or Lose It” Rule for Health Flexible Spending Arrangements

by McDermott Will & Emery | Nov 12, 2013 | Health and Welfare Plans

The Internal Revenue Service recently issued new guidance modifying the “use it or lose it” rule applicable to health flexible spending arrangements (FSAs) to allow carryover of certain unused health FSA amounts into the next plan year.

On October 31, 2013, the Internal Revenue Service (IRS) issued Notice 2013-71, which modifies the existing requirement that unused amounts in a health flexible spending arrangement (FSA) at the end of a plan year (or applicable grace period) must be forfeited. This new guidance permits an employer to amend its cafeteria plan, effective as early as the 2013 plan year, to allow up to $500 of unused amounts as of the end of the plan year to be carried forward for use in the following plan year. The tradeoff is that a health FSA cannot have both a grace period and a carryover feature; it is one or the other.

Carryover of Certain Unused Amounts Permitted

The “use it or lose it” rule applicable to health FSAs requires unused amounts remaining in a health FSA at the end of a plan year (or applicable grace period) to be forfeited. The new guidance now permits an employer to amend its plan to allow for up to $500 of unused amounts remaining in a health FSA at the end of a plan year to be carried forward to reimburse eligible expenses incurred in the next following plan year. While the employer can elect to allow less than $500 to be carried over into the next following plan year, the same carryover limit must apply to all plan participants. This $500 permitted carryover feature does not affect the $2,500 annual health FSA limit imposed by the Affordable Care Act. Thus, a participant with $500 remaining unused in his or her health FSA at the end of a plan year may be permitted to carryover the $500 into the next plan year, in addition to a maximum contribution of $2,500, for a potential total of $3,000 available reimbursement that next following plan year.

Under prior IRS guidance, health FSAs are permitted to include a two-month and 15-day grace period after the end of the plan year, during which a health FSA participant can incur eligible expenses and use the amounts contributed for the previous year to pay those expenses. The new guidance specifies that a plan that is amended to provide for the carryover of unused health FSA amounts into the following plan year cannot also have a grace period in place for that following plan year. Thus, an employer amending its plan to allow for carryover of unused health FSA amounts may also need to amend the plan to remove any existing grace period feature.

Deadline for Plan Amendments Allowing Carryover

Under the new guidance, an employer electing to allow for carryover of unused health FSA amounts must amend its plan to permit the carryover. This amendment must be adopted on or before the last day of the plan year from which amounts can be carried [...]

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New California Law Affects State Taxation of Employer Tax Gross-Ups for Domestic Partners

by Brian Tiemann, Jacob Mattinson and Todd Solomon | Nov 7, 2013 | Employment, Health and Welfare Plans, Retirement Plans

The California state legislature recently enacted a law that may affect the taxation of benefits an employer provides to same-sex domestic partners in the state. California AB 362 excludes from gross income for California state income tax purposes the amount of any tax gross-ups paid by an employer to an employee for benefits for that employee’s same-sex spouse or domestic partner. The law was approved by California’s governor on October 1, 2013, and is effective immediately through January 1, 2019.

Earlier this year the Supreme Court of the United States ruled in U.S. v. Windsor that Section 3 of the Defense of Marriage Act (DOMA) is unconstitutional (see “Supreme Court Rules on DOMA and California’s Proposition 8” for more). Section 3 of DOMA had provided that, for purposes of all federal laws, the word “marriage” means “only a legal union between one man and one woman as husband and wife,” and the word “spouse” refers “only to a person of the opposite-sex who is a husband or wife.” Subsequent Internal Revenue Service (IRS) and U.S. Department of Labor guidance clarified that, as a result of Windsor, favorable federal tax treatment of spousal benefit coverage would extend to all same-sex couples legally married in any jurisdiction with laws authorizing same-sex marriage, regardless of whether the couple currently resides in a state where same-sex marriage is recognized (see “IRS and DOL Guidance Clarifies Employee Benefits Impact of Supreme Court’s DOMA Ruling” for more information).

As a result of Windsor and the subsequent IRS guidance, the impact of California AB 362 appears fairly limited. Pre-Windsor, some employers provided a federal tax gross-up on the imputed value of coverage provided to an employee’s same-sex spouse or domestic partner. Post-Windsor, same-sex married couples in California no longer need a tax gross-up for either state or federal tax purposes because they no longer have to be taxed on the value of the coverage provided to their spouse. Because of this treatment, application of California AB 362 would be limited to a situation where an employer provides a federal tax gross-up to an employee who is in a California-registered domestic partnership. Such a gross-up, which would have been taxable under prior state law, is now no longer taxable in California. Employers in California will need to update their payroll and tax procedures accordingly. Employers both inside and outside of California that previously provided tax gross-ups may find it desirable to revisit their gross-up policies in light of the Windsor decision and the IRS guidance.

IRS Announces Employee Benefit Plan Limits for 2014

by Diane Morgenthaler and Jeffrey Holdvogt | Nov 6, 2013 | Health and Welfare Plans, Retirement Plans

The Internal Revenue Service (IRS) recently announced cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans for 2014. Although many dollar limits currently in effect for 2013 will change, some limits will remain unchanged for 2014. This On the Subject provides a chart of these 2014 cost-of-living changes.

To read the full article, click here.

New Guidance Clarifies Health Reimbursement Arrangements Under ACA

by McDermott Will & Emery | Oct 31, 2013 | Health and Welfare Plans

Recently issued guidance clarifies the application of certain provisions under the Affordable Care Act (ACA) to health reimbursement arrangements, employer payment plans, health flexible spending arrangements and employee assistance programs.

To read the full article, click here.

IRS Guidance on Employment and Income Tax Refunds on Same-Sex Spouse Benefits

by Brian Tiemann, Ruth Wimer and Todd Solomon | Oct 22, 2013 | Employment, Health and Welfare Plans, Retirement Plans

Employers extending benefit coverage to employees’ same-sex spouses and partners should review their payroll procedures to ensure that such coverages are properly taxed for federal income and FICA tax purposes. Employers also should review the options in Notice 2013-61 and consider filing claims for refunds or adjustments of FICA overpayments.

To read the full article, click here.

View From McDermott: Dollars and Cents, the Cost of Benefit Coverage

by Brian Tiemann and Todd Solomon | Oct 10, 2013 | Employment, Health and Welfare Plans

Many employers have begun the process of evaluating their options and obligations with respect to extending benefit coverage under employer-sponsored benefit plans to same-sex spouses in light of the U.S. Supreme Court’s recent ruling on Section 3 of the Defense of Marriage Act. Section 3 of DOMA provided that for all purposes of federal law the word “marriage” meant “only a legal union between one man and one woman as husband and wife,” and the word “spouse” referred “only to a person of the opposite-sex who is a husband or wife.” In June 2013, the Supreme Court ruled in United States v. Windsor that Section 3 of DOMA was an unconstitutional “deprivation of the liberty of the person protected by the Fifth Amendment.” The effect of this ruling is that federal law now generally will defer to state law definitions of marriage, including same-sex marriage, which has been legalized in 13 states and the District of Columbia.

As part of evaluating options for extending benefit coverage to same-sex spouses, employers need to consider the financial implications of such benefits. These implications include costs the employer will incur in extending such benefits, as well as the financial impact on employees who opt to utilize such benefits. Many of these costs are dependent upon the spousal benefits the employer currently offers, although the relevant considerations and cost estimates outlined below may be helpful resources.

To read the full article, click here.

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