The Supreme Court of the United States ruled 5–4 in its highly anticipated Hobby Lobby decision that closely held for-profit corporations do not have to comply with the contraception mandate under the Affordable Care Act if doing so would violate their religious beliefs. The Supreme Court based its decision on the Religious Freedom Restoration Act, which protects “persons” from government actions that substantially burden their exercise of religion, unless those government actions are the least restrictive means of furthering a compelling government interest, and determined that because the contraception mandate is not the least restrictive means available to the government, it cannot apply to closely held for-profit corporations that religiously object to the contraception mandate.
The Centers for Medicare & Medicaid Services’ Final Notice of Benefit and Payment Parameters for 2015 contains numerous alterations to premium stabilization programs, cost-sharing requirements and employee counting provisions to account for lower-than-anticipated enrollment through the Exchanges and the Obama Administration’s decision to permit individuals to “keep their current plan” through 2016. All of these changes and the fluid regulatory environment create significant challenges for issuers, who must operationalize these changes, some of which are effective in 2014, and prepare for the 2015 benefit year.
Recently issued final regulations on the employer pay-or-play rules under the Affordable Care Act (ACA) clarify the requirement that employers provide health coverage to full-time employees and their dependents, or pay a penalty and provide additional transition relief for 2015.
A second federal district court judge has ruled in favor of the government on one of the most serious challenges to the Patient Protection and Affordable Care Act of 2010 (ACA). The court dismissed a challenge to the availability of premium tax credits under the ACA. The plaintiffs now have appeals pending in two federal circuits, and similar challenges remain pending in two other federal trial courts.
Recently issued proposed regulations would expand the categories of excepted benefits under the Employee Retirement Income Security Act of 1974 (ERISA), the Internal Revenue Code (the Code) and the Public Health Service Act. In general, excepted benefits are exempt from the market reform and certain other requirements added to ERISA and the Code by the Affordable Care Act.
Recent guidance clarifies important issues under the Affordable Care Act, including mental health parity requirements; coverage of preventive care services; cost-sharing requirements; and out-of-pocket maximums, wellness programs and expatriate 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.
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 [...]
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 [...]
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.
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