• 2022 ACA Affordability Threshold Released

    In order to avoid a Shared Responsibility Payment under the ACA, employers must offer affordable, minimum value coverage to full-time employees. Coverage is considered “affordable” if the employee contribution is below a specified percentage of income for each employee.

    The IRS has announced the 2022 indexing adjustments for the affordability threshold. This was released in Rev. Proc. 2021-36.

     

    2022 Affordability Threshold

    The new affordability threshold for 2022 is 9.61%. This is a reduction from the 2021 affordability threshold, which was 9.83%.

    Employers who use the Federal Poverty Level safe harbor (as opposed to Rate of Pay or W2 safe harbors) will now be restricted to lowest cost employee only contributions of $103.14 per month in 2022. As a reminder, certain other stipends or surcharges must be included in the affordability determination.

     

    Of Note for Employers

    Employers typically cross reference these affordability threshold percentages in designing contributions such that Shared Responsibility Payments can be avoided. Of note, since the threshold was reduced for 2022, if wages were to remain level, maximum contributions may actually be reduced.

     

    Enhanced Premium Tax Credit (for Individuals)

    The enhanced premium tax credit applies to individuals with Exchange coverage. While this does not directly impact employers, the expansion of the credit is worth noting for employers who have employees that are not eligible for employer sponsored coverage.

    The ACA premium tax credit was expanded by the American Rescue Plan Act of 2021 (ARPA) for taxable years 2021 and 2022. Under standard rules, the tax credit is limited to taxpayers with household income between 100% and 400% of the federal poverty line.

    ARPA eliminated the upper income limit for eligibility and increased the amount of the premium tax credit. The revised calculations decreased the percentage of household income that individuals must contribute for Exchange coverage (in all income bands). The 2022 percentage ranges from zero to 8.5%. This reflects the percentage of household income that recipients of the tax credit must pay for Exchange coverage. This is a substantial reduction from prior year percentages (which were 2.06% to 9.78% for 2020 and 2.07% to 9.83% for 2021). Special enhancements to the credit are also included for individuals receiving unemployment compensation in 2021.

  • Health Plan Surcharges for Unvaccinated Employees

    More employers are contemplating a health plan premium surcharge for unvaccinated employees in lieu of incentives now that the FDA has approved a COVID-19 vaccine and the number of COVID-19 hospitalizations are on the rise. While this strategy has been more commonly associated with employees who smoke tobacco, employers are looking for new ways to keep the workplace safe and healthcare claim costs under control.


     

    What is a Surcharge?

    Most employers today have a set dollar amount or percentage of premiums that they pay for employee healthcare insurance. A common model is one in which an employer pays 80% – 90% percent of the premiums and requires the employee to pay the other 10% – 20%.

    A surcharge is an additional fee or premium that an employee is required to pay on top of their regular portion or a percentage for healthcare coverage through their employer. For example, employee only medical coverage costs employees $150 per month. If the employer imposes a $100 surcharge for being a smoker, an employee who smokes would have to pay $250 per month for employee only medical coverage.


     

    Cost of Hospitalizations

    According to a report dated August 20, 2021, from the Kaiser Family Foundation (KFF), 98% of people hospitalized with COVID-19 between May 2021 and July 2021 were unvaccinated. Per the KFF report, the average hospitalization cost for COVID-19 is approximately $20,000 and 113,000 of the 185,000 hospitalizations during this time may have been prevented with vaccination. This resulted in $2.3B in healthcare spending that may have been avoided.

    “Still, this ballpark figure is likely an understatement of the cost burden on the health system from treatment of COVID-19 among unvaccinated adults," researchers wrote, noting COVID-19 cases, hospitalizations and deaths have continued to increase in August and the analysis does not include the cost of outpatient treatment, which "is likely substantial.”

    While the KFF report obtains its average hospitalization costs through data from the Centers for Medicare and Medicaid Services (CMS) ($24,033) and FAIR Health ($17,094 for people over age 70 and $24,012 for people in their 50’s), many employers are seeing much higher average costs for COVID-19 related hospitalizations; Delta Air Lines reports a $40,000 average claims cost per person.


     

    Employer Considerations

    • Given the cost of care detailed above, it is no surprise that employers are looking for ways to defray their healthcare claims costs.  Employers who are considering implementing a health plan premium surcharge for unvaccinated employees need to consider many factors, such as:
    • What will the surcharge amount be?
    • Will the surcharge only apply to unvaccinated employees, or will a surcharge apply to unvaccinated dependents as well?
    • When will the surcharge be implemented and how does that align with a return to the physical worksite?
    • What time frame will you allow for those affected by the surcharge to get vaccinated?
    • What will you require as proof of vaccination?
    • Vaccination cards are considered medical information. If you require a copy of the vaccination card as proof of vaccination, are you prepared to comply with medical record security, privacy and retention requirements? Alternate options:
      • Require proof of vaccination, but do not keep a copy of the vaccination card
      • Require employees to sign a form attesting to their vaccination status
    • How will you handle the submission of false information or a fake vaccination card?
    • Will the surcharge eventually apply to booster shots or just initial vaccination?


     

    Wellness Program Considerations

    As with smoking surcharges, a surcharge for unvaccinated employees would be subject to the rules of the Affordable Care Act and HIPAA. These rules prohibit group health plans from charging similarly situated individuals different premiums or contributions, with the exception of certain wellness programs, according to the U.S. Department of Labor. Any surcharge would need to follow federal requirements for health-contingent wellness programs.

    Further, employers must offer a "reasonable alternative standard" to a health-contingent wellness program, and this requirement can differ depending on whether the program is considered an "activity-only" or "outcome-based" wellness program under federal law.


     

    Surcharge Amounts

    Employers who implement a vaccine surcharge should keep in mind wellness program incentive limits and ACA affordability rules. Vita clients can reach out to their benefits account management team for guidance and further discussion.


     

    Alternate Effects

    Given the potential reduction in healthcare claims cost and improved workplace safety, most employers may believe surcharges are the answer. However, surcharges may be unlikely to significantly increase the vaccination rate of an employer’s population. Additionally, thought must be given to the effect such a surcharge would have on company culture.

    Surcharges have no effect on the employee population who waived coverage. Typically, 10% - 15% of an employer’s population will waive off the health plan coverage. In addition, surcharges can disproportionately affect low-wage workers, which tend to be the largest unvaccinated population, according to U.S. Census data.

    In the end, for some employers, a health plan premium surcharge may be too fraught with implementation, compliance and disparity concerns, thereby making vaccine mandates a more popular option, especially with the recent FDA approval of the Pfizer vaccine.

  • The No Surprises Act Explained

    The No Surprises Act (NSA) was enacted in December 2020 as part of the Consolidated Appropriations Act of 2021. The rule bans the practice of surprise-billing for out-of-network medical care, including from air ambulance providers, hospitals, facilities, and individual providers.

    Surprise billing happens when patients unknowingly get care from providers that are outside of their health plan's network. The law outlines new requirements and restrictions for many billing situations; however, the major focus on the bill is on three major categories of care, those where patients are most vulnerable to surprise billing.

    • Emergency Care - At Out-of-Network Facilities: Surprise billing often occurs in an emergency care situation where patients have little or no choice in where they receive care. Examples of this would be emergency care at a non-participating hospital or air ambulance services furnished by a non-network provider.
    • Ancillary Care – By Out-of-Network Providers at In-Network Facilities: Surprise billing can also occur in non-emergency care situations when patients at an in-network hospital or other facility receives care from ancillary providers (such as anesthesiologists or radiologists) who are not in-network and whom patients do not specifically choose.
    • Air Ambulance: Air ambulance services are usually furnished by nonparticipating providers, and the service is called upon when patients have essentially no choice of provider.

    The problem of “balance billing” occurs when a provider charges a patient the remainder of what their insurance does not pay. This practice is currently prohibited by both Medicare and Medicaid. The No Surprises Act extends similar protections to insureds covered under employer-sponsored and individual health plans.

    New Guidance

    On July 1, 2021, the DOL, HHS, and the IRS released the first round of guidance (Interim Final Rule) prescribing regulatory requirements pursuant to surprise medical billing. Broadly, the guidance puts prescriptive rules into place to protect individuals from surprise medical bills, and details how providers will navigate these rules behind the scenes.

    In short, the new rules clarify that patients are only responsible for their in-network cost-sharing amounts in emergency situations and certain non-emergency situations where they do not have the ability to affirmatively choose an in-network provider.

    Highlights

    Following is a summary of the key provisions of the guidance:

    • In-Network Cost Sharing: Cost-sharing (deductible or coinsurance) for out-of-network services that fall within the surprise billing protections are limited to in-network levels. That means patient cost-sharing cannot be higher than if the services were provided by an in-network provider.
    • Counts Toward In-Network OOP: Applicable cost-sharing (deductible or coinsurance) must count toward in-network deductibles and out-of-pocket maximums.
    • All Emergency Care In-Network: Emergency services, regardless of where they are provided, must be treated as if it were provided on in-network basis.
    • No Pre-Authorization: The practice of requiring a prior authorization for emergency services is prohibited.
    • Ancillary Care at In-Network Rates: Out-of-network charges for ancillary care (such as an anesthesiologist or assistant surgeon) provided at an in-network facility is prohibited in all circumstances.
    • No Balance Billing: The practice of balance billing (when providers seek to collect more than the applicable cost sharing amount from the patient) is banned.
    • Notice Required When OON Provider is Selected: When a patient voluntarily seeks care at an out-of-network provider, the provider/facility must provide patients with a plain-language consumer notice. The notice must explain that patient consent is required before that provider can bill at out-of-network rate (and collect any balance billed amount).

    Effective Date and Applicability

    The new law becomes effective for plan years beginning on or after January 1, 2022. It applies to nearly all private health plans offered by employers (including grandfathered group health plans) as well as individual health insurance policies offered through the Marketplace or directly through insurance carriers.

    More Details . . .

    The following sections provide a deeper dive into the details of the guidance for those that prefer a more in-depth review.

    Emergency Services Provided by Out-of-Network Providers

    If a nonparticipating provider (for example, an anesthesiologist or assistant surgeon) provides services at a participating facility or at a nonparticipating emergency facility, the provider may not bill beyond an allowed cost-sharing amount (essentially, the in-network levels).

    In addition to specifying the payment constraint, the guidance also prescribed a specific process by which providers are paid. Within 30 days from when the provider submits a bill to a plan, the plan must determine an initial payment and directly pay the provider or issue a notice of denial. (The regulations clarify that this “initial payment” does not refer to a first installment, but rather the amount that the plan or insurer reasonably intends as payment in full.)

    If the provider disagrees with the plan’s payment, the parties may begin a 30-day open negotiation period. If the parties fail to reach an agreement, the plan or provider has four days to notify the other party and the HHS that they are initiating an Independent Dispute Resolution (IDR) process. The No Surprises Act prescribed the details of this process, including the IDR as the final solution.

    Can Surprise Billing Protections be Waived?

    There are differences in how the guidance treats whether a patient may waive their surprise billing protections. These distinctions are useful in understanding the specific (and narrow) circumstances under which additional cost sharing and balance billing can be applied.

    Out-of-Network Emergency Care
    Types of Care:

    • Emergency Room Care
    • Air Ambulance Services

    Involuntary Ancillary Care at Out-of-Network Facilities
    Types of Care:

    Circumstances where a patient does not have control in choice of provider:

    • Emergency medicine
    • Anesthesiology
    • Pathology
    • Radiology
    • Neonatology
    • Diagnostic services (including radiology and laboratory services)
    • Assistant surgeons
    • Hospitalists
    • Intensivists
    • Nonparticipating providers at a facility where there is no participating provider who can furnish the necessary item or service

    Right to Waive:

    No. Protections can never be waived. Notice and consent provisions cannot be used under any circumstances.

    Voluntary Ancillary Care at Out-of-Network Facilities/Providers
    Types of Care:

    Circumstances where a patient has a meaningful choice as to whether to select a nonparticipating provider:

    • Other services (not listed above)
    • Nonemergency care where the patient elects a specific specialist
    • Care provided where additional cost sharing and balance billing amounts are not a “surprise” because a patient knowingly and purposefully seeks care from the nonparticipating provider

    Right to Waive:

    Yes. Protections can be waived if patient agrees to receive nonemergency care from certain nonparticipating providers. Notice and consent provisions must be followed.

    Cost-Sharing Amounts

    Participants in group health plans will pay cost-sharing for items and services that fall within the No Surprises Act’s scope based on the “recognized amount,” which generally will be the lesser of the “qualifying payment amount” (QPA) (i.e., the plan’s median in-network rate for an item or service) and the amount billed by the provider.

    What is the Qualifying Payment Amount?

    The Qualifying Payment Amount (QPA) is an amount paid to a non-participating provider as determined by the plan or insurer. Generally, it is the median of all the plan or insurer’s contracted rates from January 31, 2019 for a given item or service in that geographic region, increased for inflation. The QPA affects patient cost sharing in many instances and is a key factor for arbitrators to consider if and when payment disputes are resolved through the IDR process.

    Accurate Provider Network Directories

    Health plans must update their provider directory at least every 90 days. They also must respond within one business day to requests from individuals about whether a provider or facility is in-network. Lastly, consumers who rely on incorrect information conveyed by plans or posted in directories are entitled to have services covered with in-network cost sharing applied.

    Continuity of Care

    The No Surprises Act also includes a provision which requires health plans to notify enrollees when a provider/facility leaves the plan network while it is providing ongoing care. In certain circumstances, health plans must provide transitional coverage for up to 90 days or until treatment ends (whichever is earlier) at in-network rates.

    The continuity of care requirement applies to treatment for serious or complex health conditions, institutional or inpatient care, nonelective surgery, pregnancy, and care for patients with terminal illness.

    Advanced Explanation of Benefits

    Beginning in 2022, patients can request advance information about how services will be covered before they are provided. For scheduled services, if a request is submitted, the health plan must provide written information including whether the provider/facility participates in-network and a good faith estimate of what the plan will pay and what patient cost liability may be. Generally, this information must be provided to the patient within three business days.

    Notice and Consent Exception

    Providers furnishing non-emergency services where the patient voluntarily elects to seek care out-of-network must provide notice and receive written consent from the patient in order to be exempt from the NSA’s balance-billing and cost-sharing restrictions. The nonparticipating provider generally has 72 hours before the service is delivered to obtain the patient’s consent. The process can be executed either in paper or electronic form, but notice must be provided to patients and patients must provide consent in advance of services in order for the provider to apply out-of-network cost sharing and/or balance bill for any services. To enable a plan or insurer to apply cost-sharing correctly, a provider relying on the notice and consent exception must timely notify the plan or insurer and provide the plan or insurer a signed copy of the binding notice and consent documents.

    Model Notice

    A model notice is provided for plans and insurers to post and include in all explanations of benefits to which the No Surprises Act applies. The regulations outline the process for providing the notice, which is intended to serve as good faith compliance with the NSA requirement that, beginning in 2022, a plan or insurer must disclose the prohibition on surprise billing and the entities to contact in the event of a violation.

  • Small Group Renewal Fundamentals and Strategies [Video]

    Startups and small organizations (those with under 100 employees) face a unique set of challenges when designing competitive, impactful, and cost-conscious employee benefits programs. How can your benefits help attract talent in a hyper-competitive market? How do you create long-term goals while answering short-term needs? What solutions exist to help you do the job of many? Join us for an in-depth strategy session all about building an effective benefits program that works hard for your small business and your people. In this pre-recorded webinar, we cover:

    • Recruiting and Attracting Talent
    • Rating structure and strategy
    • Long Range Goals
    • Carrier Market
    • Tech Solutions
    • Small Group Landscape
    • Location, remote work force
    • Participation
    • Ancillary Coverage
    • Role of the broker
  • More ARPA Premium Subsidy Guidance

    The IRS has issued additional guidance (Notice 2021-46) related to ARPA premium subsidies. Much of the guidance is very detailed and applicable to narrow situations. However, several questions are more widely applicable. Following is a summary of the items that would be of general interest to most employers.

    ARPA Subsidy for Longer-than-18-Month COBRA Events

    If the original qualifying event was a reduction in hours or an involuntary termination of employment, the COBRA subsidy is available to an individual who is entitled to elect COBRA continuation coverage for an extended period due to a disability determination, second qualifying event, or an extension under State mini-COBRA. The extended period of coverage must fall between April 1, 2021 and September 30, 2021. However, the subsidy is available even if the individual had not notified the plan or insurer of the intent to elect extended COBRA continuation coverage before the start of that period.

    Disqualifying Coverage

    Eligibility for the COBRA subsidy ends when an Assistance Eligible Individual becomes eligible for coverage under any other disqualifying group health plan or Medicare. This is true even if the other coverage does not include all of the benefits provided by the previously elected COBRA continuation coverage. For example, eligibility for Medicare, which generally does not provide vision or dental coverage, ends eligibility for the premium subsidy related to all previously elected COBRA continuation coverage.

    Controlled Groups

    If a plan subject to Federal COBRA covers employees of who are members of a controlled group, each employer that is a member of the controlled group is the premium payee entitled to claim the COBRA subsidy with respect to its employees or former employees. Although all of the members of a controlled group are treated as a single employer for employee benefit purposes, each is a separate employer for employment tax purposes.

    Business Reorganization

    In the event of a business reorganization (stock or asset sale), if the selling group remains obligated to make COBRA coverage available to M&A qualified beneficiaries, the entity in the selling group that maintains the group health plan is the premium payee entitled to claim the COBRA subsidy. If the employer (which may be an entity in the buying group) is not obligated to make COBRA continuation coverage available to Assistance Eligible Individuals, the employer is not entitled to the COBRA subsidy after the business reorganization.

  • 401(k) Update: Q3 2021

    Administration

    Form 5500 Season

    For calendar year plans, the 2020 Form 5500 and Form 8955-SSA (if applicable) remains due July 31, 2021, unless an application for extension has already been submitted. In most cases, the extension will be automatically prepared and filed by your retirement plan service provider on your behalf and the extended filing deadline is October 15, 2021. If you are unsure as to the status of your Plan’s Form 5500, please contact our team for assistance. 

     

    It’s Independent Audit Time for Large Retirement Plans

    “Large” plans – those with over 100 participants on the first day of the Plan Year – should have their mandatory audits well underway. There are special rules that allow for growing companies to first exceed 120 participants before becoming subject to the audit requirement, and thereafter continue being subject to the requirement while staying above the 100-participant threshold.

    Please contact Vita Planning Group if you have questions about whether the independent audit requirement applies to your Plan. For other important dates on the horizon, please check out our online Compliance Calendar.

     

    401(k) News

    Withdrawal Option for Birth or Adoption

    The SECURE Act of 2019 permitted penalty-free withdrawals of up to $5,000 for the costs associated with the birth or adoption of a child. As with any new legislation, it takes time for recordkeepers to update their systems and processes, and we are just now starting to see this new withdrawal provision being made available to retirement plans.

     

    In most cases, plan sponsors will have to request a plan amendment to allow their retirement plan to accommodate this new withdrawal option. For your convenience, we have surveyed our top recordkeepers and below is an overview of where they are at in the process of allowing for this new withdrawal option:

     

    • Fidelity Investments: Request a plan amendment via email
    • Empower Retirement: Request a “Birth and Adoption Plan Election” form
    • Money Intelligence: Available automatically as part of standard plan document
    • The Standard: Not yet available, expect to roll this out in 2022
    • ADP Retirement: Not yet available, no timeframe
    • Ascensus/ Vanguard: Not yet available, no timeframe
    • BlueStar Retirement: Not yet available, no timeframe

    Please contact us should you have any questions or if you are interested in adding this provision to your plan.

     

    Market Update1

    Economic activity both in the US and overseas continued to surge in Q2 2021. The speed and forcefulness of the economic recovery has turned investor attention toward the possible rise of inflation and the end of accommodative government economic policies. While inflation concerns did seem to cause a sell-off halfway through Q2, capital markets continued to appreciate during the quarter. US equity markets were up with the S&P 500+ rising 8.5% in Q2 and 15.3% YTD. US bond markets also rose in Q2 taking away some of the YTD losses. The BarCap US Aggregate Bond Index++ was up 1.42% in the quarter but remained down 1.6% YTD. Overseas equity markets were also buoyant with the MSCI All Country World ex US Index++ up 4.4% in Q2, extending the gains made in Q1 to finish up 9.4% YTD. What markets will be focused on going forward is the shape of the economic recovery without the benefit of government support and in the face of possibly rising interest rates.

    The fading of the Pandemic and the growth of demand in the US has fueled expectations for high GDP growth in 2021 and beyond. Q1 2021 US GDP grew at an annual rate of 6.4% and may have accelerated in Q2 to as much as 10% annualized. Full year 2021 US GDP growth is being estimated at around 7.5% with 2022 expectations between 4.0% and 5.0%. The economy seems to have been fueled by an 11% annualized rise in consumer spending in Q2 along with productivity growth (non-farm output per hour) of 6%. Consumers are increasingly confident as shown in the Conference Board’s Consumer Confidence Index+++ rising to 127.3 in June, just below pre-pandemic 2019 levels2. Labor shortages may have helped fuel the rise in productivity as businesses find ways to make do with less. Unemployment stood at 5.9% in June and the JOLTS (Job Openings and Labor Turnover Survey Survey) report, an indicator of labor scarcity, came in at its highest level since 19753. While there might be a slight rise in unemployment as COVID-related benefits end, the FED has already reduced its forecast for unemployment at the end of 2021 to 4.5%.

    The increase in economic activity in the US has given rise to expectations of higher inflation and the possible end of Government economic support. The tight labor market has had an impact on wages, with June wages up 4.6% YOY, the strongest monthly increase since1983. Supply in other areas has also not kept up with demand with bottlenecks in the supply chains of a variety of goods and shortages of some primary products. The Producer Price Index++ rose 0.8% in the month of May, a 6.6% increase YOY.4 Surging commodity prices have markets increasingly wary of any indication of a change in policy away from accommodation. So far, the FED has stressed that recent inflation numbers are transitory. However, its preferred measure of inflation, the Personal Consumption Expenditures (“PCE”) stood at 3.9% in May, well above the FED’s target of 2%. The FED estimates PCE to finish the year at 3.4% and to decline to 2.1% by the end of 2021. While the FED continues to say it is committed to the current level of interest rates until 2023, the market is increasing wary that the FED will go back to fighting inflation much more quickly. This can be most clearly seen in the spread between the 30-year and 5-year Treasury Bond falling 20% in June.5 This wariness extends to fiscal support. It is still not clear whether President Biden’s attempt to have Congress pass a slimmed-down infrastructure spending bill along with a reconciliation bill to extend COVID-related tax credits and aid to state and local governments will be passed. This could mean the end to COVID-related economic support and fiscal spending.

    GDP growth outside the US is also expected to be strong in the second half of 2021 as countries catch up to the vaccination rates of the US and the UK. The IMF is predicting global GDP to rise 6.0% in 2021 and another 4.4% in 2022, with much of the non-US growth coming from China (8.4% and 5.6%) and India (12.4% and 6.9%). In Europe, the UK is estimated to grow at 5.3% in 2021 and 5.1% in 2022, with the Euro area growing at 4.4% and 3.8%, respectively.6 This global rebound is also reflected in the Global Purchasing Managers Index++. Global manufacturing and services in June stood at 58.3 globally (50 or above is considered accelerating economic growth), with the US at 63.9, the UK at 61.7 and China at 52.9. This is very good economic news compared to what the world faced just a few months ago, but markets globally may soon have to adjust to higher interest rates and less government economic support.

            

    This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.

     

     

    Sources:

    1 Unless otherwise indicated, data and commentary is sourced from two JPMorgan Asset Management sources: 1) Guide to the Markets – U.S. Economic and Market Update, 3Q 2021, June 30, 2021, and 2) the “3Q21 Guide to the Markets Webcast” on July 6, 2021. 

    2 https://conference-board.org/data/consumerconfidence.cfm

    3 https://www.bls.gov/news.release/pdf/jolts.pdf

    4 https://www.bls.gov/news.release/pdf/ppi.pdf

    5 https://fred.stlouisfed.org/graph/?g=Ina#

    6 https://www.imf.org/en/Publications/WEO/Issues/2021/03/23/world-economic-outlook-april-2021

    Disclosures:

    +The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock's weight in the index proportionate to its market value.

    ++Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices do not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.

    ++The Bloomberg Barclays US Aggregate Bond Index, or the Agg, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States. Investors frequently use the index as a stand-in for measuring the performance of the US bond market.

    ++The MSCI All Country World Index ex USA Investable Market Index (IMI) captures large, mid and small cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 23 Emerging Markets (EM) countries*. With 6,062 constituents, the index covers approximately 99% of the global equity opportunity set outside the US.

    ++The Producer Price Index (PPI) is a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time. PPIs measure price change from the perspective of the seller.

    ++Purchasing managers' indexes (PMI) are economic indicators derived from monthly surveys of private sector companies. The three principal producers of PMIs are the Institute for Supply Management (ISM), which originated the manufacturing and non-manufacturing metrics produced for the United States, the Singapore Institute of Purchasing and Materials Management (SIPMM), which produces the Singapore PMI, and the Markit Group, which produces metrics based on ISM's work for over 30 countries worldwide.

    +++The U.S. consumer confidence index (CCI) is an economic indicator published by The Conference Board to measure consumer confidence, which is defined by The Conference Board as the degree of optimism on the state of the U.S. economy that consumers are expressing through their activities of savings and spending. Global consumer confidence is not measured.

  • Supreme Court Upholds ACA for Third Time

    On June 17, 2021, the United States Supreme Court effectively upheld the Affordable Care Act by ruling that the plaintiffs lacked standing to bring the case to court. This 7-2 vote was the third time the Supreme Court ruled to uphold the Affordable Care Act. 

    The ruling preserves the current provisions of the law, which was enacted by Congress in 2010. More information about the case and key arguments can be found in our prior blog post. The Court’s formal opinions are posted here.  

    Political opinions aside, we expect many employers and insurers to consider this good news; any changes to the Affordable Care Act would create additional administrative burden for an industry already focused on implementing recent legal changes that support pandemic recovery, as well as stabilizing increased costs.  

  • Form 941 Updated to Reflect ARPA Tax Credits

    Updated Form 941

    The IRS has released an updated draft of the 2021 Form 941, the Employer’s Quarterly Federal Tax Return. This updated draft now includes fields for taking a tax credit for ARPA COBRA subsidies.

    Quick ARPA Recap

    ARPA provides for a 100% COBRA subsidy for eligible individuals who experience a reduction in hours or an involuntary termination of employment. The potential subsidy period runs from April 1, 2021 through September 30, 2021 (subject to the regular end date of COBRA coverage). Logistically, Assistance Eligible Individuals are “deemed” to have paid their COBRA premiums, and employers are then entitled to take a tax credit for the subsidized COBRA premiums.

    How To Claim the Tax Credit

    Employers claim the tax credit for the subsidized (deemed paid, but not actually received) COBRA premiums on the quarterly Form 941. Credits are available against the employer portion of Medicare taxes owed. If insufficient Medicare taxes are owed, employers claim against future Medicare tax liability.

    Notable Fields on New Form

    Line 11(e): Fill in non-refundable credits. These are credits taken directly against the employer portion of Medicare taxes that is owed.

    Line 11(f): Fill in the number of Individuals for whom a COBRA premium subsidy was provided.

    Line 13(d): Fill in refundable credits. These are credits which are claimed against a future Medicare tax liability. The refundable portion of the credit is allowed after the employer share of Medicare tax is reduced to zero by nonrefundable credits.

    Timing

    The quarter ending June 30, 2021 will be the first period for which employers can claim credit for ARPA COBRA subsidies. Employers should plan on confirming that their COBRA administrator will be providing documentation of the total ARPA subsidy amount and the number of ARPA subsidized individuals.

  • The ARPA COBRA Subsidy FAQ: 15 Key Takeaways

    The IRS recently issued Notice 2021-31, which provides much-anticipated guidance for employers on the ARPA COBRA subsidy. The document is 40+ pages long, and the nature of much of the guidance is very detailed, very nuanced, and very narrow. It presents a plethora of situations, many of which most employers will not need to deal with directly or which only serve to clarify otherwise intuitive lines of thought. Add its sheer length, and you have a document that cannot be easily condensed or summarized into a short, meaningful article.

    That said, following are 15 key takeaways that are relevant for employers. They are presented in a short format for easy consumption, with references to the specific FAQ document those that want to dive deeper. The summary is presented in the order of the FAQ document. However, we have also highlighted five items as “Critical Issue.” These reflect guidance which is either critical or surprising in nature.

    Background on ARPA Subsidies

    As a recap, ARPA provides a 100% COBRA premium subsidy for individuals who lost coverage due to a reduction in hours or due to an involuntary termination of employment (Assistance Eligible Individuals or AEIs). The premium subsidy is available for medical, dental, vision, HRA, and EAP coverages for up to six months, from April 1, 2021, through September 30, 2021. ARPA provides that COBRA premiums are “presumed paid” by AEIs and the employer (or insurer) to whom the premiums were to be paid is entitled to a tax credit against its share of Medicare taxes.

    Key Takeaway #1: Self-Certification or Attestation   (CRITICAL ISSUE) 

    Employers may require individuals to self-certify or attest to being eligible for the subsidy and not being eligible for another group health plan or Medicare. Employers may rely on this attestation for the purposes of claiming the tax credit. In an odd twist of wording, the IRS indicates that employers are not required to secure an attestation from AEIs, however, they ARE required to maintain documented proof and substantiation in order to claim the tax credit. COBRA reporting of AEIs that have provided attestation will suffice for this documentation. (Q-4, Q-5, Q6)

    Key Takeaway #2: Waiting Period for New Coverage

    If an AEI is “eligible for” other group health plan coverage but that plan has a waiting period, the subsidy can continue during the waiting period. (Q-9)

    Key Takeaway #3: Exchange Coverage

    If a Qualified Beneficiary is currently covered under an individual policy through a Health Insurance Exchange, they are eligible to drop the Exchange coverage, re-elect COBRA coverage, and receive the subsidy. (Q-13)

    Key Takeaway #4: Retiree Coverage

    If an individual would otherwise be an AEI but has access to retiree coverage, eligibility for the retiree coverage is not a disqualifying event so long as the retiree coverage is offered under the same group health plan as is provided for active employees. The premium credit would be limited to the premium for active employees. (Q-18, Q-36)

    Key Takeaway #5: Only Spouse and Children (Not DPs )  (CRITICAL ISSUE) 

    Only a spouse or children who were covered on the day before the Qualifying Event (or a child born to or adopted by the covered employee during the COBRA period) are eligible for the subsidy. Other dependents, even though they may be eligible for coverage are not eligible for the subsidy. Of note here is coverage for Domestic Partners who may be covered under COBRA coverage, but who are not considered Qualified Beneficiaries under the COBRA law. This means they are not eligible for the subsidy. (Q-19)

    Key Takeaway #6: What Constitutes an Involuntary Termination

    There are 11 questions which outline various permutations of what constitutes an involuntary termination. Generally, these fall in line with a colloquial understanding of an involuntary termination. However, if unique circumstances arise, employers should review these questions for confirmation. (Q-24-Q-34)

    Key Takeaway #7: No Partial Subsidy for Richer Plan Coverage  (CRITICAL ISSUE) 

    If an employer allows a special enrollment and an employee elects a richer plan, the subsidy is not available for the equivalent cost of coverage under the base plan (with the employee paying the buy-up cost). To be clear, while not intuitive, no subsidy would be available if the employee elected a richer plan. There is an exception to this rule if the base plan is no longer available. In that case, the individual must be offered coverage under the “most similar” plan. (Q-41, Q-42)

    Key Takeaway #8: Employer No Longer Subject to Federal COBRA

    Employers that are no longer subject to federal COBRA (due to a reduction in the number of employees as of Jan 1, 2021) are still required to provide an extended enrollment period and ARPA subsidies to individuals who would otherwise be AEIs if their Qualifying Event occurred when they were subject to federal COBRA. Whether a QB is eligible to elect federal COBRA (and receive the ARPA subsidy) is determined by the employer’s status at the time of the Qualifying Event (not at the time ARPA would be administered). (Q-45)



    Key Takeaway #9: Extended Election Only Applies to Federal COBRA

    The extended election period (where QBs can jump back onto COBRA) only applies to federal COBRA, not to state COBRA-lookalike laws, unless the state law specifically provides for such a provision.

    Key Takeaway #10: Extended Deadlines Don’t Apply

    The election period for the ARPA extended election period is 60 days from receiving formal notification in order to receive the subsidy. The Emergency Relief Notice provisions which allow for extensions of timeframes for COBRA elections, extended payment deadlines, and non-contiguous retroactive coverage for COBRA elections do not apply. (Q56-Q59)

    Key Takeaway #11: Subsidized Amount Is 102%

    The subsidized amount is the full premium (or premium equivalent) plus the statutory 2% COBRA administration fee. (Q-63)

    Key Takeaway #12: Employer Subsidies Don’t Qualify for ARPA Subsidy  (CRITICAL ISSUE) 

    Employers who have provided any direct, pre-existing COBRA subsidy are NOT entitled to recoup any portion of their direct subsidy via the ARPA subsidy program. If an employer subsidy expires during the ARPA subsidy period, the employee would then be eligible for the ARPA subsidy. If an employer subsidized a portion of the COBRA premium, the AEI is eligible for an ARPA subsidy for the premium amount that was required to be paid by the Qualified Beneficiary. (Q-64)

    Key Takeaway #13: Subsidy Calculations for Non-AEIs  (CRITICAL ISSUE) 

    If an AEI also covers a non-AEI (for example, a DP or spouse who was added after the Qualifying Event), the amount of the subsidy calculation is based on the premium differential for those who are AEIs and those who are not. Here, an example is instructive. Assume the employee, DP, and 2 children are covered. The EE+Sp/DP+Child(ren) premium is $1,800, and the EE+ Child(ren) premium is $1,300. The amount of the ARPA subsidy would be $1,300 and the $500 cost attributable to the DP would not be subsidized. Alternatively, assume a 3-tier EE+2+ premium of $1,800, the subsidy for EE+Child(ren) coverage would be $1,800, and the DP would be covered at no additional cost. (Q-68)

    Key Takeaway #14: Timing and Method of Tax Credit

    Employers become entitled to the tax credit at the point when an election is made (for retroactive months) and on the first of each month thereafter for prospective months. The tax credit is taken against the employer portion of Medicare taxes on Form 941, Employer Quarterly Federal Tax Return. Employers may reduce their federal tax deposits up to the amount of the credit and/or request an advance (on Form 7200) of the amount if the credit exceeds the federal tax deposits. Note that tax credits taken are includible in gross income for employers. (Q-74, Q-75, Q-79)

    Key Takeaway #15: No Tax Credit Refunds Required

    If an AEI fails to provide notice that they are no longer eligible for the subsidy in a timely manner, the employer is still entitled to a previously taken tax credit (unless the employer knew of the individual’s eligibility for other coverage). (Q-78)

  • 2020 San Francisco HCSO Reporting Requirement Waived

    Earlier this month, the City of San Francisco waived the 2020 reporting requirement for the Health Care Security and Fair Chance Ordinances. This marks the second year in a row that the reporting requirement has been waived due to the Public Health Emergency. This is welcome relief for employers who employ workers in the City and County of San Francisco.

    As a reminder, this reporting reprieve does not waive the requirement to comply with all other aspects of the ordinances. If you have questions about your need to comply, please reach out to your Vita Account Manager.