• Gag Clause Prohibition: The Attestation Process

    The Consolidated Appropriations Act of 2021 (CAA) added a provision to prohibit group health plans from entering contracts with Gag Clauses, effective December 27, 2020. The new rule also requires that group health plans submit an attestation of compliance with this provision.

    Gag Clause Defined

    A Gag Clause is any term that directly or indirectly restricts the plan from:

    • Accessing provider-specific cost or quality of care information or data
    • Electronically accessing de-identified claims and encounter information or data, or from sharing these types of information or data.

    This generally means that insurers and third party claims administrators (TPAs) can no longer restrict a plan’s access to certain data by claiming that such data is “proprietary” in nature or by controlling the plan’s access to the data at the TPA’s or insurer’s sole discretion.

    For additional details on the Gag Clause provision, please refer to our detailed article.

    What is a GCPCA?

    GCPCA is a new acronym that stands for Gag Clause Prohibition Compliance Attestation. It is the attestation of compliance with the Gag Clause provisions for group health plans.

    Upcoming Deadline

    The first annual attestation is due by December 31, 2023. This attestation covers the period from inception through 2023. Subsequent attestations will be required by December 31st each year thereafter.

    Employer Action Items – Fully Insured Plans

    Fully insured carriers are generally making mass submissions of attestation on behalf of all of their fully insured clients. That said, the legal responsibility for attestation still remains with the group health plan (regardless of the underlying agreement). Thus, there are still important steps that employers must take to ensure compliance with the attestation process.

    Step #1 Confirm Compliance: Employers must first confirm (in writing) that their insurer complies with the Gag Clause (specifically, that their contracts do not contain any prohibited provisions). Insurers are typically providing a statement of compliance to employers. Note that employers will need to secure Certifications of Compliance from each carrier if coverage is offered through multiple carriers.

    Step #2 Confirm Insurer to Complete Attestation: Employers must then confirm that their insurer will be completing the GCPCA on their behalf.

    Step #3 Secure Written Confirmation: Employers must secure written confirmation that their insurer has or will submit the attestation on their behalf. Ideally, the acceptance of this responsibility would be included in the contractual agreement between the carrier and the employer. Until those agreements are updated, employers should request separate communication/confirmation of the carrier’s acceptance of responsibility.

    Employer Action Items – Self-Funded Plans

    Many employers plan on transferring responsibility for the GCPCA to either a TPA, broker, or another consulting party. That said, the legal responsibility for completing the GCPCA remains with the group health plan. Therefore, it is important to take steps to understand the process and recommended actions to affirm responsibility and document the completion of the attestation process.

    Step #1 Confirm Compliance: Employers must first confirm (in writing) that their TPA complies with the Gag Clause (specifically, that their contracts do not contain any prohibited provisions). TPAs and PBMs typically providing a short Certificate of Compliance to employers.

    Step #2 Confirm Who is Completing the Attestation: Employers must then confirm who will be completing the GCPCA for the group health plan. This can be completed by their TPA, by the employer directly, or by another third party “Submitter” (such as a broker) on their behalf.

    Step #3 Secure Authorization for Submitter: If the GCPCA is completed by any entity other than the employer, an authorization is required. Specifically, the employer must authorize the “Submitter” to also be the “Attester” of compliance.

    Step #4 Maintain Documentation of Attestation: The following elements of documentation should be maintained:

    1. Documentation of acceptance/transfer of responsibility for completion of the GCPCA.
    2. Certificate of compliance with Gag Clause provisions from TPA/PBM.
    3. Authorization for Submitter to be Attester (if applicable).
    4. Confirmation of GCPCA attestation from the website submission process.

    Unique Situations for Self-Funded Plans

    There are a few other notable items for self-funded employers.

    • Level-Funded Plans: Employers with level-funded plans should plan to follow the process as defined for self-funded employers.
    • Blue Shield: Blue Shield appears to be an outlier in that they will accept responsibility for attesting on behalf of plans. Refer to Blue Shield’s communications for an outline of details.
    • Still Figuring It Out: As a rule, ASO providers have made the determination to not accept the attestation responsibility on behalf of employer plans. However, a few are still “figuring out” their procedures. Employers should take note to confirm the final process with their TPA.

    What if we have Fully Insured and Self-Funded Plans?

    To the extent plans are offered both on a fully insured and self-funded basis (for example, Kaiser is offered alongside a self-funded plan), employers should plan to follow both the fully insured and the self-funded processes in parallel.

    What if we changed carriers or changed funding?

    Since the initial attestation covers the period of December 27, 2020, through December 31, 2023, employers will need to consider any changes in carrier or funding that have occurred during that period. For example, if a change was made from Carrier A to Carrier B in 2022, compliance documentation would need to be obtained from the prior carrier for that period of coverage. Similarly, if the plan funding mechanism has changed, employers will need to follow the applicable fully insured or self-funded processes (outlined above) for the respective periods.

    Vita Clients – Attestation Completed for You

    Fully Insured Plans: Vita will secure copies of the Certification of Compliance from all major carriers. The Vita account management team will work with employer groups to secure confirmation that the carrier will be completing the attestation on their behalf. However, employers should confirm that some written form of the acceptance of attestation responsibility is received.

    Self-Funded Plans: Vita will complete the attestation process for clients with self-funded health plans. Vita will secure a copy of the Certification of Compliance from the TPA/PBM, complete the online attestation, and maintain documentation of the submission. Clients will be required to sign an authorization form (via DocuSign) to authorize Vita to complete the attestation on their behalf.


    Website for Online GCPCA Attestation

    Gag Clause FAQs

    Instructions for submitting the GCPCA

    User Manual for submitting the GCPCA [Word Doc Download]

  • 2024 San Francisco HCSO Expenditure Rates Released

    The San Francisco Healthcare Security Ordinance (HCSO) requires covered employers to spend a minimum amount set by law on healthcare for each employee who works 8+ hours each week in San Francisco.

    2024 Expenditure Rates

    Following are the required expenditure rates, effective January 1, 2024.



    Expenditure Rate


    Monthly Maximum*

    100+ Employees

    $3.51 per hour


    20 to 99 Employees (For Profit)

    50-99 Employees (Nonprofit)

    $2.34 per hour




    0 to 19 Employees (For Profit)

    0-49 Employees (Nonprofit)





    There is an exemption for certain managerial, supervisory, and confidential employees who earn more than $121,372 per year or $58.35 per hour for 2024. These employees are considered exempt, and the HCSO expenditure requirements do not apply to them.

    * Total hours for which a healthcare expenditure is required are capped at 172 per employee per month.


    SF HCSO Primer

    For those who might want a refresher!


    Covered Employers

    An employer need not be physically located in San Francisco to be a covered employer. HCSO applies to all employers that must obtain a San Francisco business registration certificate and meet one of the following criteria:

    • Private Employers: Private employers who employ 20+ employees where any single employee works at least 8 hours per week in San Francisco.
    • Non-Profit Employers: Non-profit employers who employ 50+ employees where any single employee works at least 8 hours in San Francisco.

    Employer size counts are based on the average number of employees per week who perform work for compensation during an applicable quarter (not just those employees working in San Francisco).

    Covered Employees

    A covered employee is any person who meets all of the following four criteria:

    1. Works for a covered employer
    2. Is entitled to be paid minimum wage
    3. Has been employed by the employer for at least 90 days
    4. Performs at least eight hours of work per week in San Francisco.

    The definition of employee under the ordinance includes all employees, even if they are temporary, part-time, commissioned, or contracted (unless they are a legitimate independent contractor).

    Work performed by an employee who lives in San Francisco and works from home is considered work performed within San Francisco.

    Employees who travel through San Francisco while carrying out their job duties are not considered to have performed work in San Francisco; however, if an employee's job requires him or her to make stops in San Francisco (e.g., deliveries), the employee is considered to have performed work in San Francisco. For these employees, hours worked include travel within the geographic boundaries of San Francisco.

    Exempt Employees

    There is an exemption for certain managerial, supervisory, and confidential employees who earn more than the compensation thresholds outlined below. These employees are considered exempt, and the HCSO expenditure requirements do not apply to them, regardless of whether they meet the “work in San Francisco” requirements.




    Salary for Exempt Employees



    Hourly Rate for Nonexempt Employees



    Employees covered by Medicare or TRICARE may also be excluded if the employer maintains documentation of employee eligibility.

    Creditable Expenditures

    Fully Insured Plans: Employers can count toward their required HCSO expenditures any premium payments for healthcare coverage (for employee and/or dependent coverage). This includes medical, dental, and vision plans, as well as EAP plans that qualify as health coverage. In addition, payments to the SF City Option also qualify.

    Self-Funded Plans: Employers may not use COBRA premium rates to calculate required health care expenditures. For self-funded plans in which the employer pays claims as they are incurred, the employer may calculate the health care expenditures on an annual basis. If the employer’s annual spend falls short of the HCSO expenditure rate, the employer must make “top-off” payments for employees enrolled in these plans by the end of February of the following year. There are very specific requirements on how to calculate premiums for self-funded plans. Refer to the OLSE documentation on Calculations for Self-Funded Plans for more information.

    HSA Contributions: Employer contributions to an employee’s HSAs qualify.

    HRA Funding: The rules for HRA funding require that contributions be irrevocable in order to qualify. This results in “traditional” HRAs rarely qualifying as healthcare expenditures. Employer contributions must meet both of the following conditions to qualify:

    • Employer contributions must be irrevocable. This means that no portion of the contribution may ever be recovered by the employer, even if an employee terminates.
    • Employer contributions must be paid into a separate account on the employee’s behalf within 30 days of the end of each quarter.

    Most typical HRAs do not pass either of these criteria. Thus, few (if any) will qualify as health care expenditures for HCSO purposes.

    Employee Waivers

    Employers may ask employees who have other employer-provided coverage to waive the expenditure. However, such employees are not required to waive the expenditure (and in many circumstances, it does not behoove them to do so).

    If an employee elects to waive, they must do so using the authorized HCSO voluntary waiver form. The waiver form must be signed each year, cannot be retroactive, and is revocable at any time.

    If an employee with other coverage does not sign the voluntary waiver, the employer must still make the required health care expenditure on their behalf and may be liable for noncompliance penalties if expenditures are not made.

    Insufficient Health Care Expenditures

    If health care expenditures fall short of the required amount, employers have 30 days after the end of the calendar quarter to remit the difference to the SF City Option program. These payments fund a Medical Reimbursement Account (MRA) in the employee’s name.

    Reporting Requirements

    The SF HCSO requires that employers submit the employer Annual Report Form (ARF) by April 30th each year. The report must be submitted to the Office of Labor Standards Enforcement (OLSE), the organization with oversight over the HCSO ordinance.

    The purpose of the Annual Report Form is to provide OLSE with a snapshot of each employer’s compliance with this ordinance. The penalty for failing to submit the form by the deadline is $500 per quarter.

    Reporting Details

    The reporting requirement includes basic business data as well as data to clarify Covered Employer status. In addition, the following data points are requested:

    • Number of individuals employed in each quarter of 2022
    • Number of employees covered by HCSO in each quarter
    • Employer’s total spending on healthcare
    • Types of healthcare coverage the employer offered to employees.

    The Annual Report Form must be completed online. OLSE provides robust assistance material online, including instructions for completing the ARF, form previews, and a video guide to completing the Annual Reporting Form Resource Guide.

    Expenditure Requirements

    Following are the required expenditure rates required for covered employees:


    Expenditure Rate

    Monthly Maximum*

    100+ Employees

    $3.51 per hour


    20 to 99 Employees (For Profit)

    50-99 Employees (Nonprofit)

    $2.34 per hour




    0 to 19 Employees (For Profit)

    0-49 Employees (Nonprofit)





    Expenditure Rate

    Monthly Maximum*

    100+ Employees

    $3.40 per hour 


    20 to 99 Employees (For Profit)

    50-99 Employees (Nonprofit)

    $2.27 per hour




    0 to 19 Employees (For Profit)

    0-49 Employees (Nonprofit)





    * Total hours for which a healthcare expenditure is required are capped at 172 per employee per month.



    Administrative Guidance for SF HCSO

    San Francisco Business Registration Certificate

    HCSO Voluntary Waiver Form

    SF City Option Program

    HCSO Annual Report Form Resource Guide

    HCSO Self-Funded Premium Calculations


  • Annual Employee Benefit Plan Limits

    Additional employee benefits annual limits and numbers have now been finalized by the IRS. Recently released limits include those for Health Savings Accounts (HSAs), High Deductible Health Plans (HDHPs), and Excepted Benefits Health Reimbursement Arrangements (EBHRAs).

    Several of the 2024 limits are based on the Consumer Price Index (CPI) for the prior federal fiscal year (October 1 to September 30), so these indexed amounts have yet to be calculated. We typically see these released in late October.

    The following is a recap comparing the 2023 numbers with the finalized and projected 2024 numbers. 

    HDHP and HSA Limits



    HDHP Minimum Deductible – Self Only



    HDHP Minimum Deductible – Family



    HDHP OOP Limit – Self Only



    HDHP OOP Limit – Family



    HSA Contribution Limit – Self Only



    HSA Contribution Limit – Family



    HSA Contribution Limit – Catchup (55+)




    ACA Limits



    Health Plan OOP Limit – Self Only



    Health Plan OOP Limit - Family



    ACA Affordability Threshold




    Flexible Spending Accounts (FSA)



    Health FSA Election Maximum



    Health FSA Rollover Maximum



    Dependent Care Election Maximum (not indexed)






    HRA Limits



    QSEHRA – Self Only



    QSEHRA - Family












    Transit Pass Maximum (Monthly)



    Parking (Monthly)



    Bicycle (Monthly)






    Retirement Plans



    Elective Deferral Maximum



    Catch-up Maximum (50+)



    Total Contribution Limit (<50)



    Total Contribution Limit (50+)



    401(a) Compensation Limit






    Compensation Thresholds



    Highly Compensated Employee (HCE)



    Key Employee Officer Comp






    Other Limits



    Educational Assistance (not indexed)



    Adoption Assistance



    Social Security Wage Base






    This article will be updated and re-released when the 2024 limits are finalized.




    The HSA is an individual Health Savings Account that is owned by the employee and may be used for the payment of medical expenses that are not covered by a qualified High Deductible Health Plan (HDHP), including expenses that go toward satisfying the deductible. This maximum is inclusive of employer and employee contributions.


    A Health or Dependent Care Flexible Spending Account (FSA) allows participating employees to reduce their earnings on a pre-tax basis to pay for certain qualified expenses. Salary reductions provide significant tax savings to both the employee and the employer.

    FSA Rollover (Carryover)

    Employers may offer employees the option of rolling over a portion of their remaining Health FSA balance each year to be used in the same type of plan during the following plan year. The final balance that is available for rollover will be determined after the current plan year’s claim submission deadline.


    The Transit Plan allows employees to set money aside on a pre-tax basis for mass transit expenses. Employees get to use tax-free money for their commuting expenses when traveling to and from work.


    The Parking Plan allows employees to set money aside on a pre-tax basis for work-related parking expenses. Employees get to use tax-free money for parking at or near an office location or mass transit hub.

    Educational Assistance

    Funds received through Employer-sponsored tuition assistance plans and educational assistance programs (EAPs) allow employees to generally exclude such amounts from their income when the funds are used to finance employee education-related expenses.

  • Student Loan Payments Under Educational Assistance Programs

    Section 127 of the IRS Code allows employers to establish a program to provide tax-free payments of up to $5,250 per year to eligible employees for qualified educational expenses. Historically, the law defined qualified educational expenses as expenses incurred by an employee including: tuition, fees and similar payments, books, supplies, and equipment.

    • Tuition for undergraduate or graduate programs. (Note that these expenses do not need to be job-related.)
    • Books, supplies, and necessary equipment. (Note that meals, lodging, transportation, or supplies that employees may keep after the course is completed are not eligible.)

    The maximum tax-free benefit is $5,250 per year per employee.

    CARES Act Expands to Include Student Loan Payments

    The CARES Act amended Section 127 to include student loan repayment assistance as a qualified educational expense. This expansion allows employers to make payments for student loans on a tax-free basis.

    Tax benefits for employees include federal, state, and FICA taxes. Tax benefits for employers include tax deductibility of benefit payments made as well as the employer portion of FICA taxes.

    Expansion is Temporary

    Originally, the CARES Act expanded Section 127 to include student loan payments only between March 27, 2020, and December 31, 2020. However, the Consolidated Appropriations Act (signed on December 27, 2020) further extended the provision for five years through December 31, 2025.

    Educational Assistance Plan Requirements

    In order to take advantage of this benefit, employers must set up a formal plan, and it must meet specific requirements, as follows:

    • Employer must have a written educational assistance plan.
    • Plan may not offer a choice between taxable benefits or other remuneration (cash or noncash) and a benefit under the educational assistance program.
    • Plan may not discriminate in favor of highly compensated employees.
    • Plan may not provide more than 5% of total benefits paid to owners or shareholders owning more than 5% of the stock.
    • Employees may not receive more than $5,250 (from all employers combined).
    • Employees must be provided with reasonable notification of the availability and terms of the plan.

    Mechanism of Student Loan Payments

    Payments for student loans (including principal and interest) may be made directly to employees as reimbursement for amounts already paid or may be made directly to the lender. Note that documentation of student loan payments made is a requirement for both employee reimbursements and direct payments to lenders.

    IRS Promotion

    The IRS is actively promoting awareness of this benefit and is taking steps to highlight it for employers. There will be a free 75-minute webinar on Thursday, September 14, 2023. It will begin at 2 p.m. ET and will include a question-and-answer session. To register for the webinar or for more information, visit the Webinars for Small Businesses page on IRS.gov.


  • Relief for Roth Catch-Up Provision Problems

    The SECURE 2.0 Act introduced a requirement that, effective January 1, 2024, 401(k) catch-up contributions made by highly compensated employees (HCEs) must be made on a Roth (after-tax) basis. IRS Notice 2023-62 offers stakeholders two important points of relief: 

    • 2-Year Implementation Delay: The SECURE 2.0 provision provides important relief to the practical problems created by this provision. The Notice effectively delays the effective date of that provision for two years until 2026 (via implementing an administrative transition period). This will give plan sponsors, recordkeepers, and payroll providers additional time to create the infrastructure required to implement this provision.
    • Catchup Contributions Okay: The notice also clarifies that catch-up contributions (pre-tax or Roth) can continue to be made for tax years beginning after 2023. This is important because a technical drafting error in the SECURE 2.0 law effectively eliminated catch-up contributions for all employees (pre-tax and Roth) for 2023 and beyond. It is generally accepted that this was not the legislative intent. However, the regulatory “blessing” that catch-up contributions can still be made is a welcome clarification.

    The Timing Problem

    The Rothification requirement for HCE catch-up contributions created significant administrative challenges for plan sponsors, recordkeepers, and payroll providers alike.

    • Short Runway: With the effective date of this provision being January 1, 2024, the runway for implementation is exceptionally short. This has proven challenging for all stakeholders. Specifically, significant infrastructure changes are required to implement this provision, and the runway for designing, coding, implementing, and testing systems is very short.
    • Identifying Highly Paid Participants: Plan sponsors, recordkeepers, and payroll providers have struggled to construct processes that appropriately identify highly paid participants such that their catch-up contributions can be restricted to/converted to a Roth basis.
    • Communication to Highly Paid Participants: Plan sponsors have struggled with communicating the requirement to make catch-up contributions on a Roth basis because many Highly Paid Participants may only be identified very late in the calendar year (when catch-up contributions may have already been made on a pre-tax basis).
    • If No Roth Provision, No Catch-Up Contributions: Plans that do not provide for Roth contributions (at all) are faced with the requirement to add a Roth option or eliminate the ability for Highly Paid Participants to make catch-up contributions at all. 

    The IRS provided a two-year administrative transition period through December 31, 2025. During this transition period, plans may continue to allow high-paid participants to make pre-tax catch-up contributions without being in violation of this provision of the SECURE 2.0 Act. Additionally, plans that do not have Roth features may continue to allow catch-up contributions. Note that this relief is temporary (through 2025) and does not eliminate the need to address the challenges related to implementing this provision.

    The Drafting Error Problem

    The SECURE 2.0 law inadvertently strikes specific language from the Internal Revenue Code that, if read strictly, prohibits all participants from making catch-up contributions (pre-tax or Roth), after December 31, 2023. In a perfect world, a legislative correction would be passed to address this error. However, in the absence of such legislation, the regulatory authorities provided a statutory interpretation for how catch-up contributions can continue, even given the drafting error. 

    Preview of Other Expected Guidance

    The IRS also provided a preview of expected future guidance, including:

    • Employers would be permitted to treat pre-tax elections by participants subject to the new catch-up contribution rule as Roth elections. This eliminates any requirement to affirmatively seek Roth elections from participants that don’t otherwise have a choice for their catch-up contributions.
    • When determining whether an individual is a high-paid participant in a multi-employer plan, employers may consider wages only from the employer sponsoring the plan; employers are not required to aggregate wages with unrelated participating employers in the plan.
    • If an individual does not have wages (with the employer sponsoring the plan) that are subject to FICA in the prior year, that individual is deemed to NOT be a high-paid participant.

    This previewed guidance is not final and could be changed in the future. However, the fact that the IRS was willing to go on the record with this guidance suggests a high likelihood that it will be issued in some form.

    Employer Action Item

    While this guidance and the two-year delay is a relief, employers should continue to work closely with recordkeepers and payroll vendors to confirm that their vendors are on track to implement these provisions by January 1, 2026.


    IRS Notice 2023-62 can be referenced here


  • Recap of ACA Shared Responsibility Penalties

    It will soon be a decade since the ACA Shared Responsibility penalties were implemented. Allow us to provide a quick recap.

    Subsection (a) Penalty – The Offer Requirement with the Whammy Penalty

    Overview: This is the element that requires Applicable Large Employers (ALEs) to offer minimum essential coverage to employees working an average of 30+ hours per week. If two specific criteria are met, the employer must pay a penalty tax for that month.

    1. The employer fails to offer full-time employees (and their dependents) the opportunity to enroll in “minimum essential coverage” under an eligible employer-sponsored plan for that month, and
    2. At least one full-time employee is certified to receive a subsidy for individual coverage through the exchange for that month.

    Penalty Calculation: The penalty tax is calculated monthly as the product of the “applicable payment amount” and the total number of employees:

    Number of individuals employed by the ALE for that month*


    1/12th of $2,880 ($240 per month)

    * Minus a 30-employee credit and excluding employees in a limited non-assessment period.

    Margin of Error Rule: The regulations also include a so-called Margin of Error rule. This allows for employers to offer coverage to at least 95% but less than 100% of its full-time employees (and to those employees' dependents) but to escape the Subsection (a) penalty even if one or more of those employees who are not offered coverage receive a premium subsidy through the Exchange.

    Margin of Error Rule Factoid: While the Margin of Error rule was originally conceived to allow for some administrative grace if coverage for certain employees was overlooked, the regulations clarify that an employer can still avoid the Subsection (a) penalty if eligibility parameters are actually designed to exclude a segment of employees, so long as it is less than 5% of the otherwise-eligible population.

    Subsection (b) Penalty – The Affordability Requirement with the Per Individual Penalty

    Overview: This is the element that requires ALEs to offer " affordable " coverage.” If an ALE does not offer affordable coverage (that provides minimum value), and at least one employee receives a premium subsidy for coverage purchased through an Exchange, the ALE will be liable for the penalty tax on a per individual basis.

    Penalty Calculation: The penalty tax is calculated monthly based on the number of employees that actually receive a premium subsidy as follows:

    Number of full-time employees who receive premium tax credits for any given month*


    1/12th of $4,320 ($360 per month)

    * Other than employees in a limited non-assessment period.

    Margin of Error Rule: Even if an employer escapes the Subsection (a) penalty via the Margin of Error rule, the employer may still be liable for Subsection (b) penalties. If any employees are not offered coverage (and they are among those that fall within the Margin of Error window for the employer) and receive a subsidy under an Exchange, the employer will be liable for Subsection (b) for those individual employees. Just because an employer escapes the Subsection (a) penalty via the Margin of Error rule does not exclude the application of Subsection (b) penalties for those employees who fell through the cracks or were omitted from coverage by design. 

    Affordability Defined: Coverage is deemed affordable for an employee if the employee's required contribution (for self-only coverage) does not exceed a specified percentage of the employee's household income (9.12% in 2023). The cost of family coverage is not considered in the affordability equation. Thus, there is no impact on the determination of an affordable offer of coverage if the contribution required for any dependent coverage exceeds the threshold.

    Safe Harbor Options: Immediately after the law was passed, regulators noted the impossibility of employers being able to calculate affordability based on household income. Therefore, three safe harbor options were provided for employers:

    • W-2 Safe Harbor – Contributions less than 9.12% of W-2 wages
    • Rate of Pay Safe Harbor – Contributions less than 9.12% of hourly or monthly pay rate.
    • FPL Safe Harbor – Contributions less than 9.12% of the federal poverty line. Notably, individuals with income below 100% of the FPL are not eligible for a premium subsidy, therefore, an employee with income below 100% of the FPL cannot trigger Subsection (b) penalty.

    There are pros and cons for each method, and certain pay arrangements lend themselves to specific Safe Harbor methods. In addition, there are many details and nuances that are not included in this summary. Employers may select whichever method is most appropriate for them.

    When Are Penalties Levied?

    Significant Delay Possible: Employers should be aware that there can be a significant delay (up to many years) before being tapped to make Shared Responsibility payments. The IRS has a data-match program that cross-references coverage/affordability offers as reported on Form 1095 and premium subsidies information provided by the Exchanges. The data match process can only occur after all reporting has been completed, which means it can’t even start until after Form 1095s and individual tax returns have been filed, and reports from the Exchanges on premium subsidies have been submitted.

    Be Aware of Premature Assuredness: Employers in potential jeopardy of needing to make Shared Responsibility payments should be aware that such liabilities can take multiple years to surface. Feelings of assuredness for not having been assessed a penalty in the short term may be premature.

  • Employer’s COBRA Notice Mailing Found Insufficient

    In the lull between Open Enrollment and next year’s plan renewals, it is reasonable to look at some compliance issues, specifically COBRA notice procedures. A recent court case found an employer’s COBRA notice mailing procedures to be insufficient. This created significant liability for the employer.

    This case also provides useful reminders for all employers regarding COBRA notice requirements. Give it a read and think about whether your procedures would stand the test. Or if you are pressed for time, jump to the Lesson at the end of the article.

    COBRA Notification Requirements

    COBRA law requires employers to provide a formal notification of COBRA election rights notice to Qualified Beneficiaries. When a qualifying event occurs (such as termination of employment), the following employer notice responsibilities are triggered. There are also specific time thresholds that must be met for notifications.


    Days after Qualifying Event Occurs

    Employer notifies Plan Administrator

    The employer must notify its group health plan administrator when a qualifying event occurs

    30 days

    44 days combined*

    Plan Administrator notifies Qualified Beneficiary

    The plan administrator then must notify the employee of his or her right to continue coverage under COBRA.

    14 days

    *When the employer and Plan Administrator are the same entity, both day allocations are allowed (44 days total).

    Proof of Notice

    The courts generally recognize that a “good faith” effort to send an election notice to an employee satisfies an employer’s COBRA notice requirements. However, the burden of proof lies with employers to demonstrate that this good faith effort was made. 

    Over the course of decades of lawsuits, two general methods of notification have emerged as satisfactory for meeting an employer’s COBRA notification obligation:

    1. By documenting the sending of required notices via first-class mail.
    2. By a plan administrator adopting standard procedures for generating and mailing COBRA notices and maintaining evidence that the procedures are consistently followed for a specific individual.

    As an example of the standardized procedure method, if mail merge letters are the standard procedure, documentation would need to be maintained of the Excel spreadsheet that fed the mail merge process. Upon challenge, the specific individual’s information would need to be identified in the mail merge file.

    Facts of the Jewel Case

    An Illinois federal district court concluded that an employer failed to show it made a good faith effort to provide a COBRA election notice to a terminated employee. (Link to Earl v. Jewel Food Stores, Inc. case.)

    In this case, the employee was terminated for violating the employer’s attendance policy. The employer asserted that it mailed a COBRA election notice to the employee. However, the employee did not receive the notice. 

    Both the employer and employee agreed that the employee’s termination of employment was a COBRA qualifying event, and that the employee did not receive a COBRA notice from the employer. Thus, the question before the court was whether the employer made a good-faith effort to provide a COBRA election notice to the employee.

    The Ruling

    To show its good faith efforts, the employer-provided:

    1. The COBRA notice itself, which was addressed to the employee’s home address, and
    2. A Certificate of Mailing which was an internal document stating that a “Qualifying Event Letter” may have been sent to the employee at his last known address.

    Based on this evidence, the court determined that the employer had failed to show that it made a good faith effort to provide the employee with a COBRA election notice. According to the court, the employer provided no evidence of:

    1. Sending the COBRA notice by certified or first-class mail
    2. Documentation of the employer’s standard procedures for generating or mailing COBRA notices
    3. Documentation of whether the employer’s COBRA mailing procedures were followed for this employee.

    The court also rejected the employer’s argument that even if the employee had received the COBRA notice, he did not need COBRA and could not have afforded to pay for COBRA coverage.

    The Lesson

    The takeaway from this lawsuit is the importance of maintaining both defined procedures and procedural integrity relative to required COBRA notifications. Look at your procedures and confirm the following:

    If Handled Internally: What is your process for sending notifications?  How well is the process documented? Could you produce documentation showing that you followed the process for a specific Qualified Beneficiary?

    If Outsourced to COBRA Administrator: What is your process for providing data on Qualifying Events (or Initial Notices) to your COBRA administrator? Does your administrator have a documented process for mailing notifications?  Could your administrator produce documentation showing they followed the process for a specific Qualified Beneficiary? 

    Vita’s COBRA Administration Process

    The Vita COBRA administration process checks all the required boxes in terms of following a defined process and retaining documentation on the notification sent for each Qualified Beneficiary. 

  • PCORI Filings on the Horizon

    The Patient-Centered Outcomes Research Institute (PCORI) is an independent, non-profit research organization created to help patients and providers make better-informed healthcare decisions. The organization commissions research within the framework of creating actionable, evidence-based medicine.

    PCORI was created as part of the Affordable Care Act and is funded by a fee that was also included in the legislation. The fee is paid by all health plans, including fully insured health plans, self-funded health plans, and account-based plans.

    PCORI Counting Rules

    1. Per Human, Not Per Employee: Counting for PCORI fees is based on the number of covered persons (not just covered employees). As such, each employee and each dependent must be counted for PCORI fee payment purposes.
    2. Exception for Account-Based Plans: The one exception is for the calculation of PCORI fees for account-based plans (such as HRA plans), which are counted on a per-employee basis even if dependent expenses are eligible for reimbursement under an account-based plan. This includes plans such as HRAs. 
    3. Exception for More Than One Self-Funded Plan: There is also a special rule that PCORI fees are only payable for one self-funded plan, even if an employer has more than one self-funded plan and even if an individual may be covered under more than one self-funded plan.

    Who Pays the Fee?

    For fully insured plans, the insurance carriers pay the fee on behalf of employers. The actual fee is baked into the fully insured premium. 

    For self-funded plans, plan sponsors/employers are required to pay the fee directly.

    2023 PCORI Rate

    The updated PCORI rate for 2023 filings is $3.00 per covered life. This applies to plans with policy years ending on or after October 1, 2022.

    PCORI Reporting

    PCORI Fees are paid on the Q2 IRS Form 720. Currently, Form 720 still lists the 2022 rate under Row 133 of the form. However, we expect that the form will be updated in the next few weeks. The Q2 Form 720 is due on July 31, 2023 (one month after the last day of the quarter). 

    Complex Counting Example

    The following is an example of an employer with 500 employees. Employees have a choice between a self-funded health plan and a Kaiser HMO plan. In addition, the employer provides a non-integrated medical travel HRA plan that covers all employees.


    Covered Employees

    Persons Counted for PCORI

    PCORI Payments Due

    Who Pays PCORI Fee

    Self-Funded Plan





    Fully Insured Kaiser Plan





    Medical Travel HRA Plan



    by special rule



    In this example, PCORI fees would be due as follows: 

    • Employer pays PCORI fees for the 1,000 humans on the self-funded health plan
    • Kaiser pays the PCORI fee for the 250 humans on the Kaiser plan
    • Employer also pays PCORI fees for the 100 “extra” employees that are covered under the self-funded HRA plan (but who are covered under the fully insured Kaiser plan and for whom Kaiser paid the PCORI fee because the employer did not pay a PCORI fee under a self-funded plan). The employer owes a PCORI fee for these 100 employees (but not their dependents because of the special rule for account-based plans.

    As an aside, if there were not a Kaiser plan in place, only one PCORI fee would be due for the 1,000 humans on the self-funded medical plan. In the above example, the 500 employees covered by the medical travel HRA plan would be a "gimme" because that would be a second self-funded plan. 


  • 2024 Medicare Part D Creditable Coverage Criteria

    The Centers for Medicare and Medicaid Services (CMS) recently released its updated Medicare Part D coverage criteria guidelines. These guidelines can be used by group health plan sponsors to determine whether the prescription coverage offered under their plans is creditable for 2024. In addition, creditability status should be incorporated into the required Part D disclosures to plan participants as well as to the CMS.

    What is creditable coverage?

    To be considered “creditable coverage,” the value of prescription drug coverage offered under a group health plan must be actuarially equivalent to (or greater than) the actuarial value of Medicare Part D Rx coverage. In short, prescription drug coverage must be at least as good, if not better than coverage under Medicare Part D.

    Notice Requirements for Employers

    Employers must provide an annual notice to plan participants of whether the prescription coverage offered under their group health plan is “creditable coverage” or not. Notice must be provided to all plan participants, their spouses and dependents, retirees, COBRA participants, and beneficiaries. The CMS provides model notices of both Creditable and Non-Creditable Disclosure Notices. Notification must be provided to individuals annually by October 15th each year.

    In addition, employers must provide notice to the CMS of whether coverage offered is creditable or not. Notice to the CMS must be completed online via the CMS website. The online process is straightforward and can be completed in just a few minutes. The CMS certification process must be completed within 60 days after the beginning date of the Plan Year.

    Creditable Coverage Criteria

    Following are the updated 2024 parameters for standard Medicare Part D prescription drug benefit. These are the criteria used to determine if Rx coverage is creditable. Guidelines for 2023 are also included for context.


    • 2023: $505
    • 2024: $545

    Initial Coverage Limit

    • 2023: $4,660
    • 2024: $5,030

    Out-of-Pocket Threshold

    • 2023: $7,400
    • 2024: $8,000

    Total Part D Spending at OOP Threshold*

    • 2023: $10,516.25
    • 2024: $11,477.39

    Estimated Part D Spending at OOP Threshold**

    • 2023: $11,206.28
    • 2024: $12,447.11

    * For beneficiaries who are not eligible for the coverage gap discount program.

    ** For beneficiaries who are eligible for the coverage gap discount program.

    Notably, the minimum cost-sharing numbers under the catastrophic coverage portion of the benefit no longer apply. Cost-sharing for the catastrophic coverage portion was eliminated by the Inflation Reduction Act of 2022.

    Prescription drug coverage that does not meet these minimum criteria is considered non-creditable.

    This Seems Complex

    The process for determining actuarial value equivalency for Medicare Part D coverage is, in fact, quite complex.

    • Good News: Insurance carriers handle the actuarial determination for fully insured plans. For plans that are fully insured, the insurance carrier will indicate whether the Rx coverage is creditable or non-creditable.
    • Bad News: Self-Funded plans need to calculate or outsource the calculation of whether coverage is creditable or not.

    Most plans in today’s marketplace that offer comprehensive Rx benefits are typically determined to offer Creditable coverage. Plans that are most typically non-creditable are small group Bronze plans and certain HDHP plans.

    It is important to note that Medicare Part D creditability rules do not require employers to offer creditable coverage. They merely require that employers notify employees of the creditability status of their group sponsored health plan.

    Why does creditability matter?

    If a Medicare beneficiary does not have Rx coverage from another source that is at least as good as standard Part D coverage, a premium penalty of 1% of the premium is charged for each month a Medicare beneficiary delays enrolling in Medicare Part D coverage without equivalent coverage. However, maintaining prior creditable coverage cancels this penalty and allows individuals to delay enrolling in Part D coverage without paying a late enrollment penalty. Please note that the surcharge for delaying enrollment does not expire. The premium penalty continues through the duration of Part D coverage.

    Why are employers involved?

    In order for Medicare beneficiaries to decide whether they need to sign up for Part D coverage or whether they can delay, they need to know whether their group coverage is creditable or not. Employers are required to notify participants of Part D creditability so that participants will have the necessary information to take action and enroll into Part D coverage to avoid the premium penalty (or not).

    Resource Links

    2024 Medicare Part D Criteria (page 134)

    Model Notices (for Participants)

    CMS Portal for Employer Reporting


  • 2024 Health Savings Account (HSA) Limits Announced