Blogs Compliance

The IRS has just released IRS Notice 2022-4 which announced the annual update to PCORI fees. PCORI fees were instituted as part of the ACA and fund the Patient-Centered Outcomes Research Institute. The new fee applies for health plan years ending on or after October 1, 2021, and before October 1, 2022 (which includes 2021 calendar year plans). The fee increased by $0.13 to $2.79 per covered individual.

PCORI fees are based on the average number of lives (not employees) covered by a health plan or policy.

For 2021 plans, fees are to be reported and paid annually to the IRS by August 1, 2022, via the second quarter Form 720. (Normally, the deadline is July 31st, but this year it falls on a Sunday.)
 

10-Year Extension of PCORI Fees

Originally, PCORI fees were set to sunset plan years ending after September 2019. However, Congress extended these fees for an additional 10 years (through September 30, 2029) as part of the Further Consolidated Appropriations Act of 2020.
 

Which Plans Are Subject?

It is generally known that Employer sponsored health plans are subject to the PCORI fees, but common questions exist as to who “pays” the fee from a practical standpoint and which plans are subject to the fees. The following is a high-level overview, as well as a link to a detailed chart, put together by the IRS which addresses essentially every scenario:
 

• Fully Insured Plans: Paid and filed by the insurance carrier (fees subsumed in premiums)  
• Self-Insured Plans: Paid and filed by the employer plan sponsor
• HRA Plans (Integrated with Fully Insured Health Plan): If integrated with fully insured plan, Employer must pay and file (because it is considered a stand-alone self-funded plan)
• HRA Plans (Integrated with Self-Insured Health Plan): No payment or filing required (because it is considered part of the underlying self-funded plan)
• HRA Plans (EBHRA): Paid and filed by Employer plan sponsor
• COBRA Participants: COBRA participants are to be counted as part of the underlying participant count of the health plan. Who pays and files for COBRA participants follows the process outlined above for fully insured or self-insured plans.
• Stop-Loss Policies: No payment or filing requirement
• Detailed IRS Listing

 

Calculating PCORI Fees

The IRS provides employers with several options for determining the average number of covered lives under their plan. Note that the fee is not calculated based on the number of employees covered under the plan. Rather, each employee, spouse and child dependent covered by the health plan is counted. The PCORI fee is sometimes known as a “Belly Button” fee because it is calculated by counting each belly button, not each employee. The IRS has stated employers may use any of the following methods to calculate the average number of covered lives under their plan:
 

• Actual Count Method: Add the total of lives covered for each day of the year and divide by the total number of days in the plan year. (This is a cumbersome method and used by very few employers.)
• Snapshot Method: Add the total lives covered on one date in each quarter of the plan year. Average the totals for each of the four dates.
• Snapshot Factor Method: Similar to the snapshot method, on one date each quarter, count participants with self-only coverage as one life and count those with coverage other than self-only as 2.35 lives. Average the totals for each of the four dates.
• Form 5500 Method: Use a reasonable formula to approximate the actual lives covered that includes the number of participants reported on the Form 5500 for the plan year. Typically, the average of the number of participants on the first day and the last day of the plan year is used. (This method cannot be used with 5500 extensions.)

 

Reporting and Paying the Fee

PCORI fees are reported and paid as part of the second quarter Form 720. The Form 720 is typically filed quarterly. However, PCORI fees are reported and paid annually, and fees are “dropped into” the second quarter’s filing of Form 720. Payment is due no later than July 31 of the calendar year immediately following the last day of the plan year. For example, PCORI fees for calendar year 2021 plans are due on July 31, 2022. Plan sponsors who must pay the PCORI fee but are not otherwise required to report any other liabilities on Form 720 are only required file Form 720 only once a year (for the second quarter). No other filing is required in the first, third or fourth quarters of the year. Deposits are not required for PCORI fees, so plan sponsors are not required to pay the fee using EFTPS.
 

Next Steps

Vita clients can expect to receive communication from their account team to assist in the calculation of populations and fees due.
 

More Details

Please see the Instructions for Form 720 for more details on how to fill out the form and calculate the fee. 

In connection with Mental Health Awareness Month, the Department of Labor (DOL) has sought to assist employers in better understanding how to comply with the Family Medical Leave Act (FMLA) regarding mental health conditions. On May 25, 2022, the DOL issued new guidance and FAQs on requirements for providing FMLA leave to employees to address their own mental health conditions or to care for a covered family member with a mental health condition. (Click here for Quick Basics on FMLA)
 

Leave for Mental Health Conditions under FMLA

Eligible employees may take FMLA leave for their own serious health condition or to care for a spouse, child, or parent because of a serious health condition. The guidance confirms that a mental health condition can constitute a “serious health condition” if the condition requires either:
 

• Inpatient Care: A serious mental health condition that requires inpatient care includes a situation in which the individual stays overnight in a hospital or other medical care facility. Examples include rehabilitation centers for drug addiction and treatment centers for individuals with eating disorders.
• Continuing Treatment by a Healthcare Provider: Mental health conditions that require continuing treatment by a health care provider include:
  • Conditions that incapacitate an individual for more than three (3) consecutive days and require ongoing medical treatment.
  • Chronic conditions that cause occasional periods when the individual is incapacitated and requires treatment by a health care provider at least twice a year.

Ongoing medical treatment for a mental health condition can be multiple appointments with a health care provider or a single appointment and follow-up care. Examples of such treatment include behavioral therapy, prescription medications, or rehabilitation counseling. Examples include anxiety, depression, and dissociative disorders.
 

Leave Documentation Guidelines

Employers may require an employee to submit a certification from a health care provider to support the need for FMLA leave. The information provided on the certification must be sufficient to support the need for leave, but a diagnosis is not required.
 

Employee or Family Member

Eligible employees can take FMLA leave to care for their own serious mental health condition or to care for a covered family member with a serious mental health condition. For example, the FAQs explain that an eligible employee would be entitled to FMLA leave to attend a family counseling session for a spouse who is in an inpatient treatment program for substance abuse or to assist a parent receiving medical treatment for depression with day-to-day activities.
 

Caring for a Covered Military Servicemember or Veteran

The FMLA also provides eligible employees with up to 26 workweeks of military caregiver leave in a single 12-month period to care for a covered servicemember and certain veterans with a serious injury or illness. An employee may be an eligible military caregiver if they are the spouse, son, daughter, parent, or next of kin of the servicemember. Eligible employees may take military caregiver leave under the FMLA for a covered service member or veteran with a serious mental health condition when the condition (1) was incurred or aggravated in the line of duty and (2) makes them unfit to perform their military duties. Although the mental health condition must be incurred or aggravated in the line of duty, it does not have to manifest itself before the service member leaves active duty for the employee to use FMLA leave. Examples include caring for a veteran whose mental health condition, such as post-traumatic stress disorder, traumatic brain injury, or depression, manifested after the individual became a veteran but is related to their military service.
 

Confidentiality

The FMLA requires employers to keep employee medical records confidential and maintain them in separate files from more routine personnel files. However, supervisors and managers may be informed of an employee’s need to be away from work or if an employee needs work duty restrictions or accommodations.
 

Protection from Retaliation

Employers are prohibited from interfering with, restraining, or denying the exercise of, or the attempt to exercise, any FMLA right. Examples include refusing to authorize FMLA leave or disclosing or threatening to disclose information about an employee’s or an employee’s family member’s mental health condition to discourage them from taking FMLA leave.
 

A Word of Caution

Employers should be reminded not to discourage taking FMLA leave. An employer can run afoul of the FMLA rules if the employer “denies or interferes with FMLA benefits to which an employee is entitled resulting in harm to the employee.” 

A recent case from the Seventh Circuit Court of Appeals (Ziccarelli v. Dart et al.) highlights how employers can be vulnerable to the “interferes with” standard. Importantly, the FMLA does not require an actual denial of FMLA benefits for a violation to occur. Instead, an employer violates an employee’s FMLA rights when it denies, interferes with, or restrains the employee’s exercise or attempt to exercise such rights. Following is a quick overview of the case:

FMLA Request: During the current leave year, an employee has used more than 300 hours of leave and, at his doctor’s recommendation, asks his employer for an additional 8 weeks of leave for treatment of his serious health condition. Specifically, the employee asks the employer about the possibility of using his available FMLA leave as well as his sick leave and other employer-provided leave benefits. 

Employer Response: In response, the employer’s representative states that the employee has taken a significant amount of FMLA leave and tells him not to take any more FMLA leave, or he will be disciplined. Based on this conversation, the employee decides not to take any more leave and, instead, chooses to retire. The employee then files a complaint alleging that the employer interfered with his rights under the FMLA. 

Examples of prohibited interference or restraint include refusals to grant or accept proper requests for FMLA leave, burdensome FMLA approval processes, informing an employee with FMLA leave available that missing additional time will have consequences, and other actions that discourage employees from requesting FMLA leave. Concerning Mr. Ziccarelli, the court concluded that he had more than a month of FMLA leave available at the time he requested FMLA leave from his employer and, therefore, the alleged statement that Mr. Ziccarelli would be disciplined if he took any more FMLA leave was sufficient to support an FMLA interference claim and allow the matter to proceed to trial.
 

Quick Basics on FMLA for Reference

Employees are eligible for FMLA benefits if they work for a covered employer for at least 12 months, have at least 1,250 hours of service for the employer during the 12 months before the leave, and work at a location where the employer has at least 50 employees within 75 miles.

Covered employers include private employers if they employed 50 or more employees in 20 or more workweeks in the current or preceding calendar year. Public agencies, including local, state, or Federal government agencies, and public and private elementary and secondary schools are FMLA-covered employers regardless of the number of employees they employ.

FMLA requires employers to:
 

• Provide 12 work weeks of FMLA leave each year,
• Continue an employee’s group health benefits under the same conditions as if the employee had not taken leave, and
• Restore the employee to the same or virtually identical position at the end of the leave period.

FMLA may be unpaid or may be used at the same time as employer-provided paid leave.
 

Link to Guidance

https://www.dol.gov/agencies/whd/fact-sheets/28o-mental-health

The Transparency in Coverage final rule was issued in October of 2020 by the HHS, DOL, and Department of the Treasury. These rules require non-grandfathered group health plans (both fully insured and self-insured) to disclose information regarding in-network and out-of-network allowed amounts for billed services. The ultimate goal of the legislation is to reveal in real time the cost of health care services.
 

Implemented in Phases

The first phase of compliance requires the posting of three Machine-Readable Files (MRF) that disclose the cost of healthcare services. These are files that can be imported and read by computer systems. The three files disclose the following data:
 

• In-Network Rate (negotiated rates with contracted providers)
• Out-of-Network Allowed Rates (billed charges and allowed amounts)
• In-Network Prescription Drug File

These files must be updated monthly and must be accessible without login credentials or fees to access the files. The In-Network and Out-of-Network files must be posted and accessible by July 1, 2022. The prescription drug file has been delayed until further notice. It should be noted that the format of these files is not something that is decipherable at the consumer level.

The second phase will include the rollout of an online cost estimator tool which will provide consumers with cost share estimates for all covered services. The first round of the consumer level disclosure requirement is effective January 1, 2023 and reflects a list of 500 designated services. The final phase will require costs for all services to be disclosed. This last phase is effective January 1, 2024.
 

Fully Insured Plans – No Action Required

For those employer groups with fully insured plans, it is the responsibility of the insurance carrier to comply with the MRF requirements. Vita is in the process of confirming that all insurance carriers will be in compliance with this requirement.
 

Self-Insured Plans – Action Required for July 1, 2022

Employers that offer self-insured health plans must take action to comply with these requirements. The specific requirement is to post somewhere on their public website a link to the MRF. Employers will be able to determine where, on their website, this file is posted as long as it is publicly facing and does not require login credentials. The requirements state that anyone in the United States should be able to locate this link.

Employers should start working with IT resources now to ensure compliance by the July 1 deadline.
 

Next Steps

Vita clients with self-insured plans will receive an email with additional instructions based on the specifics of the health plans in place and recommendations on verbiage to assist in the process.

Vita will continue to monitor the developments of the cost estimator tool and post further updates as information is solidified.

 

HIPAA Reports Released

The HHS Office for Civil Rights (OCR) recently released two reports for Congressional review. These reports address HIPAA breaches and complaints reported to OCR during the 2020 calendar year as well as the enforcement actions taken by OCR in response to those reports.
 

How Does This Apply to Employee Benefits?

As a reminder, all group health plans are subject to the HIPAA Privacy and Security rules as well as breach notification requirements. These reports provide a useful synopsis of enforcement activity and offer some additional insights, including the reminder that OCR opens compliance reviews for all breaches affecting 500 or more individuals. The breach notification report includes a helpful list of the most common post-breach remedial actions taken to mitigate harm and prevent potential future breaches (summarized at the end of this article). Covered Entities should take note of the trends identified in these reports and examine their own compliance in light of these developments.
 

Compliance Report Highlights

Report Contents: This report provides an overview of HIPAA’s privacy, security, and breach notification rules, followed by a more detailed discussion of OCR’s enforcement process and a summary of 2020 complaints and compliance reviews.

No Penalties: OCR did not assess any civil monetary penalties or initiate any audits in 2020.

Top Violations: The breach report contains useful information regarding the most commonly reported categories of breaches. The top five violations alleged in complaints resolved by OCR involved:

• Uses and disclosures of PHI

• Unspecified safeguards

• Access rights

• Administrative safeguards for electronic PHI

• Technical safeguards

Complaint Resolution: Technical assistance or corrective action resolved 59% of the complaints. Of the compliance reviews opened in 2020, 88% resulted from large breach notifications, and 2% resulted from small breach notifications. The remaining compliance reviews stemmed from incidents brought to OCR’s attention by other means, including media reports.

Resolution Agreements: An appendix includes a summary of the 11 resolution agreements reached following the compliance investigations. While the facts of the cases vary, there were commonalities in compliance issues identified and in the requirements of resolution agreements. Many of the resolution agreements required the covered entities to conduct enterprise-wide risk analysis and develop and implement risk management. The development of right of access policies and workforce training regarding those policies was another recurring requirement. Risk analysis and management and the right of access have been areas of focus for OCR for several years, and this report makes clear that both remain high on OCR’s list of enforcement priorities.
 

Breach Notification Report Highlights

Overview: This report begins with an overview of the notification requirements for covered entities and business associates following discovery of a breach of unsecured PHI.

Breach Notifications Received: The OCR reports that they received 656 large breach notifications (affecting 500 or more individuals), 66,509 notifications of breaches affecting fewer than 500 individuals, and 27,182 complaints alleging violations of HIPAA and the HITECH Act. The number of “500+” breaches increased by 61% from the number received in 2019, and those 656 breaches affected over 37 million individuals. In addition, 66,509 small breach notifications were received, affecting more than 312,000 individuals.

Source of Breaches: Breaches at health plans and business associates represented 23% of large breach reports. Following is a summary of the breach source areas: 

• 68% of the “500+” breaches involved hacking/IT incidents of electronic equipment or a network server (which involved use of malware, ransomware, phishing, and posting PHI on public websites)

• 23% involved unauthorized access or disclosure of records containing PHI

• 5% involved thefts of electronic equipment/devices

• 2% involved loss of electronic media or paper records (2%)

• 2% involved improper disposal of protected health information

OCR Recommendations: The report concludes with a summary of security standards and implementation specifications that, based on investigations, need improvement. The OCR urged covered entities to focus on the following areas:

• Risk analysis and risk management processes

• Information system activity reviews

• Audit controls

• Security awareness and training

• Authentication processes
   

Links to OCR Reports

Compliance Report

Breach Notification Report

In 2018, CA passed SB 1008 which requires fully insured dental plans in California to provide a dental Summary of Benefits Coverage. This requirement mirrors the health plan Summary of Benefits Coverage introduced by the Affordable Care Act, only this law applies to dental plans.

The intention behind the ACA provision was to make it easier for employees to compare their medical plan options (in an apples-to-apples format). Now, California has added an equivalent disclosure for dental plans.
 

Fully Insured Dental Plans Only

This applies to fully insured dental plans only, as self-funded plans are exempt from state legislative authority. Only plans written in California are subject to this disclosure law.
 

Required Format

The law prescribes that the Summary of Dental Benefits Coverage (SDBC) follow a very specific format. The law outlines the “uniform benefits and disclosure matrix” down to the requirement to use an Arial 12-point font. This matrix has been dubbed the dental SBC or SDBC.
 

Who Must Create the SDBC?

Insurance carriers are responsible for creating and providing the dental SBC to employers.
 

Distribution Requirements

Employers must distribute the dental SBCs to all eligible employees. The dental SBC must be distributed at the following times:

1. Upon being newly eligible

2. At open enrollment

3. At Special Enrollment

The method of distribution must be in one of three formats:

1. Paper form free of charge to the individual’s mailing address

2. Electronically by email

3. Electronically by directing the participant to the insurer’s website for a copy of the dental SBC.

In the case of either electronic distribution option, notice must be provided that a paper copy is available free of charge.
 

Effective Date

The effective date for this law is January 1, 2022, so dental carriers are now required to provide dental SBCs to employer groups.
 

How Does ERISA Fit In?

Generally, ERISA preempts state laws that “relate to” employee benefit plans. This typically relegates state legislators to governing (or mandating) insurers, not employers sponsoring employee benefit plans. In this case, legislators have done a bit of an end-run around by including specific “Group Policyholders Obligations” in the law. Most pundits would say that the inclusion of Group Policy Holder Obligations regulates something that “relates to” an employee benefit plan (in this case a dental plan) by specifically requiring employers to provide the dental SBC matrix disclosures to plan participants.

While the insurer provisions are not controversial, the employer disclosure requirements will likely be challenged at some point. That said, in the meantime, employers would be wise to include the dental SBCs with their health plan SBC disclosure materials.
 

What are Dental Carriers Doing?

At this point, we are seeing dental carriers, well, scrambling. Despite the long runway on this law, as a rule, carriers are not prepared to distribute the customized dental SBC to employers. We are seeing carriers send out “generic” dental SBCs (along with directions to pair it with the plan certificate) despite the law’s very detailed customization instructions. It is our sense that carriers have been expecting the law to be challenged, and thus have been lulled into non-action. But with 2022 here, the carriers are now scrambling to get something out to comply with the law.

On Wednesday, February 9th, Governor Gavin Newsom signed Senate Bill 114, providing additional COVID-19 supplemental paid sick leave for covered employees unable to work or telework due to certain reasons related to COVID-19.
 

Who is subject?

Employers with 26 or more employees are subject to this new legislation. Small employers with 25 or fewer workers are exempt.
 

When will it take effect?

The law will take effect on February 19th, 2022, ten days after the bill was signed. It will be retroactive to January 1st, 2022, and will remain in effect through September 30th, 2022.
 

Who is eligible?

Covered employees include those working full-time, or those that are scheduled to work an average of 40 hours per week in the 2 weeks preceding the date the covered employee took COVID-19 supplemental paid sick leave.

Employees who do not work 40 hours per week are entitled to COVID-19 supplemental paid sick leave equal to the total number of hours the employee is normally scheduled to work over one week. Employees who work variable hours are entitled to seven times the average number of hours worked per day over a six-month lookback period preceding the date the covered employee took COVID-19 supplemental paid sick leave.
 

What is the duration of, and the qualifying reasons for, the additional leave?

Covered employees are now entitled to two separate 40 hour allotments of supplemental paid sick leave.

A covered employee may take up to 40 hours of COVID-19 paid sick leave if they are unable to work or telework due to one or more of the following reasons:
 

• The covered employee is subject to a quarantine or isolation period related to COVID-19 as defined by federal, state or local orders
• The covered employee is advised by a healthcare provider to self-quarantine or isolate due to COVID-19 related concerns
• The covered employee is attending an appointment for themselves or a family member to receive a COVID-19 vaccine or vaccine booster (employers may limit the supplemental paid sick leave to 3 days (or 24 hours) unless the covered employee provides verification from a healthcare provider that the employee or family member is continuing to experience symptoms related to the vaccine or vaccine booster)
• The covered employee is experiencing symptoms, or caring for a family member experiencing symptoms, related to a COVID-19 vaccine or vaccine booster
• The covered employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis
• The covered employee is caring for a child whose school or place of care is closed or otherwise unavailable due to COVID-19

A covered employee may take up to an additional 40 hours of COVID-19 paid sick leave if they or a family member tests positive for COVID-19.

Employers are authorized to require the covered employee to take another test on the fifth day after the first positive test and provide documentation of the results. Employers are also authorized to require the covered employee to provide documentation of a family member’s positive test result before paying the COVID-19 paid sick leave. If the covered employee refuses to provide documentation as requested, the employer is not obligated to provide the additional COVID-19 paid sick leave. Employers are required to make a test available at no cost to the covered employee.
 

What is the rate of pay?

A covered employee is to be compensated for each hour of COVID-19 paid sick leave at their regular rate of pay, not to exceed $511 per day, or $5,110 in aggregate. An employer cannot require a covered employee to use any other paid or unpaid leave, time off, or vacation time prior to or in lieu of the COVID-19 paid sick leave.

The legislation does not provide any direct tax or financial relief to employers for providing the additional COVID-19 paid sick leave. As such, there is no mechanism in place for employers to recoup any pay amounts associated with the additional COVID-19 paid sick leave.

Summary: This applies to all employers offering medical plan coverage with a plan renewal date of January 1. The online disclosure must be completed by March 1, 2022 (assuming a calendar year medical plan contract).
 

Overview

Federal law requires that employers provide annual notification of the Medicare Part D Prescription Benefit "creditability" to employees prior to October 15th. However, that same law also requires plan sponsors to report creditability information directly to the Centers for Medicare and Medicaid Services (CMS) within 60 days of the first day of the contract year if coverage is offered to Part D eligible individuals. Many employers have a January 1 renewal plan year. So, for many employers, the deadline is in a couple of weeks! If your plan renews some time other than January 1, you have 60 days after the start of your plan year to complete this disclosure.
 

Mandatory Online Creditable Coverage Disclosure 

Virtually all employers are required to complete the online questionnaire at the CMS website, with the only exception being employers who have been approved for the Retiree Drug Subsidy (RDS). This disclosure requirement also applies to individual health insurance, government assistance programs, military coverage, and Medicare supplement plans. There is no alternative method to comply with this requirement! Please remember that you must provide this disclosure annually.

The required Disclosure Notice is made through completion of the disclosure form on the CMS Creditable Coverage Disclosure web page. Click on the following link: CMS Disclosure Form.

Employers must also update their questionnaire if there has been a change to the creditability status of their prescription drug plan, or if they terminate prescription drug benefits altogether.
 

Detailed Instructions and Screenshots Available

If you would like additional information on completing the online disclosure, a detailed instruction guide is available online. The instructions also include helpful screenshots so that you will know what data to have handy. More info here: CMS Notification Instruction Guide.

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Helpful Tip for Vita's Clients

The Medicare Part D creditability status of your medical plans is outlined in the Welfare Summary Plan Description that we provide to all clients. Please refer to this document as you will need this information to complete the online disclosure. 

The IRS has released an advanced copy of proposed regulations that, if finalized, will ease some of the ACA reporting requirements for employers. The IRS also used the publication as another opportunity to announce that the era of leniency for inaccurate or incomplete reporting has ended. There are three key changes proposed in the regulations:

• Extension of 1095 Deadline
• Alternative to Furnishing 1095 Statements
• Elimination of Transitional Good Faith Relief 
   

Deadline Extension for Furnishing 1095s to Individuals

The proposed regulations would permanently extend the deadline for furnishing Form 1095-B and 1095-C to individuals. The deadline would change from January 31 (current) to 30 days after January 31 or March 2nd (except in a leap year). If the deadline falls on a weekend or legal holiday, the form is due on the next business day. This proposed extension generally aligns with the extensions that have been granted each year since the requirements took effect. This action would make the change permanent.
 

Alternative to Automatically Furnishing Statements: 1095-B

The proposed regulations offer an alternative to automatically furnishing statements in certain situations. In short, carriers who are required to furnish Forms 1095-B to insureds (to report fully-insured minimum essential coverage being provided) would be able to employ an alternate communication method rather than mailing forms to individuals. This includes:

• Posting a “clear and conspicuous” notice on its website
• Providing information about how to request a form
• Furnishing a Form 1095-B within 30 days after an individual’s request is received.

The notice must remain in the same location on the website until October 15 of the year following the calendar year to which the statement relates.

The IRS is easing these reporting requirements primarily due to fact that the information has little utility, since Congress lowered the penalty for the “individual mandate” to $0, effective as of 2020. It is subject to change if the individual mandate is increased in the future.
 

Alternative to Automatically Furnishing Statements: 1095-C

Unlike the individual mandate penalty, the employer Shared Responsibility Payment penalties are still in play. Therefore, this relief does not apply to furnishing statements to an Applicable Large Employer’s (ALE) full-time employees or reporting information to the IRS. However, similar relief is available to ALEs with respect to furnishing Forms 1095-C to non-full-time employees and non-employees enrolled in the ALE’s self-insured health plan.
 

Elimination of Good Faith Relief

Since the requirements came into play, employers have enjoyed an era of transitional good faith relief where the IRS has been accommodating of employers filing incomplete or inaccurate information on Forms 1094 and 1095. In 2020, the IRS first announced that it would cease to provide the “transitional good faith relief” that it had previously offered. These new regulations reiterate that this relief from penalties for reporting incorrect or incomplete information will no longer be available for reporting for tax year 2021 and beyond. The IRS noted that an exception from penalties may still be available if the filer can show reasonable cause for the failures.
 

What About State Reporting?

To date, we are not aware that any states have followed suit in offering parallel relief for state reporting requirements. Stay tuned for more updates.
 

Effective Date

The changes in the proposal would apply for calendar years beginning after December 31, 2021, but insurers and ALEs may choose to apply the changes for calendar years beginning after December 31, 2020. Although these are proposed regulations, they may be relied upon by taxpayers.

U.S. Department of Health and Human Services regulations require annual notice to all plan participants regarding the Medicare Part D Prescription benefit “creditability” of your group health plan. This notice must be provided by October 14 to coincide with the annual Medicare open enrollment period which runs from October 15 to December 7. This notification provides Medicare-eligible employees with important information to help determine whether they need to enroll in Medicare Part D.

Again?  Didn’t I just do this after my medical plan renewal? 

Not quite. Same law, different requirement. In addition to this annual employee disclosure requirement each fall, plan sponsors must report creditability information directly to the Centers for Medicare and Medicaid Services (CMS) within 60 days of the first day of the medical policy year. Many Vita clients have a January 1 plan renewal, so for many employers, the deadline is the end of March.
 

How Do We Know If Our Prescription Benefit Is “Creditable”?

A prescription drug plan is considered "creditable" if the prescription drug benefits are expected to pay as much as or more than standard Medicare Part D prescription drug coverage. If a plan will not pay out as much as Medicare prescription drug plans pay, it is considered "non-creditable".

If you are a Vita client, you can confirm the creditability of your own plan by referring to your ERISA Welfare Plan Summary Plan Description (SPD).
 

Employer Action Item

The ERISA SPD that Vita provides our clients has been designed to incorporate all of the necessary disclosure language for the Medicare Part D Creditability requirement.  If you have distributed this SPD to your employees in 2021 (or since October 15 of last year), you are already in compliance with the annual disclosure requirement. Not a Vita client and need some help? Let's chat!

If you prefer to send a separate Medicare Part D creditability notice, you may use the sample documents (model notices) available through the Center for Medicare & Medicaid Services website. There you can find sample documents for plans that are creditable or non-creditable for Medicare Part D purposes. Please note that the vast majority of group health plans include prescription benefits that are creditable.

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