• 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

  • Increased ACA Penalty Amounts for 2024

    The ACA provides for two different Employer Shared Responsibility payments, each of which is updated by a COLA factor annually. The updated 2024 penalty amounts have recently been released.

    Two Types of Penalties

    Subsection “A” Penalty: The Code § 4980H(a) penalty may be levied if an Applicable Large Employer fails to offer minimum essential coverage to at least 95% of full-time employees (and their dependents) for any month. The full penalty can be triggered by just one employee receiving a premium subsidy under the Exchange. The penalty is calculated based on the total number of full-time employees of the employer (minus 30) in any month in which an employee received a subsidy.

    Subsection “B” Penalty: The Code § 4980H(b) penalty may be applied if an Applicable Large Employer offers minimum essential coverage to the required number of full-time employees, however, the offered coverage is not affordable or does not provide minimum value. This penalty is applied on a 1:1 basis whereby a penalty is applied for each employee each month they receive a premium subsidy under the Exchange.

    Trigger for Penalties: Either or both penalties are triggered by an employee receiving subsidized coverage under the Exchange (when they otherwise could/should have been offered employer sponsored coverage).

    2024 Penalty Amounts

    Subsection “A” Original Penalty of $2,000: Increased for 2024 to $2,970 ($282 per month)

    Subsection “B” Original Penalty of $3,000: Increased for 2024 to $4,460 ($372 per month)

    Effective Date

    These updated penalties are effective for tax years and plan years beginning after December 31, 2023.


    These updates were made in the IRS revenue procedure, Rev. Proc. 2023-17.

  • IRS Confirms FSA Substantiation Requirements

    On March 29, 2023, the IRS Chief Counsel’s office issued a memorandum that explains the substantiation requirements for medical and dependent care FSA plan claims. The memo also outlines the consequences of various substantiation shortcuts that have popped up in recent years.

    In short, the memo reconfirms that FSA reimbursements must be included in an employee’s income and are not eligible for pre-tax treatment unless the expense is fully substantiated by an independent third party in accordance with IRS rules.

    Severe Consequences

    If the claims substantiation practices of an FSA plan do not satisfactorily meet the IRS standards, all salary reductions made under the plan would be considered taxable to employees. Effectively, failing to properly substantiate claims according to IRS guidelines invalidates the cafeteria plan. As a result of this disqualification, salary reduction elections would need to be recharacterized as taxable for the employee and considered wages for the purpose of FICA and FUTA taxes. The memo clarifies that the taxation consequences apply to all reimbursements in the year, including any portion of reimbursements that were actually properly substantiated.

    Prohibited Substantiation Practices

    The memo specifically called out several practices that fail to comply with IRS rules. Any reimbursements made under any of these practices do not qualify as valid cafeteria plan expenses, and any such reimbursements must be taxed to the employee (included in gross income). These practices include:

    • Allowing employee self-certification of expenses
    • Substantiating only some expenses (random sampling)
    • Not requiring substantiation of expenses below a “de minimis” dollar amount
    • Not requiring substantiation of expenses from “favored providers”
    • Not requiring that dependent care reimbursements be substantiated after the expense has been incurred

    Required Substantiation Clarified

    The IRS clarifies acceptable substantiation practices by presenting an example that includes necessary requirements. The example outlines the following claim substantiation elements:

    • All medical expenses must be substantiated by an independent third party (specifically, a party independent of the employee and the employee’s spouse or dependents).
    • Expense documentation must describe the service or product, the date of service or sale, and the amount of the expense.
    • Employees must certify that expenses have not been reimbursed by insurance or otherwise and that they will not seek reimbursement from any other plan covering health benefits.
    • Reimbursements using “EOB rollover” procedures (based on claims adjudication documentation from an insurance company) that comply with IRS rules are acceptable.
    • Reimbursements substantiated via a debit card program that complies with IRS rules are acceptable (substantiation is still required for non-auto-adjudicated claims).

    Dependent Care Example Explained

    The clarification on dependent care plan substantiation aims to address the situation where certain plans allow participants to submit a form at the beginning of the plan year and attest to the annual dependent care expenses they will incur in the upcoming year.

    The form typically requires that employees notify the plan if their dependent care situation changes such that they will not incur the amount of dependent care expenses they projected in the attestation. The plan then automatically reimburses participants each pay period for a pro-rata portion of their personally attested annual dependent care expenses. Reimbursements under these arrangements are not limited to or tied to expenses that have been incurred or substantiated. The IRS deems these arrangements as not meeting the substantiation requirements; therefore, reimbursements must be included in employees’ gross income.

    Employer Takeaway

    The guidance in the IRS memo is not new news. It generally reiterates information included in the Proposed Regulations issued in 2007. However, the IRS has recognized that some non-compliant claims substantiation practices have been adopted in the marketplace. This memo serves as a reminder to employers and FSA administrators that the IRS is both aware of the non-compliant practices and committed to maintaining the substantiation levels required in the law.

    Vita Flex Substantiation Practices

    Vita Flex FSA administration has never allowed or adopted any of the “shortcut” substantiation practices addressed in the IRS memo. Vita Flex has and will continue to be committed to ironclad compliance in the administration of FSA plans.


    A copy of the IRS memo can be founded here.


  • What’s the Deal with Health Plan Gag Clauses?

    The Consolidated Appropriations Act of 2021 (CAA) prohibits employer-sponsored group health plans from entering into agreements that contain so-called “gag clauses.” Importantly, there is also a requirement that each group health plan annually attests to the absence of gag clauses in its agreements.

    The goal of the provision is to allow group health plans and insurers to have access to and be able to publish cost and quality information as part of the CAA’s broader directive toward transparency in health coverage.

    What are gag clause prohibitions?

    On a high level, the prohibition generally restricts group health plans from entering into agreements that limit the plan’s access to de-identified claims data or the group health plan’s ability to disclose provider-specific information (such as cost and quality information) to certain third parties, including plan participants. Specifically, the gag clause rule prohibits plans and insurance companies from entering into agreements with providers, TPAs, or other service providers that restrict:

    • Provider-specific cost or quality of care information sharing with plan members
    • Claims data sharing with plan sponsors (and their service providers). Claims data sharing includes individual claims pricing.
    • Electronic access of de-identified claims and encounter information or data.

    The guidance also provided examples of what constitutes a gag clause, including provisions such as the following that are often included in TPA contracts:

    • Provisions that treat provider rates as proprietary and restrict disclosures to participants
    • Provisions that stipulate that rates can only be disclosed at the discretion of the TPA.

    Gag Clause Prohibition Compliance Attestation (GCPCA)

    The federal agencies issued guidance on February 23, 2023, outlining submission requirements. The agencies created a special web portal hosted by the Centers for Medicare and Medicaid Services (CMS) for submitting Gag Clause Prohibition Compliance Attestations. This is the only method available for submitting attestations. The link for submission is here.

    What are the penalties?

    Plans that fail to comply may face a civil penalty of up to $100 per day, adjusted annually, for each individual impacted by a violation.

    Attestation Timing

    The first annual attestation is due by December 31, 2023. This first attestation is to cover the period from December 27, 2020, through 2023. Subsequent attestations are due by December 31st of each year.

    Which plans are subject?

    The rules apply generally to health plans but not to “excepted benefits,” such as dental and vision plans. In addition, account-based plans, such as HRAs or FSAs, are not required to attest.

    Responsibility for Submission

    Employers may transfer responsibility for submission of the GCPCA to a TPA or insurer by maintaining a written agreement specifying the transfer of responsibility. However, there is a difference in actual legal responsibility between self-funded and fully insured employers.

    Self-Funded Plans: Self-funded plans may contract with their third-party administrator (TPA) to submit the attestation on their behalf. The agreement must be in writing. That said, like the RxDC reporting, the legal responsibility for the attestation remains with the group health plan (regardless of any underlying agreement). 

    Fully Insured Plans: Fully insured plans may (and most will) have the insurer submit the attestation on their behalf. The agreement must be in writing. Once a written agreement is in place, the actual legal responsibility can be transferred to the insurance carrier.

    Action Items

    Practically speaking, the heavy lifting associated with the submission of the GCPCA is likely to fall on insurance companies and TPAs. That said, the following action items should be considered:

    1. All Employers: Review any agreements with potential gag clauses. Amend agreements as necessary.
    2. Self-Funded Employers: Reach out to TPAs or other service providers, including pharmacy benefit managers, and coordinate who will submit the attestation with CMS.
    3. Fully Insured Employers: Coordinate and confirm that the insurer will handle all CMS attestations. 
    4. All Employers: Execute written agreements to clarify the transfer of responsibility for submission of the GCPCA. Confirm that responsible entities are on track for the initial submission to be made by December 31, 2023.


    The Centers for Medicare and Medicaid Services (CMS) maintains a comprehensive website with many useful resources. Resource links follow:

  • 401(k) Update: Q2 2023


    DOL Adjusts Counting Methodology for Defining Large Plans

    In February 2023, the Department of Labor issued a change to the methodology for determining if a retirement plan is considered “large,” for the purpose of Form 5500 reporting and the need for an independent audit of a retirement plan.

    The new guidance indicates that the 100-participant threshold for determining large plan status will be based only on the number of participants (actively employed and/or terminated) with balances as of the first day of each year. Previously this threshold included all eligible employees, even those with no balance. The revised methodology is generally seen as a welcome change for those smaller employers on the cusp of being considered a large plan. This change takes effect for plan years beginning on or after January 1, 2023.


    Independent Audit Time for Large Retirement Plan Filers

    Now that the retirement plan nondiscrimination testing season is wrapping up for calendar year retirement plans, steps should be taken toward the completion of the annual independent audit. The independent audit report must be included with the Form 5500 filing, due on July 31st or October 16th, for plans that are on the extended filing due date.

    The independent audit requirement applies to employers who sponsor “large” plans – those with over 100 participants on the first day of the Plan Year (January 1st for Calendar Year plans). There are special rules that allow for growing companies to first exceed 120 participants before becoming subject to the audit requirement and thereafter continue to be 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 applies to your plan. For other important dates on the horizon, download our online Compliance Calendar.

    IRS Proposed Guidance on Forfeitures1

    In February 2023, the Internal Revenue Service issued proposed regulations to define more clearly when and how plan sponsors should use forfeitures in qualified retirement plans. Forfeitures occur when unvested participant account balances are returned to the plan. While the IRS has frowned on forfeitures being carried over year-to-year, this is the first attempt to codify an already existing best practice.

    The proposed guidance requires plan sponsors to use forfeitures no later than 12 months after the close of the plan year in which the forfeitures arise. The rule allows forfeitures to be used for any of the following:

    • Pay plan administrative expenses.
    • Reduce employer contributions.
    • Increase benefits in other participants’ accounts in accordance with plan terms.

    In most cases, employers already have these elections in place. However, it is a good reminder to review your current practice and to confirm that your plan permits all available uses of applying forfeitures in order to maximize your ability to use them. The proposed rule would become effective for the first plan year beginning on or after January 1, 2024.

    Market Update2

    Despite concerns over banking fundamentals caused by the closure of Silicon Valley Bank (“SVB”) and the emergency purchase of Credit Suisse by the Union Bank of Switzerland, equity markets at home and abroad rose in Q1 2023. The US S&P 500 Index was up 7.36% in the first quarter, and the MSCI All Country World ex-US Index was up 6.48%. Those same concerns over the banking system led to a rally in Bond markets. The Bloomberg US Aggregate Bond Index finished the quarter up 2.96% on rising expectations that the Fed would end and possibly reverse its current round of interest rate hikes. Markets are now dealing with heightened expectations for negative economic growth in the US sometime in 2023 as businesses slow hiring and capital expenditure in order to protect margins and lending conditions tighten as banks focus on building their balance sheet and reserves.

    The US Bureau of Economic Analysis (“BEA”) announced that the US economy grew at an annual rate of 2.6% in Q4 2022, meaning GDP for 2022 rose 2.1%.3 The Philadelphia Federal Reserve Bank’s survey of forecasters still shows positive GDP growth for 2023, of between 0.5 to 1.0%, but with possible negative GDP growth in the middle of the year.4 The biggest question for GDP growth is whether a banking crisis will lead to a possible repeat of the 2008 financial crisis. While the failure of SVB will bring focus on the regulation of small and regional banks, overall bank capitalization in the US is healthier than at any time in the past 30 years because of capital adequacy regulations implemented since the global financial crisis of 2008. But where the SVB failure may spill over into the rest of the economy is in the tightening of lending standards as banks focus on quality credit exposure, thus limiting the availability of capital for business spending and investment.

    The one area of good news seems to be inflation. There seems to be a sustained downturn in inflation, with Headline YOY CPI falling month after month from its peak of 9.2% in June 2022 to 6.0% in February 2023. Inflation is expected to continue to fall throughout 2023 due to improved supply chain conditions and possible falling demand. The Fed has been quite forceful in raising interest rates over the past year to try and accelerate the downward pace of inflation and is still publicly committed to fighting inflation. This includes a 0.25% rise in the Fed Funds rate in March despite the financial strains on banks like SVB, and the Fed’s forward guidance, which indicates at least one more 0.25% rise in interest rates in 2023. However, cash bonds and futures prices show that markets increasingly expect the end of monetary tightening sooner rather than later.

    Though early expectations forecast positive corporate earnings in 2023 from 2022, this may be difficult to realize as rising costs have hurt margins. The ability of firms to pass on price hikes due to inflation may have run its course, with the focus in 2023 shifting to managing costs to maintain margins. The mighty American consumer may not be there to help spend the economy out of recession. Consumer sentiment is low, tracking at about 60 compared with the long-term average of 85.6, consumer savings are weak, tracking at 4.5% of disposable income compared with the long-term average of 8.9%, and credit card debt is rising with the percentage of consumer debt to disposable income at 6.2%, up from the 2021 low of 4.5%.

    Volatility will continue to plague asset markets this year as the congruence of high interest rates, tight credit conditions, and slower spending on the part of businesses and consumers make the US economy vulnerable to economic slowdown and recession. While the asset prices are significantly more attractive now than at the beginning of 2022, the headwinds identified above will continue to challenge investors in 2023.



    1 https://www.federalregister.gov/documents/2023/02/27/2023-03778/use-of-forfeitures-in-qualified-retirement-plans
    Unless otherwise indicated, data and commentary for the Market Update are sourced from three JPMorgan Asset Management sources: 1) Guide to the Markets – U.S. Economic and Market Update, 2Q 2023, March 31, 2023, 2) the “2Q 2023 Guide to the Markets Webcast” on April 3, 2023, and 3) Eye on the Market Outlook 2023, “Silicon Valley Bank Failure”, March 10, 2023. 


    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.

    +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, the 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 MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.

    The MSCI Emerging Markets Index is a float-adjusted market capitalization index that consists of indices in 21 emerging economies: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.

    The FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. Equity REITs. Constituents of the Index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property.

    The Consumer Price Index (CPI) is a measure of inflation compiled by the US Bureau of Labor Studies.

  • Fixing the Catch-up Contribution Glitch

    Secure 2.0 Section 603 was intended to require that all catch-up contributions be Roth contributions. However, it contains a drafting mistake that inadvertently results in no participants being able to make catch-up contributions (pre-tax or Roth) beginning in 2024. The accidental elimination of a subparagraph in the text of the bill creates the problem.

    Alarm Bells Ringing

    Within a matter of days after the passage of Secure 2.0, this issue surfaced and was acknowledged as a technical error, setting off alarm bells throughout the industry. Importantly, it is generally understood that essentially no member of Congress believed that they were voting to eliminate catch-up contributions in 2024 and beyond. That said, fixing a technical error in a bill, even a significant one that is clearly unintentional, isn’t always easy for Congress.

    Potential Fixes

    Option #1: The first and most straightforward option would be for Congress to enact a technical correction to address this mistake. It is generally recognized that this issue is an unintended drafting error and one that would be corrected without contention. While straightforward, this option could face a timing challenge as technical corrections legislation is generally not enacted on an accelerated basis. However, the potential magnitude of this error could assist in streamlining such legislation, specifically by hitching a ride on another bipartisan bill that is moving through Congress this year.

    Option #2: A second potential solution could be guidance issued by the IRS. Unfortunately, it is not entirely clear whether the IRS has the regulatory authority to essentially re-interpret the statutory language to reflect what was intended as opposed to what was actually drafted.

    Option #3: A third option provides that, absent a formal correction, plan sponsors follow the intended meaning of the law in the reasonable assumption that even if the error was not fixed in 2023, the error will eventually be corrected. This is clearly a “distant third” in the order of preference of plan sponsors. While it is generally accepted that this is an error that will be corrected, leaving plan sponsors to skate the presumption of correction prior to it actually occurring is the least favorable option.

    Damage Control

    It is generally accepted that the best option would be that Congress takes affirmative action to correct the error and retain catch-up contributions in 2024 and beyond. If Congress doesn’t act before 2024, it will potentially put 2024 catch-up contributions at risk. Absent such a fix, the IRS could step in and issue guidance to circumvent the glitch. Stay tuned.

  • Preventive Care Coverage Post-Braidwood: Special Rule for HDHP Plan Coverage

    The DOL, HHS, and Treasury have issued FAQs in response to the Braidwood case. In that case, a Texas federal judge declared the ACA requirement to provide preventive care on a no-cost basis unconstitutional. This raised a plethora of questions about how preventive care can be covered and what actions plans can/must take in providing preventive care coverage.

    The bulk of the FAQs provided clarity on issues that are fairly straightforward. However, in welcome news, important clarification was provided to confirm that plans can continue to cover preventive care under HDHPs (as before).

    Special Rule for Preventive Care under HDHPs

    Can a plan continue to offer preventive care on a pre-deductible basis? 
    Yes. Until further guidance is issued, preventive care services previously recommended with an "A" or "B" rating by the U.S. Preventive Services Task Force (USPSTF) on or after March 23, 2010, will be treated as preventive care for purposes of HDHP/HSA plan rules. This applies regardless of whether these items and services would otherwise not be considered qualified preventive care under an HDHP. This means that HDHP plans do not need to be immediately amended, that preventive care coverage can continue as is and that retaining such a plan design will not compromise participants’ ability to make HSA contributions.

    Super Short Summary

    The full text of the FAQs can be reviewed here, but a super short summary of key questions and answers is provided below for easy reference: 

    Does it apply to all preventive care? 
    No. It only applies to services receiving an “A” or “B” rating by the U.S. Preventive Services Task Force AFTER March 23, 2010. Services deemed preventive care prior to that time or by an agency other than the USPSTF are not impacted. The departments recognize that pre/post decisions are not clear at this time and will be providing additional guidance on this. 

    What about immunizations and well-child/well-woman care? 
    These services are not impacted by the Braidwood case (because they were not deemed preventive care by the U.S. Preventive Care Task Force). Therefore, they must continue to be covered. Such services include immunizations, contraceptive services, breastfeeding services and supplies, cervical cancer screening, and pediatric preventive care. 

    If plan changes are made, do participants need to be notified? 
    Yes, if plan provisions are changed, plans must comply with all regular participant notice procedures.


  • Reminder: 2022 SF HCSO Annual Report Due May 1

    The San Francisco Health Care Security Ordinance (HCSO) requires that employers submit the Employer Annual Reporting Form by May 1, 2023. The report must be submitted to the Office of Labor Standards Enforcement (OLSE), the organization overseeing 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 (ARF) 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 ARF.

    The deadline for filing the 2022 form is May 1, 2023.


    HCSO Primer

    Covered Employers

    An employer need not be physically located in San Francisco to be a covered employer. HCSO applies to the following employers:

    • 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 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.

    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.

    Expenditure Requirements

    The ordinance 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. The following are the required expenditure rates:

    2023 Expenditure Rates

    For Profit

    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)


    There is an exemption for certain managerial, supervisory, and confidential employees who earn more than $114,141 per year (or $54.88 per hour). These employees are exempt and the HCSO expenditure requirements do not apply to them.


    Instructions and resources for employers can be found on the OLSE’s website.