• Employers' Medicare Part D 2024 Creditability Disclosure Due February 29

    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 February 29, 2024 (assuming a calendar year medical plan contract).


    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 sometime 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 the 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 are 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.

    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. 

  • DOL Penalties Increase for 2024

    The Department of Labor (DOL) has announced the 2024 annual adjustments to civil monetary penalties for a wide range of benefit-related violations. As background, legislation enacted in 2015 requires annual adjustments to certain penalty amounts by January 15th of each year. The increased 2024 penalties are effective after January 15, 2024, and apply to any violations occurring after November 2, 2015.

    Health and Welfare Benefit Plans


    Updated Penalty

    Failure to file Form 5500

    $2,670 per day that the filing is late

    Summary of Benefits and Coverage (SBC)

    $1,406 per failure (which means per participant not receiving an SBC)

    Failure to provide notice of CHIP availability

    $141 per day per participant

    401(k) Plan Penalties


    Updated Penalty

    Failure to provide notice for auto-enrollment plans

    $2,112 per day

    Failure to provide blackout notices

    $169 per day

    Failure to comply with recordkeeping and reporting requirements

    $37 per day per employee

    Genetic Information Nondiscrimination Act (GINA)


    Updated Penalty

    Failure to comply with GINA requirements

    $141 per day of noncompliance

    Minimum penalty for non-de-minimus failure to meet genetic information requirements not corrected before notice from DOL

    $20,641 minimum

    Cap on penalties for unintentional failure to meet genetic information requirements

    $688,012 maximum

    Other Penalties


    Updated Penalty

    Failure to file annual report for MEWAs (including M-1)

    $1,942 per day

    Failure to provide plan documents to DOL within 30 days of request

    $190 per day late (capped at $1,906 per request)


    Penalty Reality

    The reality is that the DOL retains discretion to impose lower penalties, and, in certain circumstances, they do. It is, therefore, true that not all violations will result in maximum penalties being applied. That said, out-of-compliance employers should not bank on leniency in the assessment of penalties without a compelling reason for their non-compliance. While a certain measure of penalty moderation has been seen in the past, we think that the DOL’s enforcement efforts will continue to tighten in the future. 


    Federal Civil Penalties Inflation Adjustments


  • No Surprise Bills for Ground Ambulances in California

    California AB 716 will end “surprise” billing for ground ambulance services. As a state law, it applies to fully-insured plans written in the state of California. However, because of the ERISA pre-emption, it does not apply to self-funded plans.


    The federal No Surprises Act was passed by Congress in December 2020. In a nutshell, the law prohibits most surprise billing situations. Surprise billing situations can include: a patient who receives out-of-network services during an emergency room visit or while receiving care at an in-network hospital, as well as air ambulance charges. However, the protections in the No Surprises Act (as passed) do not extend to ground ambulance services.

    What does the law require?

    Payment Cap of In-Network Amount: The new law limits the amount that a non-network ambulance provider can charge, limiting charges to the amount a patient would pay for an in-network ambulance.

    Must Count Toward Out-of-Pocket Max: The in-network cost-sharing amount paid by the insured must count toward the out-of-pocket maximum and count toward any deductible in an equivalent manner as for other in-network services.

    No Balance Billing: Ambulance providers may not balance bill any portion of fees in excess of the in-network contracted payment amount.

    Uninsured Individual Protections: The law also caps ambulance bills for uninsured individuals. Specifically, providers may not charge more than the Medi-Cal or Medicare rate, whichever is greater.

    Payment Amount for Ambulance Providers: The bill specifies that if an ambulance provider does not have a contract agreement with the patient’s insurer, the health plan will pay the ambulance providers at rates negotiated and set locally through city or regional governments (also known as the Local Emergency Medical Authority or LEMSA rate).

    Collections Restrictions: The law prohibits ambulance providers and debt collectors from reporting patients to a credit rating agency or taking legal action against them for at least 12 months after the initial ambulance bill (and then collection action is limited to the in-network contracted fee amount). In addition, wage garnishments or liens on primary residences may not be used as a means of collecting unpaid ambulance bills.

    Is there an arbitration process?

    The federal No Surprises Act included a process by which providers and insurers can enter into binding arbitration when an agreed-upon reimbursement rate cannot be achieved. The No Surprises Act arbitration process has been the subject of much effort, debate, and legal challenge since the inception of the act. Notably, there is NO equivalent clause in California’s AB 716. Rather, the bill simply states the amount insurers are to pay out-of-network ambulance providers.

    So, are there no surprise ambulance bills anymore?

    Not quite. The new law is projected to protect approximately 14 million individuals covered by fully insured health plans. Existing laws already protect Medicare and Medi-Cal beneficiaries from surprise ground ambulance bills. However, AB 716 does not apply to the nearly 6 million Californians enrolled in self-funded health plans. Recall that self-funded plans are exempt from state regulation and subject only to federal regulation under ERISA.

    Effective Date

    The law becomes effective for health insurance policies issued, amended, or renewed on or after January 1st, 2024.


    AB 726 Ground Medical Transportation


  • 401(k) Plan Rules for Long-Term Part-Time Employees

    The initial SECURE Act created a new class of plan participants called Long-Term Part-Time Employees or LTPT Employees. Employees in this new class must be given the right to make deferrals to 401(k) plans.

    Certain plans may need to allow LTPT Employees to enroll starting January 1, 2024. The Treasury Department released proposed regulations to implement rules relating to LTPT Employees on November 27, 2023.

    Definitions and Requirements

    LTPT Employee: An LTPT employee is an individual who meets the following criteria:

    • Worked three consecutive 12-month periods
    • Worked at least 500 hours of service in each of those three 12-month periods

    Hours/Years of Service: Hours and years of service are generally calculated the same as hours and years of service for other plan eligibility rules.

    Exclusions: The rule does not apply to employees covered under a collective bargaining agreement and non-resident aliens with no U.S.-source earned income. 

    Age 21 Criteria: Plans may also add additional criteria for employees to qualify for LTPT status that requires employees to reach age 21 by the end of the three-consecutive-year period to qualify. 

    Election Rights: Plans are required to give qualifying LTPT Employees the ability to make elective deferrals in retirement plans. 

    Qualification Timing: The initial 12-month period to determine eligibility for LTPT employees must be based on the employee’s date of hire. Subsequent 12-month periods may be determined by the first day of the plan year.

    Entry Dates: Plans may use the same entry date timing for LTPT employees as applied to other eligible employees.

    Employer Matching: Plan sponsors are not required to provide matching or non-elective contributions to LTPT employees. However, plan sponsors may elect to do so. This employer discretion is completely independent of whether the plan sponsor makes such contributions to other employees. A differential in matching contributions (between LTPT employees and other employees) would also not cause a 401(k) plan to fail the nondiscrimination tests.

    Vesting: LTPT employees obtain a year of vesting service for each 12-month period in which they are credited with at least 500 hours of service. LTPT employees incur a one-year break in service when they have not completed at least 500 hours.

    Top Heavy Considerations: Plan sponsors may exclude all LTPT employees from the application of top-heavy testing. However, LTPT employees are not excluded in determining whether the plan is a top-heavy plan.

    Three-Year Rule Becomes Two-Year Rule

    The duration requirement for LTPT employee qualification drops from three years to two years based on amendments enacted in the SECURE 2.0 Act.

    Plan Years Before 2025: For plan years beginning before 2025, LTPT employees must meet the 500-hour threshold for three consecutive years. (As enacted in the initial SECURE Act.) 

    Plan Years 2025 and Beyond: For plan years beginning after December 31, 2024, the three-consecutive-year requirement drops to a two-consecutive-year requirement. (Reflecting changes enacted in the SECURE 2.0 Act.)

    Employer Action Item

    Plan sponsors should review employment records from 2021 through 2023 to determine whether any LTPT employees should be given the opportunity to make elective deferrals in 2024. Note that 12-month periods starting on or after January 1, 2021, would count in determining if an employee qualifies as an LTPT employee.


    Notice of Proposed Rulemaking: Long-Term, Part-Time Employee Rules for Cash or Deferred Arrangements Under Section 401(k), 26 CFR Part 1, 88 Fed. Reg. 82796 (Nov. 27, 2023).


  • Annual Employee Benefit Plan Limits

    The last of the employee benefits annual limits have now been released by the IRS. This summary includes recently released limits for Health FSAs, Dependent Care FSAs, Commute, and QSEHRA plans. Following is a recap comparing the 2023 numbers with the finalized 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





    IRS Rev. Proc. 2023-23 (Covering HSA, HDHP, and EBHRA limits)

    IRS Notice 2023-75 (Covering Retirement plan limits)

    IRS Rev. Proc. 2023-xx (Covering FSAs, QSEHRAs, and Commute Plans)




    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.

  • A New Frontier for California SDI/PFL

    A new California law (SB 951) made two significant changes to the State Disability Insurance (SDI) and Paid Family Leave (PFL) programs.

    1. Increased Benefit Levels: SDI and PFL benefit percentages are increased as follows. Unlike previous benefit increases, these benefit increases do not include a sunset provision.
    • In 2024: Benefit levels of 60%-70% of Average Weekly Wages (AWW), which were initially effective in 2018, have been extended through the end of 2024. These increases would have reverted absent this legislation.
    • In 2025: Benefit levels will be further increased to 70%-90%.
    Worker Earnings Compared to AWW
    Benefit Level
    Benefit Min
    Benefit Max
    70% of Less
    90% benefit
    More than 70%
    70% benefit
    63% of AWW
    1. Elimination of Wage Cap: These benefit enhancements are funded by the elimination of the taxable wage limit on individual wages subject to the annual SDI withholding rate, effective January 1, 2024. The wage cap in 2023 was $153,164. In 2024, there will be no cap. 


    Higher Benefits for Lower Wage Earners in 2025

    The new program retains the current structure that reflects two tiers of benefits based on wages earned by employees. Higher benefit percentage levels are provided to workers who earn lower wages. The specific calculation is based on an employee’s quarterly wages compared to the average state wages. The formula is a bit convoluted, but a simplistic summary of the calculation can be expressed as follows: 

    • Employees Earning Less than 70% of Average Weekly Wage: Benefits will increase up to 90% income replacement under both the PFL and SDI programs (up from the current 70%).
    • Employees Earning More than 70% of Average Weekly Wage: Benefits will increase up to 63% income replacement under both the PFL and SDI programs (up from the current 60%).

    The average wage figure is calculated based on employees covered by unemployment insurance in California, as reported to the Department of Labor. For context, in 2021, the average wage figure was approximately $70,000 (based on Bureau of Labor Statistics OEWS reporting). Currently, low-wage earners are eligible for 70% income replacement of their regular wages under the programs.

    How does all this work in real life?

    Frankly, the minimum benefit of 63% of AWW can be a bit confusing. It exists to protect people from getting a lower benefit if their income is just slightly over the 70% of AWW level.

    The best way to understand this is to look at examples at various income levels. The following examples assume the AWW for 2025 is $1,642. This happens to be the 2024 AWW. This number will change in 2025, but we will use it for the purpose of these examples.

    Earnings % of AWW 

    Weekly Earnings 

    Benefit Percentage 

    Benefit Based on Percentage 

    Minimum Benefit 

    (63% of AWW) 

    Actual Benefit 


    $   985 


    $  886 


    $  886 










    $   874 






    $   919 













    but not relevant 






    but not relevant 






    but not relevant 

    or benefit cap 

    Note that the minimum benefit level of 63% of AWW creates a floor of benefits for individuals earning between 70%-90% of AWW. In short, it assures that no one will be financially penalized if their wages fall in the gap between the 90% and 70% benefit levels. Note the row in blue highlights the “crossover point” between the two benefit levels.

    For reference, the average wage figure is calculated based on employees covered by unemployment insurance in California as reported to the Department of Labor. For context, in 2021, the average wage figure was approximately $70,000 (based on Bureau of Labor Statistics OEWS reporting). Currently, low-wage earners are eligible for 70% income replacement of their regular wages under the programs.

    How is this funded?

    SDI is funded by employee payroll contributions at a rate that varies each year. The required contribution has historically applied only up to a specific wage threshold (for example, in 2023, the wage limit is set at $153,164). To pay for the increase in benefits, SB 951 repeals the wage ceiling for contributions. This change makes all earned income subject to SDI contributions.

    Effective Dates

    January 1, 2024: For employee contribution increases (via repeal of wage ceiling).

    January 1, 2025: For increased benefits for disability or family leaves.

    When can this benefit be used?

    Employees can apply for PFL or SDI benefits during an otherwise unpaid leave. This includes leaves for disability or medical needs, as well as leaves under California’s Pregnancy Disability Leave law, the California Family Rights Act, and the Family Medical Leave Act (FMLA) leave.

    Contributions and Benefits by Year

    The current benefit structure remains in place for 2023. Following are the updated wage and benefit thresholds. 

    Premium (Withholding Requirement)
    Wage Threshold
    No limit
    Maximum Withholding
    No limit
    Maximum Weekly Benefit


    Impact of No Cap on High-Income Earners

    The elimination of the wage cap will have a significant impact on high-income earners. Consider the following example:

    Maximum Weekly Benefit
    0% increase
    Wage Threshold
    No limit
    Tax Rate
    Annual Tax Payment
    139% increase


    Voluntary Disability Insurance (VDI) Plan Option

    The California Employment Development Department (EDD) allows employers to opt out of the mandatory state program and offer a self-funded, voluntary disability and paid family leave program (VDI) to its California employees. This serves as a legal alternative to the mandatory SDI coverage (which includes paid family leave).

    The EDD has created the Employer’s Guide to Voluntary Plan Procedures, which outlines the VDI process and considerations for employers. VDI plans must meet the following requirements: 

    • Plans require written approval (a vote) from the majority of employees eligible for coverage.
    • It cannot cost employees more than SDI.
    • Provide all the same benefits as SDI plus at least one element that provides a benefit enhancement. (It should be noted that the EDD is approving what can only be called “micro-enhancements” to plans as acceptable enhancements.)
    • Employees can reject the VDI and choose SDI coverage.
    • Covered employees must be given a written document that outlines their benefits.
    • Must be offered to all eligible California employees of the employer.
    • Must be updated to match any increase in benefits that SDI implements due to legislation or approved regulation.

    Employer Considerations

    Employers will want to be aware of the elimination of the wage cap, noting the impact on higher wage earners and the payroll processing changesrequired. Additionally, larger employers will want to consider whether implementing a VDI program may be a suitable option moving forward. From a marketplace perspective, SDI administration vendors are focused on employers with more than 500 California employees. Careful consideration will need to be given to both EDD’s requirements and marketplace availability of VDI options.  Consideration will include a feasibility study which would include calculation of the security deposit and quarterly assessment paid by the employer to the EDD as the EDD still has oversight on VDI plans.


    California SB951

    EDD Voluntary Plan Procedures



  • Overcoming Administration Challenges of Voluntary Life Benefits

    Several years ago, the Department of Labor (DOL) investigated Prudential Life Insurance Company’s practices involving voluntary, supplemental group life insurance coverage. The issue was that premiums were paid by plan participants (via salary reduction) for extended periods of time, but after participants died, claims were denied on the grounds that the participants failed to provide evidence of insurability at the time they applied for the insurance.

    Parallel investigations found that other life insurers also engaged in similar practices. The marketplace reality is that, absent this recent spotlight on these issues, many insurance companies have been guilty of varying degrees of sloppiness in syncing payroll deductions with underwriting approvals.


    In the settlement agreement, Prudential agreed to revise this practice and ensure that beneficiaries are not harmed in the event employers fail to verify that participants’ evidence of insurability was approved prior to collecting premiums. The specifics of the settlement prohibit Prudential from denying a beneficiary’s claim based on the lack of evidence of insurability when premiums were collected for more than three (3) months. In addition, formerly denied claims based on lack of evidence of insurability have been reprocessed.

    Forward Guidance to All Insurance Companies

    The DOL encouraged all insurers to examine their practices to ensure they are not engaged in similar conduct. Practically, it’s more correct to say the DOL issued a stern warning as they are greatly concerned about protecting participants and curtailing these types of practices.

    Roadmap for Employers

    This activity signals the DOL’s clear interest in protecting beneficiaries and presents an outline of DOL expectations for insurers and plan sponsors/employers in their administration of voluntary life insurance benefits. 

    Importantly, what is at issue here is not that insurance companies have the right to deny applications for supplemental, voluntary life insurance (if a participant does not pass the insurability requirements). Rather, it is a problem when employees perceive that they have insurance (because they are paying premiums via salary deductions), but their coverage is not really in force because their evidence of insurance documentation was not submitted.

    The Often-Missed Step: Split Salary Deductions Into Two Parts

    Historically, errors were made by simply starting premium salary deductions for the entire life insurance benefit and the employer forwarding the full premium to the insurance company rather than withholding and forwarding just the premium amount due for the Guaranteed Issue (GI) benefit level. This simple administrative error created a disparity in how much insurance an employee was paying for – and believed they owned - vs. how much had been approved by the insurance company. 

    The lesson for employers administering voluntary life insurance plans is that salary deductions must be split into two parts:

    • The premium/salary deduction associated with any Guaranteed Issue (GI) insurance coverage, and
    • The premium/salary deduction associated with any coverage that requires Evidence of Insurability (EOI). The following graphic illustrates the steps in the process for administration of this portion of the insurance coverage.
    Voluntary Life Insurance Salary Deductions

    Employer Action Item

    Employers should review their internal procedures as well as how they coordinate with their voluntary life insurance company. Specifically, employers should confirm that the following process elements are defined and implemented:

    1. Split Premium: Split voluntary life premium into two parts. Commence salary deductions for the guaranteed issue portion only and delay salary deductions for any portion of the premium attributed to insurance that requires evidence of insurability.
    2. Coordinate with Payroll: Coordination and communication between benefits and payroll departments are critical in defining and implementing processes.
    3. Confirm Insurance Decision: Obtain documentation of insurance approval (or denial).
    4. Commence Additional Deductions: Upon insurance approval, commence additional salary deductions.


     The settlement agreement can be referenced here.

  • Understanding Today's Long Term Care Issues

    There is a lot of noise in the news about long-term care. Some individuals, especially high-income earners, are urgently purchasing personal long-term care (LTC) policies. Some employers are considering implementing LTC policy offerings to aid employees who want to purchase individual policies. Still, others are suggesting that employers and individuals alike take a “wait and see” approach. So . . . what is going on, and why are there so many conflicting recommendations?

    Let’s Start at the Very Beginning

    Starting at the very beginning means understanding the long-term care problem in the United States. The problem is caused by a convergence of multiple social, economic, and financial challenges.

    • The Cost of LTC Services: The cost for long-term care of all types has increased significantly over the past decades. In fact, costs have risen to levels that are not affordable for many, if not most individuals. While the actual cost of long-term care can be very location-specific, approximate costs fall as follows:

    $7,600 per month for care in a long-term care facility (a.k.a. nursing home)

    $3,600 per month for care in an assisted living facility

    $68 per day for adult daycare

    $20 per hour for home health aide

    • Aging Population: There is a significant demographic shift in the population. The baby boomer generation is entering the stage where they begin needing long-term care services. The increasing percentage of elderly leads to concerns about the sustainability of care systems.
    • Health Insurance Does Not Cover: Traditional health insurance plans do not provide coverage for long-term care services, because long-term care services are defined as custodial in nature, not medical in nature. Since services for long-term care are not considered medically necessary, they are not covered by health insurance or Medicare.
    • Inadequate Home Care Infrastructure: While there is a decided preference for “aging in place,” there aren’t always sufficient resources or infrastructure to support this. The ultra-mobility of our society often means that families are spread far apart, a reality that does not lend itself easily to family care. In addition, for families with young children or career-focused individuals, changing lifestyles to care for a parent (as may have been the custom in prior generations) is not often considered a realistic solution.
    • Financial Strain on Families: Families often bear the financial burden when institutional care is needed. This can lead to significant financial strain, forcing families to dip into savings or retirement funds.
    • Lack of Awareness of Issues: Many people are unaware of the costs and needs associated with long-term care. As such, families are frequently unprepared for both the social and financial realities when a family member needs long-term care services.
    • Lack of Funding for Social Services: Medicaid does provide long-term care services for individuals who have no assets and extremely limited income (and for many who have spent down the assets they did have paying for care). However, state budgets are also constrained and with LTC future cost projections rising, state governments are going to have to be creative in how they find ways to both pay for necessary long-term care services (for those on Medicaid) and ensure that facilities are available to meet the need.

    Collectively, these challenges paint a bleak picture of the long-term care horizon. This is why there is a problem. This is why many people and states are seeking solutions. This is why you are hearing so much “noise” about long-term care in the news!

    What happened in Washington state?

    To solve their long-term care problem, Washington passed legislation that created the WA Cares Program. It is a mandatory long-term care program established to help residents afford long-term care services. Requiring mandatory participation helps to promote a broad coverage base.

    • Funding: Funded by a payroll tax on employees. The tax is currently set at 0.58%. There is no wage cap, thus all earned income is taxed under the program.
    • Benefits: $36,500 lifetime benefit to pay for long-term care services.
    • Criticisms: Some actuarial projections indicate that the program will not remain solvent over the long-term given the aging population. There are also concerns about the adequacy of the lifetime benefit, given the rising costs of care. Lastly, there are design criticisms given that the tax must be paid by all residents. However, benefits are not available for residents who have paid the tax but later move out of state.
    • Opt-Out Provision: The law allowed residents to opt out of paying the payroll tax if they purchased and maintain an “equivalent” individual LTC policy. The law allowed a six-month window in which to purchase an individual policy prior to the effective date of the program. The effect of the purchase window caused a run on policy purchases. Over 500,000 Washington residents purchased policies during the six-month window to opt out of the payroll tax. Who were those individuals? As a rule, they were residents with high incomes . . . for whom the payroll tax would typically be higher than the cost of the LTC policy premium. The knock-on effect of the mass opt-out is that many high-income earners will not be paying into the WA Cares program, thus, the program is at some risk of being underfunded or needing to raise the premium in the future.

    What is happening now?

    Many states across the country are considering following in Washinton’s footsteps and implementing a state-sponsored, mandated long-term care program. There are currently twelve (12) states considering such a program. These include Alaska, California, Colorado, Hawaii, Oregon, Illinois, Michigan, Minnesota, New York, North Carolina, Pennsylvania, and Utah.

    States typically start with a “Feasibility Study” to review plan designs, actuarial cost projections, various taxation structures, and overall feasibility. The next step is to propose a bill for consideration by the legislative body. As an example of the process, California recently completed their Feasibility Study and Actuarial Analysis. No legislation has been proposed, but it is expected that a bill will be submitted in the 2024 legislative session. Then, there is the issue of the passability of the legislation. This is a matter that is unique to each state, where social needs, financial/tax cost, and political realities must be balanced in the various branches of state legislature. For most states, this process may take years. For some, it is possible that legislation may move quickly, intending to learn from Washington’s experiment and act swiftly to get a jump on the problem.

    Will my state have an opt-out provision?

    The one lesson most states will surely learn from Washington is that providing a future window to purchase a policy and secure an opt-out from taxation is not viable because of the potential to compromise the funding base for the program. In lieu of a future window, states will likely consider three potential options:

    • No opt-out
    • Opt-out if the private policy is in force prior to law passage
    • Opt-out if the private policy is in force during the lookback period (12 months)

    The reality is that no one knows which option may or may not be included in the legislation for any given state. This is why we see some recommendations to purchase a policy (just in case) and others that suggest a wait and see approach.

    Why does income level matter?

    The higher the income, the higher the payroll tax payment if your state passes a mandatory LTC program. Thus, the higher the income, the more advantageous it will be to purchase an individual policy that will allow an individual to opt out of the payroll tax.

    Individual Considerations

    What should I do? There is a high likelihood that, at some point, most people are likely to need long-term care services. The question is, how are you going to deal with that? There are multiple strategies to consider:

    • Kick the Can: You can kick the can down the road and decide to simply deal with it later in life. The negative consequence of this strategy is that for too many people, “later” never really comes, and you end up not really having a solution. Also, LTC policies are significantly cheaper for younger people, so the kick-the-can-down-the-road strategy means that if you do choose to purchase a policy later, it will be more expensive.
    • Run the Risk: You can wait to see if your state passes a mandatory LTC program and run the risk that enough pre-information will be available to make an informed decision before any deadline in your state.
    • Bite the Bullet: The bite-the-bullet option means recognizing the reality that you will likely benefit from purchasing a private policy, both to protect your assets and to avoid any potential taxation from a mandated program. It entails considering your long-term risk and needs, reviewing policy options, and purchasing a personal LTC policy sooner rather than later. This strategy will put in place financial protection against future long-term care expenses. Depending on policy provisions and timing of purchase, this option may also allow you to opt out of taxation for a state program (depending on what the state program allows).

    How much should I buy? Here, our recommendation is to purchase all that you NEED . . . and NO MORE. We are fans of “corridor insurance,” meaning purchase insurance for a portion of your expected need and plan to pay out of pocket for some portion of it as well. This keeps the policy premium lower and allows you to self-insure a portion of the risk. As an example, if you project that you will need a LTC services that cost $6,000 per month, you might consider purchasing a policy that covers $3,000 or $4,000 per month and then know that when you need LTC services, you will pay the balance out of your savings or assets. If you never need the services, then you save on premiums. If you do need the services, you have insurance for a portion of the expenses, and the remainder can more easily be taken from savings or assets without compromising the long-term viability of your financial profile.

    Where should I buy LTC? The very first place to look is through your employer. If your employer offers a group option (either partially funded by your employer or fully paid by employees), this is usually the best place to start. Policies offered in the group marketplace are often more competitively priced (and they are portable when you leave your employer).

    Employer Considerations

    Depending on the phase of state legislative consideration, employers that are considering adding LTC to their benefits offering may want to do so sooner rather than later, as private LTC plans will likely need to be in place prior to the effective date of any state-wide program (if not sooner) for employees to opt-out of the state program (if opt-outs will be permitted). There also may be some concern over carrier capacity if there is a rush to implement a private plan, like what happened with the WA Cares program. 

    There are multiple ways employers can implement LTC coverage.

    • Sponsored Benefit: Employers can offer coverage with a subsidized base benefit and the option for individuals to buy-up to a more comprehensive policy (for themselves or their family members).
    • Carve-Out Benefit: Employers can offer coverage with a subsidized base benefit for a subset of their population. For example, management or executive-level employees. Most insurance carriers require a minimum number of employees in the carve-out to offer coverage.
    • Voluntary Benefit: Employers can launch a fully voluntary LTC benefit offering for their employees. This allows their employees to hop onto a group policy at the employees’ own expense. However, in all cases, insurance carriers require a minimum level of participation to offer any guaranteed issue coverage; otherwise, the policies would be fully underwritten individually. All such policies would be fully portable for employees upon termination.

    It should be noted that there is no requirement for employers to offer LTC coverage to employees.

    California Current State

    In 2019, the California Assembly passed A.B. 567, which established a Long-Term Care Task Force within the California Department of Insurance to assess the feasibility of developing and implementing a culturally competent statewide insurance program for long-term care in California.

    The Feasibility Report summarizes the program recommendations made by the Task Force and outlines the financial, administrative, and political feasibility considerations.

    The Task Force proposed a progressive payroll tax, but declined to provide definitive direction on whether it would be imposed on employees, employers, or shared. Five (5) potential plan designs were defined, from basic coverage with a $36,000 benefit level to a very robust option with a $144,000 benefit level. The projected tax ranged from 0.50% to 2.4% of payroll for the plan design options outlined by the Task Force.

    Various opt-out provision possibilities were addressed in the feasibility study, from none, to partial, to full. Timing options considered for the potential opt-out provision include a requirement to have private coverage in place prior to the law passing or having private coverage in place during a 12-month lookback period. In addition, consideration was given to a partial opt-out for individuals purchasing private coverage after the law was passed.

    Importantly, whether there is sufficient political incentive to pass a law implementing a mandated LTC program (once proposed) is an entirely different matter. Pundits disagree on whether the political will and focus will exist to pass such legislation in the 2024 legislative session.


    California AB 567
    Feasibility Report
    Feasibility Report FAQ
    CA DOL Long Term Care Task Force


  • Civil Monetary Penalties for HIPAA, MSP, and SBC Violations Updated

    The Department of Health and Human Services has announced adjustments of civil monetary penalties for statutes within its jurisdiction. The latest adjustments are based on a cost-of-living increase of 1.07745%. These adjustments are effective for penalties assessed on or after October 6, 2023, for violations occurring on or after November 2, 2015. Following are highlights of the adjustments potentially affecting employee benefit health plans.


    The HIPAA administrative simplification provisions encompass standards for privacy, security, breach notification, and electronic health care transactions. HIPAA has four tiers of violations that reflect increasing levels of culpability, with minimum and maximum penalty amounts outlined within each tier and an annual cap on penalties for multiple violations of an identical provision. The newly indexed penalty amounts for each violation of a HIPAA administrative simplification provision are as follows:

    Minimum Penalty Maximum Penalty Calendar Year Max
    Lack of knowledge
    $137 $68,928 $2,067,813
    Tier 2
    Reasonable cause and not willful neglect
    $1,379 $68,928 $2,067,813
    Tier 3
    Willful neglect, corrected within 30 days
    $13,785 $68,928 $2,067,813
    Tier 4
    Willful neglect, not corrected within 30 days
    $68,928 $2,067,813 $2,067,813


    Medicare Secondary Payer 

    The Medicare Secondary Payer statute prohibits a group health plan from “taking into account” the Medicare entitlement of a current employee or a current employee’s spouse or family member and imposes penalties for violations. The indexed amounts for violations applicable to employer-sponsored health plans are as follows:

    Annual Penalty
    Offering Incentives
    Offering incentives to Medicare-eligible individuals not to enroll in a plan that would otherwise be primary
    Failure to Respond
    Failure of responsible reporting entities to provide information identifying situations where the group health plan is primary


    Summary of Benefits and Coverage (SBC)

    An SBC generally must be provided to participants and beneficiaries before enrollment or re-enrollment in a group health plan.

    Per Incident Penalty
    Willful Failure
    Willful failure to provide an SBC as required


    Timing of Penalty Changes

    The annual adjustments to penalties are designed to preserve their deterrent effect in the face of inflation. The HHS’s “annual” adjustments are supposed to be made by January 15 of each year, but in practice have come at irregular intervals. The last adjustment was made on March 17, 2022.

    Employer Action

    These monetary penalties are significant; thus, we recommend that employers assess their group health plan HIPAA compliance program and confirm that policies and procedures are effectively deployed and that HIPAA training is in place for all employees with access to PHI.

    As a reminder, Vita provides a HIPAA Compliance Program for group health plans. In addition, a 20-minute Critical HIPAA Training video is available on demand for employees who have access to PHI and need to be trained.


    HHS, Annual Civil Monetary Penalties Inflation Adjustment, 45 CFR Part 102, 88 Fed. Reg.69531 (Oct. 6, 2023)


  • IRS Announces Retirement Plan Limits for 2024

    The Internal Revenue Service has announced the 2024 cost-of-living adjustments (COLAs) to the various dollar limits for retirement plans. The Social Security Administration (SSA) has also announced the taxable wage base for 2024:



    Elective Deferral Limit (401(k) & 403(b) Plans)



    Catch-Up Contributions (Age 50 and over)



    Annual Defined Contribution Limit



    Annual Compensation Limit



    Highly Compensated Employee Threshold



    Key Employee Compensation



    Social Security Wage Base





    • Elective Deferral Limit means the maximum contribution that an employee can make to all 401(k) and 403(b) plans during the calendar year (IRC section 402(g)(1)).
    • Catch-up Contributions refers to the additional contribution amount that individuals age 50 or over can make above the Elective Deferral and Annual Contribution limits if permitted by the company’s retirement plan.
    • Annual Contribution Limit means the maximum annual contribution amount that can be made to a participant's account (IRC section 415). This limit is expressed as the lesser of the dollar limit or 100% of the participant's compensation and is applied to the combination of employee contributions, employer contributions, and forfeitures allocated to a participant's account.
    • Annual Compensation Limit means the maximum compensation amount that can be considered in calculating contribution allocations and nondiscrimination tests. A plan cannot consider compensation in excess of this amount (IRC Section 401(a)(17)).
    • Highly Compensated Employee Threshold means the minimum compensation level established to determine highly compensated employees for purposes of non-discrimination testing (IRC Section 414(q)(1)(B)).
    • Social Security Wage Base is the maximum amount of earnings subject to Social Security payroll taxes.