No Changes to Parking and Transit Pretax Contribution Limits

The maximum pretax contribution employees can make to cover qualified transit and parking expenses is not changing. These are the applicable numbers for the 2015 tax year – effective January 1, 2015. Please read the entire IRS Revenue Procedure 2014-61 for more information.

  • Parking: $250

  • Transit: $130


PCORI Fee Increase for New Plan Years

The adjusted applicable dollar amounts for PCORI fees were recently released in IRS Notice 2014-56. For plan years ending on or after October 1, 2014 – September 31, 2015 the fee has been increased to $2.08 per covered life. This is an increase of $0.08.  Please refer to our prior guidance on PCORI fees or contact our Sales or Client Relations teams if you have any additional questions.


Additional Permitted Election Changes for Health Plans: IRS Notice 2014-55

The Internal Revenue Service recently released IRS Notice 2014-55 which states that as of September 18, 2014 participants in an employer sponsored section 125 cafeteria plan have two additional reasons to change their health insurance plan elections during a plan year.

How does this affect participants?

All employees covered by a company cafeteria plan now have two additional reasons to change their health insurance plan elections during the plan year. These include the following two scenarios:

  • If an employee’s hours are reduced to fewer than 30 hours (on average) per week and the employee is still eligible for the employer’s health plan coverage.
  • If an employee chooses to stop participating in the employer’s group health plan in order to purchase coverage through an ACA marketplace.

How does this affect employers?

Employer cafeteria plans will need to be amended to reflect these changes before the last day of the plan year in which elections are allowed. These amendment changes can be made retroactive to the first day of your plan year, assuming your plan follows the IRS guidance and employers have communicated these amendments to your participants. For plan years beginning in 2014, employers can amend the plan at any time before the last day of the plan year beginning in 2015.

What do I do now?

If you decide to opt into these new election change offerings you will need to update the amendment for your plan document and Summary Plan Description (SPD).  Once this amendment has been adopted you will need to keep this on file with your plan document and provide it to your employees as this would be a material change to your benefits offering.  You can find the proposed amendment document here.

What about future plan documents?

Unless otherwise specified, HRCTS will include this new election change offering with our standard template documents moving forward.  If you require customized documents you will need to notify us whether you have adopted these new election change offerings.


PCORI Fees

IRS Form 720 and Instructions

The Affordable Care Act imposes fees on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Institute. The fees, required to be reported annually on the 2nd quarter Form 720 and paid by its due date, July 31st, are based on the average number of lives covered under the policy or plan. The fees apply to policy or plan years ending on or after October 1, 2012, and before October 1, 2019. HRCTS will make available an Average Covered Lives Report to all clients that are responsible to file and pay the PCORI fee each year. You can request this report by contacting your Account Management Team.

The IRS recently released the revised Form 720 that insurers and sponsors of self-insured plans will use to pay the Patient-Centered Outcomes Research Institute (PCORI) fee. The fee is due by July 31 of the year following the calendar year in which the plan/policy year ended. Sponsors of calendar year plans must pay the 2013 fee by July 31,2014. Any plan ending January 2, 2013 – December 31, 2013 would have to pay the fee by July 31, 2014. Any plan ending January 2, 2014 - December 31,2014 will have to pay the fee by July 31, 2015. Plan sponsors can now complete their planning for payment of this fee. The IRS has also confirmed health insurers and self-insured health plan sponsors can deduct PCORI fees as ordinary and necessary business expenses. The fee is based on the number of covered lives including employees, retirees and COBRA participants along with their covered dependent spouses and children are all counted. However, only the employee, retiree or COBRA participant needs to be counted for an HRA or a health flexible spending account (health FSA) -- dependents covered by these accounts can be excluded.

The types of plans that must pay the PCORI Fees by July 31, 2014 include:

  • Health/accident plans
  • HRAs with a plan year that began 1/1/2013 that are not an excepted benefit (Employer contribution is greater than $500)
  • Health FSAs with a plan year that began 1/1/2013 that are not an excepted benefit (Plan has employer contributions with the maximum reimbursement greater than two times an employee’s salary reduction election or employer contribution is greater than $500)
  • Retiree plans

Calculating the Fee:

The amount of the PCORI fee is equal to the average number of lives covered during the policy year or plan year multiplied by the applicable dollar amount for the year. For policy and plan years ending after Sept. 30, 2012, and before Oct. 1, 2013, the applicable dollar amount is $1. For policy and plan years ending after Sept. 30, 2013, and before Oct.1, 2014, the applicable dollar amount is $2. For policy and plan years beginning on or after Oct. 1, 2014, and before Oct. 1, 2019, the applicable dollar amount is further adjusted to reflect inflation in National Health Expenditures, as determined by the Secretary of Health and Human Services.

IRS Form 720 can be accessed at http://www.irs.gov/pub/irs-pdf/f720.pdf which is an interactive document so that can be completed on line.

 

The PCORI fees are entered on line 133 for the appropriate plans. See pages 8 and 9 of the IRS Instructions for completing these fields. Instructions can be found at http://www.irs.gov/pub/irs-pdf/i720.pdf.

 

 

Complete the fields on page 7 and make your check or money order payable to “United States Treasury”.

Additional information on the PCORI fees can be found here:
Patient-Centered Outcomes Research Trust Fund Fee (IRC 4375, 4376 and 4377): Questions and Answers
• An IRS chart that shows which types of benefits the fee applies to:  Application of the Patient-Centered Outcomes Research Trust Fund Fee to Common Types of Health Coverage or Arrangements

Please Note:
This information is provided for educational purposes only. It reflects the understanding of HRC Total Solutions and our partners using the available guidance as of the date shown and is subject to change. It is not intended to provide legal advice.  You should not act on this information without consulting legal counsel or tax advisors.  (June 14, 2014)


COBRA Termination Process for Aged Out Dependents

The following update considers the regulatory guidance for handling COBRA beneficiaries during the month in which a dependent attains age 26. A commenter requested clarification on the application of section 4980H to an employee’s child for the month in which the child attains age 26. In response, the final regulations clarify that for purposes of section 4980H, a child is a dependent for the entire calendar month during which he or she attains age 26.

Employers must continue to cover the beneficiary through the end of the month of the dependents attaining the age of 26 on the active plan. Employers may use "Event Date" to continue coverage and do not need to adjust to “End Of Month” because of this regulation change.  The event which is occurring in the above situation is loss of coverage.  The loss of coverage happens on the last day of the month therefore the date of the event will always fall on the end of the month for dependants aging off.


IRS Ruling on Employee Benefits for Same-Sex Couples

On June 26, 2013 the Supreme Court ruled that Section 2 of the Federal Defense of Marriage Act (DOMA) was unconstitutional.  On August 29, 2013 the IRS further ruled that as a result of this ruling, same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as “married” for federal tax purposes.  They have also clarified that this holds true even if they later move to a state where same-sex marriage is not recognized.

 

What does this mean for our participants?

The medical and dependent care flexible spending accounts (FSA/DCA) are federally regulated tax savings accounts.  This ruling now allows a participant to submit expenses incurred to cover expenses for their same-sex spouse that was previously ineligible.  What is not yet clear however is if this new ruling is a qualifying event to change their election. 

For the Health Reimbursement Arrangements (HRA) this new ruling now allows those same pretax benefits to be extended to spouses of the same-sex.  Previously any benefit received would have been given on a taxable basis. 

The IRS has also stated that an individual affected by this ruling is able to but not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations. 

 

What does this mean for our employer groups?

The IRS has stated in Rev. Ruling 2013-17 that a premium for medical coverage of same-sex spouses is now able to be deducted on a pretax basis from the employee. The IRS has also stated that they intend to issue streamlined procedures for employers who wish to file refund claims for payroll taxes paid on previously-taxed health insurance and fringe benefits provided to same-sex spouses.

 

Questions and Answers:

The IRS also issued Rev. Ruling 2013-17 along with two sets of Answers to Frequently Asked Questions (FAQs) that provided additional guidance for employers. The first set of FAQs addressed issues surrounding employer sponsored benefits for same sex couples found here.  The second set of FAQs deals with questions for registered domestic partners and individuals in civil unions found here. HRCTS will continue to notify our clients and partners of any further changes and/or finalized requirements as they become available.

Please note that this message is for informational purposes only.  It is not intended as legal advice.  Please consult your own Attorney or Tax advisor.


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