United States: Employee Benefits Update - November 2015

Upcoming Health Plan Compliance Deadlines and Reminders

1. Reinsurance Fee for Group Health Plans.

a. Reporting for 2015. Contributing entities (the third-party administrator for self-funded plans or the insurer for fully insured plans) must report to the Department of Health and Human Services ("HHS") their health plans' annual enrollment counts by November 16, 2015 using the electronic 2015 ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form. The form will then calculate the contribution amount owed. The contribution rate for the 2015 calendar year is $44 per reinsurance covered life.

b. Payment for 2014. For contributing entities that chose to pay the 2014 reinsurance fee in two installments, the second payment ($10.50 per reinsurance covered life) is due by November 15, 2015.

2. Summary Annual Report for Calendar Year Group Health Plans. For calendar year plans that obtained an extension to file their annual report (Form 5500), the Summary Annual Report must be distributed to participants and beneficiaries no later than December 15, 2015 (two months after the close of the extension period).

3. Health Plan Open Enrollment Requirements.

a. SBCs. Plan sponsors of group health plans must issue a new summary of benefits and coverage ("SBC") to participants and beneficiaries covered under the plan with each open enrollment. Group health plans without open enrollment must issue the SBC 30 days in advance of the plan year (December 2, 2015 for calendar year plans).

b. HRA Opt-Out. Plan sponsors of health reimbursement arrangements ("HRA") must offer participants an annual opportunity to opt-out of and waive all future reimbursements from their HRA. This opt-out notice can be provided with the open enrollment materials.

4. ACA Reporting for Plan Sponsors of Self-Funded Health Plans and Applicable Large Employers. Plan sponsors of self-funded health plans and applicable large employers (generally, those employers with 50 or more full-time employees and full-time employee equivalents) must file the first Affordable Care Act ("ACA") reports with the Internal Revenue Service ("IRS") no later than February 29, 2016 (March 31, 2016 if e-filing) and provide a copy of the report to employees no later than February 1, 2016. Because these reports generally require plan sponsors of self-funded health plans and applicable large employers to accumulate monthly enrollment and eligibility data for the 2015 calendar year, plan sponsors and applicable large employers should be preparing, or working with their venders to prepare, these reports in order to meet the February 1, 2016 deadline.

Upcoming Retirement Plan Compliance Deadlines and Reminders

Defined Contribution Plans

1. Retirement Plan QDIA Notice. Plan sponsors of defined contribution plans that invest participant contributions in a qualified default investment alternative ("QDIA") because the participant failed to make an investment election must provide an annual notice to all participants at least 30 days, but not more than 90 days, before the beginning of the plan year. Plan sponsors of calendar year plans must send the notice between October 3 and December 2, 2015.

2. Retirement Plan Automatic Enrollment Notice. Plan sponsors of defined contribution plans with an eligible automatic contribution arrangement or a qualified automatic contribution arrangement must provide an annual notice to all participants on whose behalf contributions may be automatically contributed to the plan at least 30 days, but not more than 90 days, before the beginning of the plan year. Plan sponsors of calendar year plans must send the notice between October 3 and December 2, 2015. Plan sponsors can combine the automatic enrollment notice with the QDIA notice.

3. Safe Harbor 401(k) Plan Notice. Plan sponsors of safe harbor 401(k) plans must provide participants an annual safe harbor notice that describes the safe harbor contribution and other material plan features at least 30 days, but not more than 90 days, before the beginning of the plan year. Plan sponsors of calendar year plans must send the notice between October 3 and December 2, 2015. Plan sponsors can combine the safe harbor notice with other required notices, such as the QDIA notice.

All Retirement Plans

1. Discretionary Amendments. All discretionary amendments to qualified retirement plans must be adopted no later than the end of the plan year in which they are effective. A discretionary amendment generally includes any change to the terms of a plan that is not required for plan qualification. Plan sponsors of calendar year plans must ensure discretionary amendments effective in 2015 are adopted no later than December 31, 2015.

2. Determination Letter Filing. Remedial Amendment Period Cycle E individually designed plans must be submitted for a favorable IRS determination letter no later than January 31, 2016. Cycle E plans include those sponsored by employers with tax identification numbers ending in a five or a zero, as well as governmental plans.

RETIREMENT PLAN DEVELOPMENTS

DOL Confirms Economically Targeted Investments Are Subject to the Same Fiduciary Standards as Other Investments

The Department of Labor ("DOL") issued an Interpretive Bulletin and regulation clarifying its position on the fiduciary standards that apply when plan fiduciaries consider economically targeted investments ("ETI"). ETIs generally are investments selected for the economic benefits they create, separate from the investment return to the plan. The DOL has clarified that plan fiduciaries may invest in ETIs based, in part, on their collateral benefits provided the investment is economically and financially equivalent, with respect to the plan's investment objectives, return, risk and other financial attributes, to other investments without the collateral benefits. In short, the fiduciary standards applicable to ETIs are the same as the standards applicable to all plan investments.

Fee Updates—Retirement Plan Limits and PBGC Premiums

The IRS has announced the 2016 retirement plan limitations. Most limitations remain unchanged; a few limitations that have changed include:

  • The adjusted gross income limitation for determining the retirement savings contribution credit (or saver's credit) has increased: $61,500 for married couples filing jointly; $46,125 for heads of household; and $30,750 for all other taxpayers.
  • The adjusted gross income phase-out range for Roth IRA contributions has increased to $184,000 to $194,000 for married couples filing jointly, and $117,000 to $132,000 for singles and heads of household.
  • The deduction phase-out range for IRA contributors who are not active participants but whose spouses are has increased to incomes between $184,000 and $194,000.

The Pension Benefit Guaranty Corporation ("PBGC") has increased the per-participant flat premium rate for plan years beginning in 2016 to $64 for single-employer plans and $27 for multiemployer. The variable-rate premium for single-employer plans has increased to $30 per $1,000 of unfunded vested benefits, and the per participant cap has increased to $500 times the number of participants.

HEALTH AND WELFARE PLAN DEVELOPMENTS

EEOC Issues Proposed GINA Regulations Addressing Spousal Incentives Under Wellness Programs

On October 30, 2015, the Equal Employment Opportunity Commission ("EEOC") issued proposed regulations under the Genetic Information Nondiscrimination Act of 2008 ("GINA") to address another aspect of wellness programs. The proposed regulations would permit employers to offer inducements (whether financial or in-kind) to employees in exchange for information about an employee's spouse's current or past health status as part of a health risk assessment. The proposed regulations confirm that such request must satisfy the same standards applicable to requesting such information from employees (e.g., that the provision of genetic information is voluntary and the individual provides prior, knowing, voluntary and written authorization). Additionally, the proposed regulations would align the maximum incentive allowed under the GINA regulations with the maximum incentive allowed under the ACA: 30% of the total annual cost of coverage for the plan in which the employee and any dependents are enrolled. The proposed regulations provide detailed rules for how an employer may allocate the incentive between the employee and the employee's spouse. Finally, the EEOC proposes to apply the same reasonableness standard as it included in the proposed Americans with Disabilities Act wellness regulations. Thus, an employer may request genetic information as part of health or genetic services only when those services are reasonably designed to promote health or prevent disease.

The EEOC separately issued a press release and a series of questions and answers on the proposed regulations. The questions and answers confirm that employers are encouraged, but not required, to comply with the proposed regulations.

Departments Issue 29th Set of ACA FAQs

The DOL, HHS and IRS (collectively, the "Departments") have issued additional informal guidance implementing the ACA. This 29th set of frequently asked questions ("FAQ") also provides guidance on Mental Health Parity implementation.

Preventive Care Guidance

1. Breastfeeding Support. The FAQs provide additional detail on the requirement that non-grandfathered health plans cover lactation counseling without cost-sharing in-network:

  • Plan sponsors must provide a list of in-network lactation counseling providers as part of the general ERISA requirement to provide a listing of network providers in summary plan descriptions and SBCs.
  • If a plan has no in-network lactation counseling providers, the plan must cover non-network lactation counseling providers without cost-sharing.
  • Plans must cover lactation counseling without cost-sharing when performed by any provider acting within the scope of the provider's license or certification under applicable state law.
  • Plans may not limit lactation counseling to services provided on an in-patient basis.
  • Coverage for lactation support services must extend for the duration of breastfeeding.

Similarly, the requirement that non-grandfathered health plans cover rental or purchase of breastfeeding equipment without cost-sharing likewise extends for the duration of breastfeeding.

2. Adult Obesity. The FAQs reiterate that non-grandfathered health plans are not permitted to impose general exclusions that would encompass recommended preventive services. Specifically, a non-grandfathered health plan may not generally exclude weight management services for adult obesity because the United States Preventive Services Task Force recommends plans cover screening for obesity in adults and multicomponent behavioral interventions for adults with a body mass index of 30 kg/m2 or higher. The FAQs note that multicomponent behavioral interventions could include:

  • group and individual sessions of high intensity (12–26 sessions in a year);
  • behavioral management activities, such as weight-loss goals;
  • improving diet or nutrition and increasing physical activity;
  • addressing barriers to change;
  • self-monitoring; and
  • strategizing how to maintain lifestyle changes.

3. Colonoscopies. As part of a preventive care colonoscopy, non-grandfathered health plans must cover pre-procedure specialist consultations if recommended as medically appropriate by the individual's provider and any pathology exam on a polyp biopsy without cost-sharing when provided in-network. The Departments note that the prior guidance could have been read as not requiring such coverage, so this guidance is not effective until the first plan year beginning on and after December 22, 2015.

4. BRCA Testing. The Departments clarify that non-grandfathered health plans must cover genetic counseling and, if indicated, testing for BRCA mutations for any woman found to be at increased risk, using a screening tool designed to identify a family history that may be associated with an increased risk of having potentially harmful gene mutations, regardless of whether the woman has previously been diagnosed with cancer, as long as she is not currently symptomatic of or receiving active treatment for breast, ovarian, tubal or peritoneal cancer.

5. Contraceptive Coverage. Finally, the Departments provide detail on how nonprofit and closely held for-profit employers with sincerely held religious objections to providing contraceptive coverage claim the accommodation from providing contraceptive coverage.

Wellness Programs

The Departments reiterate that a "reward" under a wellness program includes both financial and nonfinancial incentives.

Mental Health Parity and Addiction Equity Act

Plans must provide participants with the criteria for making medically necessity determinations, as well as any processes, strategies, evidentiary standards, and other factors used in developing an underlying non-quantitative treatment limitation upon request regardless of whether the criteria may be proprietary or the commercial value of the information. Plans may provide a summary of the criteria in layperson's terms but may not provide the summary in lieu of the actual criteria.

ACA Reporting Forms and Guidance

The IRS has issued the final version of the Form 8809, Application for Extension of Time to File Information Returns. Plan sponsors of self-funded health plans and applicable large employers may request an automatic 30-day extension of time to file Forms 1094-C, 1095-C and 1095-B (collectively, the "Forms") by filing the Form 8809 on or before the deadline to submit the Forms with the IRS. For the 2015 reports, the filing deadline is February 29, 2016, or March 31, 2016 if filing electronically. Additionally, plan sponsors of self-funded health plans and applicable large employers may request a second 30-day extension by filing another Form 8809 on or before the end of the first extension period. This second request is not automatic and must be approved by the IRS.

REINHART COMMENT: The general instructions for Form 8809 state that Form 8809 may be used to request an extension of time to file only the forms listed in line 6 of Form 8809. While Form 1095-B is listed in line 6, Form 1094-B, the Transmittal Form, is not. This may be an oversight, as it would be an odd result for plan sponsors of self-funded health plans to have to file Form 1094-B, the Transmittal Form, by the original deadline but not the corresponding Form 1095-B, the Health Coverage Form. Plan sponsors of self-funded health plans who are considering requesting an extension of time to file Form 1095-B should monitor any changes to the Form 8809 to determine whether Form 1094-B deadline can also be extended.

The IRS also issued the final version of Publication 5223, General Rules and Specifications for Affordable Care Act Substitute Forms 1095-A, 1094-B, 1095-B, 1094-C and 1095-C. Internal Revenue Code sections 6055 and 6056 require plan sponsors of self-funded health plans and applicable large employers, respectively, to file a report with the IRS and to provide a copy of the information reported to the employee. Plan sponsors of self-funded health plans and applicable large employers may provide a copy of Forms 1095-B or 1095-C, as applicable, to the employee or may prepare a substitute form. Plan sponsors of self-funded health plans and applicable large employers that choose to prepare a substitute form must follow the rules set forth in Publication 5223.

Definition of Small Employer for ACA Health Insurance Market Provisions

Congress has amended the definition of "small employer" for certain purposes in the ACA. Under the original rules, the definition of small employer was those employers with 100 or fewer employees. Prior to 2016, states had the option of limiting the definition of small employer to those with 50 or fewer employees. Now, the definition of small employer will be employers with 50 or fewer employees and states are allowed to define small employers as those employers with 100 or fewer employees. This definition generally applies to employers in the small group insured market.

Fee Updates—PCORI

The IRS has issued the adjusted Patient-Centered Outcomes Research Institute ("PCORI") fees for plan years ending on or after October 1, 2015 and before October 1, 2016. The PCORI fee will increase $.09 to $2.17. As a reminder, the PCORI fee is payable by plan sponsors of self-funded plans based on the average number of lives covered under the plan and is due annually by July 31 of the year following the plan year. The PCORI fee sunsets with plan years ending before October 1, 2019.

GENERAL DEVELOPMENTS

President Signs Bipartisan Budget Act of 2015

On November 2, President Obama signed the Bipartisan Budget Act of 2015 (the "Budget"), which includes a few items of note for employee benefit plan sponsors. First, the Budget will increase PBGC premiums for single-employer plans beginning in 2017. The rate increases will be phased in over three years, increasing to $80 per participant in 2019. Variable rate premiums will increase to $41 by 2019. Second, the Budget extends MAP-21 pension funding stabilization percentages to 2020. Additionally, the Budget provides defined benefit plan sponsors with more flexibility to use substitute mortality tables.

Finally, the Budget also eliminates the ACA's automatic enrollment requirement. This is good news for large employers who sponsor health plans, as there were many administrative questions surrounding this requirement.

The Department of the Treasury Issues Proposed Regulations Implementing Obergefell v. Hodges for Federal Tax Purposes

The Department of Treasury issued proposed regulations confirming that a marriage of two individuals, regardless of sex, will be recognized for federal tax purposes if that marriage is recognized by any state, possession or territory of the United States. The proposed regulations also interpret the terms "husband" and "wife" to include same-sex spouses. The proposed regulations do not treat registered domestic partnerships, civil unions or similar relationships not denominated as marriage under state law as marriage for federal tax purposes. The proposed regulations amend regulations under the Income Tax, Estate Tax, Generation-Skipping Transfer Tax and Employment Tax parts of the Code, as well as general administration and procedure.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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