Employee Benefits Compliance

Flurry of New Government Guidance on HCR

Last week the Feds left several holiday packages for benefits professionals. We’ve unwrapped them, and look what we got!

  • Delayed Effective Date of HCR Nondiscrimination Rules to Insured Plans.
    (IRS Notice 2011-1. 12/22/2010. 7 pages)
    The IRS and Departments of Labor and Health and Human Services have determined that compliance with Health Care Reform nondiscrimination provisions (applicable to insured health plans) should not be required until after regulations or other administrative guidance of general applicability has been issued under PHS Act § 2716. “The Departments anticipate that the guidance will not apply until plan years beginning a specified period after issuance.” Before the beginning of those plan years, any sanctions for failure to comply will not apply, and an insured group health plan sponsor will not be required to file IRS Form 8928 with respect to excise taxes resulting from non-compliance with the nondiscrimination rules.
    Text of IRS Notice 2011-1: Delay of Nondiscrimination Rules for Insured Group Health Plans (PDF)
  • FAQs on Affordable Care Act Implementation Part V and Mental Health Parity Implementation.
    (DOL/EBSA, 12/22/2010, 8 pages)
    The FAQs Parts I-IV previously issued by the IRS, DOL and HHS have been very helpful and address practical issues that come up in implementing the ACA. FAQs Part V continues this trend and includes the following: 1) preventive services: clarifies that a plan may impose a copayment for preventive services provided at an in-network outpatient hospital, although it does not impose a copayment for the same services provided at an in-network ambulatory surgery center; 2) automatic enrollment: delays—until regulations are issued—the requirement that employers with more than 200 full-time employees automatically enroll eligible employees in the employer group health plan; 3) 60-day prior notice: delays the requirement to provide 60 days’ notice before a material modification is made to a group health plan—until guidance is issued about the ACA’s requirement of a summary of benefits and coverage; 4) dependent coverage to age 26: provides an example of how a plan can waive a co-payment requirement for participants under age 19, although ACA requires that benefits for dependent children may not vary due to age except for children over 26 (because the age 19 waiver in the example applies to employees and spouses enrolled in the plan, not just to children); 5) grandfather status: clarifies that a plan will retain its grandfather status if its out-of-pocket (OOP) spending limit is based on a formula that is based on employees’ compensation, and compensation increases which results in an increase in the OOP limit; 6) small employers and MHPA: clarifies that employers with fewer than 50 employees are still exempt from the Mental Health Parity and Addiction Equity Act, even though ACA changed the definition of “small employer” for some purposes; and 7) wellness programs: clarifies that an employer wellness programs is subject to the HIPAA nondiscrimination rules only if it is, or is part of, a group health plan, but not if it is operated as an “employment policy” that is separate from the group health plan, and provides several examples of program terms that do not violate HIPAA nondiscrimination rules.
    Text of FAQs About Affordable Care Act Implementation Part V and Mental Health Parity Implementation
  • HHS Issues Regulations Requiring Insurers to Justify Rate Increases of 10% or more in 2011.
    (HHS, 12/22/2010, 136 pages)
    HHS issued regulations requiring insurers who intend to raise rates by 10% or more in 2011 to publicly detail the reasons for the increase, through both a narrative description and a quantitative analysis. HHS will then review the proposed rate increases and determine whether they are unreasonable. The law does not authorize HHS to reject proposed increases, but only to deem them reasonable or unreasonable. The proposed regulations apply to policies sold in the individual and small group markets.
  • IRS issues Notice 2011-5, on use of Health FSA and HRA Debit Cards to Purchase Prescribed Over-the-Counter Drugs (IRS, 12/26/2010, 4 pages)This document modifies Notice 2010-59 (2010-39 IRB 396) which did not allow the use of health FSA and HRA debit cards to purchase over-the-counter medicines or drugs after December 31, 2010. The new notice will allow the use of debit cards to purchase prescribed over the counter drugs when certain requirements are met. This notice will be in IRB 2011-3, dated Jan. 18, 2011. Text of IRS Notice 2011-5: Use of Health FSA and HRA Debit Cards To Purchase Prescribed Over-the-Counter Drugs (PDF)
  • Fringe Benefit Exclusion for Qualified Parking and for Transit Pass to Remain at $230/month for 2011. IRS Rev. Proc. 2011-12 (IRS, 12/23/2010)Excerpt: “For taxable years beginning in 2011, the monthly limitation under IRC section 132(f)(2)(A), regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass, and under section 132(f)(2)(B), regarding the fringe benefit exclusion amount for qualified parking, is $230.” Text of IRS Rev. Proc. 2011-12: Fringe Benefit Exclusion for Qualified Parking to Stay at $230 for 2011 (PDF)
  • IRS Issues Guidance for Employers on New 2011 Payroll Tax Rates (IRS, 12/17/2010).
    Employees’ Social Security tax withholding rates will decrease from 6.2% to 4.2% in 2011 as a result of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 that was enacted by Congress and signed by the President. IRS Notice 1036 provides guidance to help employers implement the two-percentage-point cut in payroll taxes, along with the income-tax withholding tables that employers will use during 2011. (The new Tax Law continues the current income tax rates and brackets.) The one-year reduction in the Social Security tax rate will not affect employees’ future Social Security benefits. In Notice 1036, the IRS asks employers to adjust their payroll systems as soon as possible, but not later than Jan. 31, 2011. For any Social Security tax over withheld during January, employers should make an offsetting adjustment in employees’ pay as soon as possible but not later than March 31, 2011.
    IRS issues Guidance for Employers on New 2011 Payroll Tax Rates