This Compliance Advisory helps you to stay up to date on regulatory changes to help simplify your job and mitigate compliance risk.

Compliance Recap

December 2017

December was a relatively busy month in the employee benefits world.

The Internal Revenue Service (IRS) delayed the reporting deadlines in 2018 for the 1095-B and 1095-C forms to individuals. President Trump signed the Tax Cuts and Jobs Act. The Centers for Medicare and Medicaid Services (CMS) released guidance on accommodation revocation notices.

A U.S. District Court vacated U.S. Equal Employment Opportunity Commission (EEOC) wellness rules effective January 1, 2019. The U.S Department of Health and Human Services' Office of Child Support Enforcement (OCSE) issued Frequently Asked Questions to address employers' duties regarding medical support notices.

The IRS released Form 8941 instructions regarding credit for small employer health insurance premiums and Form W-2 reporting guidance for Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs).

IRS Extends 2018 Deadlines for 1095-B and 1095-C Forms to Individuals

On December 22, 2017, the Internal Revenue Service (IRS) issued Notice 2018-06, delaying the reporting deadlines in 2018 for the 1095-B and 1095-C forms to individuals. The 1095-B form is now due to the individual identified as the "responsible individual" on the form by March 2, 2018. The 1095-C form is now due to employees by March 2, 2018.

There is no delay for the 1094-C and 1094-B forms, or for forms due to the IRS.

President Trump Signs Tax Bill

On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act (Act) that, among other items, eliminates the individual mandate penalty under the Patient Protection and Affordable Care Act (ACA). The Act reduces the penalty associated with the individual shared responsibility provision to zero, effective in 2019.

Per the Congressional Research Service's summary, the bill amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses.

For businesses, the bill:

• Reduces the corporate tax rate from a maximum of 35 percent to a flat 20 percent rate (25 percent for personal services corporations).
• Allows increased expensing of the costs of certain property.
• Limits the deductibility of net interest expenses to 30 percent of the business's adjusted taxable income.
• Repeals the work opportunity tax credit.
• Terminates the exclusion for interest on private activity bonds.
• Modifies or repeals various energy-related deductions and credits.
• Modifies the taxation of foreign income.
• Imposes an excise tax on certain payments from domestic corporations to related foreign corporations.

The bill also repeals or modifies several additional credits and deductions for individuals and businesses.

In particular, the Act eliminates the business deduction for qualified mass transit and parking benefits starting in 2018, and eliminates the exclusion for bicycle commuting expenses for tax years 2018 through 2025. These benefits (except for bicycle commuting) will continue to be tax-exempt to employees. For 2018, employees can contribute up to a maximum of $260 per month for both qualified mass transit and parking expenses through an employer-sponsored qualified transportation plan under Section 132(f).

The Act's elimination of the business deduction for qualified mass transit and parking benefits means that employers will be taxed on the value of providing qualified transportation fringe benefits.

CMS Releases Guidance on Accommodation Revocation Notices

The Patient Protection and Affordable Care Act (ACA) requires that non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual health insurance coverage provide coverage of certain specified preventive services without cost sharing. Under the ACA and interim final regulations, objecting entities could use an accommodation process as part of the exemption from the ACA's requirement to provide contraceptive coverage.

If an entity wants to revoke the accommodation, then the regulations require that written notification be given to participants and beneficiaries. The Centers for Medicare and Medicaid Services (CMS) released guidance on the two methods that can be used to provide accommodation revocation notices.

U.S. District Court Vacates EEOC Wellness Rules Effective January 1, 2019

On August 22, 2017, the United States District Court for the District of Columbia held that the U.S. Equal Employment Opportunity Commission (EEOC) failed to provide a reasoned explanation for its decision to adopt 30 percent incentive levels for employer-sponsored wellness programs under both the Americans with Disabilities Act (ADA) rules and Genetic Information Nondiscrimination Act (GINA) rules.

At that time, the court declined to vacate the EEOC's rules because of the significant disruptive effect it would have. However, the court remanded the rules to the EEOC for reconsideration.

In September 2017, the EEOC filed a status report indicating its schedule to comply with the court order, including issuing a proposed rule by August 2018 and a final rule by October 2019. It stated that it did not expect to require employers to comply with a new rule before 2021.

The court found the EEOC's process of not generating applicable rules until 2021 to be unacceptable. Instead, the court determined that one year was ample time for employers to adjust to new EEOC rules. The court vacated the EEOC rule effective January 1, 2019, and ordered the EEOC to promulgate any new proposed rules by August 31, 2018.

OCSE Issues FAQs Regarding Employers' Duties Regarding Medical Support Notices

The U.S Department of Health and Human Services' Office of Child Support Enforcement (OCSE) issued its "Medical Support - Answers to Employers' Questions" FAQs, which instruct employers and plan administrators how to complete Parts A and B of the National Medical Support Notice (NMSN). The FAQs also provide, among other items, the following guidance:

• When a plan receives a request for information by a child support agency that issued an NMSN, the plan administrator is permitted to disclose protected health information in response to the NMSN under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
• Even if a recently terminated employee has elected self-only COBRA continuation coverage, a plan should enforce the NMSN to cover the child of that former employee. If the plan is subject to COBRA and if the child loses coverage due to a qualifying event, then the child is a qualified beneficiary with the right to elect COBRA continuation coverage.
• A plan administrator may take all necessary steps to enroll the child named in the NMSN if coverage is available and the premiums can be deducted with the limits of the Consumer Credit Protection Act (CCPA). Such steps may include changing an employee's coverage to a different option, even if it affects the employee's premiums.

IRS Releases Form 8941 Instructions: Credit for Small Employer Health Insurance Premiums

The Internal Revenue Service (IRS) released its instructions for Form 8941 which eligible small employers use to figure the credit for health insurance premiums for tax years beginning after 2009. For tax years beginning after 2013, the credit is only available for period of two consecutive tax years. Generally, the maximum credit is a percentage of premiums that the employer has paid during the tax year for health insurance coverage that the employer provided to certain employees enrolled in a qualified health plan offered through the Small Business Health Options Program (SHOP) Marketplace.

IRS Releases Form W-2 Reporting Guidance for QSEHRAs

The IRS released its Form 8962 with instructions. Form 8962 is used by individual taxpayers to calculate and report a premium tax credit. The instructions provide a reminder to employers who provided a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) to their eligible employees. For each employee covered under its QSEHRA, the employer should report the annual permitted benefit by indicating Code FF in Box 12 of the employee's Form W-2.

Question of the Month

Q. What code should an employer use for Form 1095-C Line 14 if:

• the employer offers minimum essential coverage (MEC) providing minimum value (MV) to a full-time employee that is affordable (using the Federal Poverty Level safe harbor for affordability) and
• the employer offers at least MEC to the employee's spouse and dependents?

Does the code change if the employee declines coverage because the employee is covered by the spouse's group health plan?

A. The employer should use Code 1A in Line 14. The code doesn't change if the employee waives coverage.

The UBA Compliance Advisors help you to stay up to date on regulatory changes to help simplify your job and mitigate compliance risk. This information is general and is provided for educational purposes only. It reflects UBA's understanding of 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 other knowledgeable advisors.

Compliance Recap

November 2017

November was a busy month in the employee benefits world. President Trump nominated Alex Azar for Secretary of the U.S. Department of Health and Human Services (HHS).

The Internal Revenue Service (IRS) updated its guidance on employer shared responsibility penalty assessments and released guidance on Qualified Small Employer Health Reimbursement Arrangement (QSE HRA) implementation and administration. The U.S. Department of Labor's Employee Benefits Security Administration (EBSA), the IRS, and the Pension Benefit Guaranty Corporation (PBGC) released advance informational copies of the 2017 Form 5500 annual return/report and related instructions.

The U.S. House Republicans introduced a tax reform bill called the "Tax Cuts and Jobs Act" that, if passed, would impact multiple aspects of the tax code. The DOL issued a final rule to delay the applicability date of its rule that amends claims procedure requirements of ERISA-covered employee benefit plans that provide disability benefits.

The DOL released guidance for group health plans impacted by Hurricane Maria and California wildfires. The DOL and IRS jointly announced deadline extensions for those affected by Hurricane Maria. The IRS provided additional guidance on leave-based donation programs' tax treatment.

IRS Updates Guidance on Play-or-Pay Penalty Assessments

To comply with the Patient Protection and Affordable Care Act (ACA), "large" employers must offer their full-time employees health coverage, or pay one of two employer shared responsibility / play-or-pay penalties. The IRS determines the penalty each calendar year after employees have filed their federal tax returns.

The IRS recently indicated on its "Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act" webpage that, in late 2017, it plans to issue Letter 226J to inform large employers of their potential liability for an employer shared responsibility payment for the 2015 calendar year.

IRS Releases Guidance on QSE HRA Implementation

In December 2016, the 21st Century Cures Act (Cures Act) became law. The Cures Act allows certain small employers to reimburse individual health coverage premiums up to a dollar limit through health reimbursement arrangements called "Qualified Small Employer Health Reimbursement Arrangements" (QSE HRAs). Although the provision went into effect on January 1, 2017, the IRS did not issue detailed guidance regarding QSE HRA implementation at that time.

On October 31, 2017, the IRS released Notice 2017-67, providing guidance on the implementation and administration of QSE HRAs.

DOL Delays Disability Claims Procedure Regulations' Applicability Date

The U.S. Department of Labor (DOL) issued a final rule to delay the applicability date of its rule that amends the claims procedure requirements of ERISA-covered employee benefit plans that provide disability benefits. The DOL is delaying the applicability date from January 1, 2018, to April 1, 2018. The DOL's Fact Sheet contains a summary of the regulation's requirements.

DOL Provides Guidance for Group Health Plans Impacted by Hurricane Maria and California Wildfires

The DOL issued a news release to recognize that plan participants and beneficiaries may encounter problems due to Hurricane Maria and the California Wildfires. The DOL advises plan fiduciaries to make reasonable accommodations to prevent workers' loss of benefits and to take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time frames.

The DOL also acknowledged that there may be instances when full and timely compliance by group health plans may not be possible due to physical disruption to a plan's principal place of business. The DOL's enforcement approach will emphasize compliance assistance, including grace periods and other relief where appropriate.

IRS Provides Additional Guidance on Leave-Based Donation Programs' Tax Treatment

In recent months, the IRS provided guidance for employers who adopt leave-based donation programs to provide charitable relief for victims of Hurricane and Tropical Storms Irma and Maria. This month, the IRS issued Notice 2017-70 which extends the guidance to employers' programs adopted for the relief of victims of the California wildfires.

These leave-based donation programs allow employees to forgo vacation, sick, or personal leave in exchange for cash payments that the employer will make to charitable organizations described under Internal Revenue Code Section 170(c).

The employer's cash payments will not constitute gross income or wages of the employees if paid before January 1, 2019, to the Section 170(c) charitable organizations for the relief of victims of the California wildfires. Employers do not need to include these payments in Box 1, 3, or 5 of an employee's Form W-2.

Question of the Month

Q. Under the ACA, what employers must report information on Form W-2 and what information must be reported?

A. The ACA requires employers to report the cost of coverage under an employer-sponsored group health plan. Reporting the cost of health care coverage on Form W-2 does not mean that the coverage is taxable.

The UBA Compliance Advisors help you to stay up to date on regulatory changes to help simplify your job and mitigate compliance risk. This information is general and is provided for educational purposes only. It reflects UBA's understanding of 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 other knowledgeable advisors.