Making a List and Checking It Twice

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Employee Health & Benefits National Compliance Leader
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December 20, 2018

Health and Welfare Plan Action Items – Closing 2018 and First Quarter 2019

This article is intended to provide employers with a checklist of action items related to their health and welfare plans that should take place at the end of 2018 through the first quarter of 2019. The checklist focuses on actions required under federal law and does not address certain actions that may be required under applicable state or local law. Where noted below, the timing requirements for certain actions may vary for non-calendar year plans.      

Affordable Care Act (ACA) Employer Shared Responsibility Rules 

Determine applicable large employer (“ALE”)/applicable large employer member (“ALEM”) status for 2019.

  • For 2019, an existing employer is an ALE or ALEM and subject to the ACA’s employer shared responsibility rules if: (i) it averaged 50 or more full-time equivalent employees during its 2018 months of operation; or (ii) is a member of a controlled group of related legal entities that collectively did so.

  • A new employer is an ALE for 2019 if: (i) it reasonably expects to average at least 50 full-time equivalent employees during its 2019 months of operation; or (ii) is a member of a controlled group of related legal entities that collectively did so in 2018 or is reasonably expected to do so in 2019.
  1. Prepare 2018 Forms 1095-C and distribute to required individuals by March 4, 2019.  No extension is available.

  2. File 2018 Forms 1094/1095 with the IRS by April 1, 2019 for electronic filers (February 28, 2019 for paper filers).  Automatic and for cause extensions are available.

  3. Based upon the 2018 reporting results, determine whether any changes will be made to the measurement process to determine full-time employee (FTE) status under the ACA and/or plan eligibility rules to address potential employer shared responsibility payment penalty risk under Section 4980H of the Internal Revenue Code (IRC).

Employer Shared Responsibility Provision

Notes

2019 Amount

IRC Section 4980H(a) penalty aka the “doomsday” or “sledgehammer” penalty

 

Triggered when an ALE/ALEM fails to offer minimum essential coverage to at least 95% of its FTEs and at least one FTE qualifies for a subsidy in the public health insurance exchange

This penalty is projected to be $2,500 multiplied by all of the ALE/ALEM’s ACA FTEs, pro-rated monthly ($208.33/month)

An ALE may exclude 30 FTEs from the penalty calculation

This 30 FTE limit applies at the controlled group level, and an ALEM is limited to excluding its proportional share of this amount

IRC Section 4980H(b) penalty aka the “per affected FTE” or “tack hammer” penalty

Triggered when an ALE/ALEM offers minimum essential coverage to at least 95% of its FTEs but fails to offer affordable, minimum value coverage to an FTE who qualifies for a subsidy in the public health insurance exchange (the “affected FTE”)

This penalty is projected to be $3,750 per each affected ACA FTE, pro-rated monthly ($312.50/month)

Employer affordability safe harbor percentage

Applicable to Form W-2, rate of pay, and federal poverty limit safe harbor calculations

9.86%

Written Plan Document Items

  • ERISA health and welfare plan document – Amendments intended to be effective during a plan year generally must be adopted no later than the last day of that plan year.[1] This principle also generally applies to non-ERISA health and welfare plan documents (but see below for cafeteria plans). Changes in applicable law requiring or permitting amendments may allow for different amendment periods.  

  • IRC Section 125 cafeteria plan document – Amendments generally cannot be effective before they are adopted. In other words, an amendment intended to be effective as of the beginning of the plan year must generally be adopted before the first day of that plan year. Changes in applicable law requiring or permitting amendments may allow for different amendment periods.  

2019 Plan Design and Administration  

While plan designs are or are in the process of being finalized for 2019, we recommend employers (in their capacity as plan sponsors and plan administrators) consider a few key items related to plan design and administration: 

Confirm the plan design complies with applicable 2019 limits:

Plan
Design Item

2019 Limits

High Deductible Health Plans (HDHPs)

Annual out-of-pocket maximum

$6,750 self-only

$13,500 family*

Minimum annual deductible

$1,350 self-only

$2,700 family

ACA Non-Grandfathered Group Health Plan that are not HDHPs

Annual out-of-pocket maximum

$7,900 self-only

$15,800 family*

Health Savings Account (HSA) and Health Flexible Spending Account (Health FSA)

Annual HSA contribution limit

$3,500 self-only

$7,000 family

Annual HSA catch-up contribution limit (age 55 or older) 

$1,000 (unchanged)

Annual Health FSA employee contribution limit[2]

$2,700

*Non-grandfathered plans (including non-grandfathered HDHPs subject to the ACA) must apply an embedded self-only out-of-pocket maximum limit for each individual enrolled in family coverage 

  • ACA non-grandfathered group health plans will be required to cover additional preventive services without cost sharing (in-network): (i) folic acid supplementation for women planning or capable of pregnancy, (ii) preeclampsia screening for pregnant women, (iii) obesity screening for children and adolescents, and (iv) vision screening for children.

    Additional preventive services will apply to non-calendar year plans during 2019 as recommendations are generally effective for plan years beginning one year after the month a recommendation is issued. For example, the recommendation for skin cancer behavioral counseling was issued in March 2018 and will become effective for plan years beginning on or after April 1, 2019.

    Final regulations enabling employers to object to providing mandated women's contraceptive services on religious or moral grounds were recently issued and are addressed later in this newsletter. 
          
  • Confirm the wellness program complies with applicable law, including the wellness rules under the Health Insurance Portability and Accountability Act (HIPAA), the Americans with Disabilities Act (ADA), and the Genetic Information Nondiscrimination Act (GINA). The wellness incentive limits under the ADA and GINA will be vacated as of January 1, 2019,[3] and an increase in wellness programs challenged by participants may result. We addressed these issues and actions employers might take in an earlier article.

  • Confirm the plan complies with the Mental Health Parity and Addiction Equity Act (MHPAEA). The U.S. Department of Labor (DOL) continues to focus on parity issues under the MHPAEA. Plans tend to do well complying with the parity rules related to cost sharing and visit limits, but may still violate the MHPAEA because the administrative hurdles or limitations for mental health and substance abuse benefits are greater than those for medical and surgical benefits. MHPAEA litigation has been heavy in recent years, although liability for compliance by a fully insured plan generally lies with the insurance carrier.

Other Items

  • Prepare 2018 Forms W-2 and distribute to required individuals by January 31, 2019. A hardship extension is available in extraordinary circumstances.

    • Ensure Forms W-2 correctly reflect the cost of group health coverage in Box 12 using Code DD as required by the ACA.

    • Ensure Forms W-2 correctly reflect HSA contributions in Box 12 using Code W.

  • Employers that provide prescription drug coverage to Medicare Part D eligible individuals must file an annual disclosure with the Centers for Medicare and Medicaid Services (CMS) indicating whether the coverage is creditable with Medicare Part D. This disclosure is due 60 days after beginning of plan year, or March 1, 2019 for calendar year plans.[4] 


[1] It can be difficult to enforce an intended amendment before it has actually been adopted.  It will require clear and convincing evidence that the change actually occurred and may require evidence that the change was known to the participant.  

[2] Employer contributions do not count toward this limit.

[3] Note: The rest of the wellness rules under the ADA and GINA remain intact, however.

[4] Interestingly, there are no fines for failing to file this disclosure.

The information contained herein is for general informational purposes only and does not constitute legal or tax advice regarding any specific situation. Any statements made are based solely on our experience as consultants. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. The information provided in this alert is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency is not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions. © 2018 Marsh & McLennan Agency LLC. All Rights Reserved.