May 13, 2016
Employee Benefits & Executive Compensation — IRS Informs on Fundamental Cafeteria Plan Rules. The IRS has released three information letters reiterating several basic cafeteria plan legal requirements, some of which have been brought back to the forefront due to the ACA’s constraints on certain types of health expense reimbursement programs.
• In Information Letter 2016-0001, the IRS confirms the long-standing rule that health flexible spending accounts (“FSAs”) cannot be used to reimburse or pay health insurance premiums.
• In Information Letter 2016-0009, the IRS cites existing guidance (Chief Counsel Advice 201547006) to confirm that that the payment or reimbursement of a spouse’s health insurance premiums may not be excluded from the employee’s income if the spouse pays premiums on a pre-tax basis (e.g., through the spouse’s employer’s cafeteria plan).
• In Information Letter 2016-0013, the IRS approves of a third-party administrator’s request for supplemental information to substantiate a claim for reimbursement from an employee’s health FSA, indicating that reasonable requests for adequate substantiation of eligible medical expenses protects the nontaxable status of the health FSA.
April 29, 2016
Employee Benefits & Executive Compensation – State Required Claims Data Collection Preempted by ERISA — In Gobeille v. Liberty Mutual Insurance Company, the U.S. Supreme Court affirmed that Vermont’s all-payer claims database law is preempted by ERISA. Many states have rules for collecting claims information, provider files, and other health-related data from health plans and payors. The Court confirmed that the federal government had the authority to require data from ERISA self-insured group health plans, but the ruling may impact state enforcement of its data collection laws against these plans.
April 22, 2016
Employee Benefits & Executive Compensation – DOL Releases FAQs on Range of Health Care Reform Topics — The DOL has released Frequently Asked Questions (FAQs) regarding several cutting edge topics related to market reform provisions of the Affordable Care Act, Mental Health and Substance Abuse Parity laws, and the Women’s Health and Cancer Rights Act. The broad range of topics include the:
• scope of ACA-mandated preventive care coverage related to colonoscopies and contraceptives;
• ACA restrictions on rescissions of coverage;
• clarification on the scope of required breast reconstruction coverage following mastectomy;
• elaboration on plan coverage of approved clinical trials for cancer treatment; and
• examples of mental health and substance abuse parity law applications with respect to plan disclosures, plan coverage of opioid use treatments, and parity testing for the plan’s quantitative treatment limitations and financial requirements.
The FAQs also delve into plan pricing, with new requirements for pricing coverage of out-of-network emergency services, and revisiting previous concerns about “referenced-based” plan pricing models that might implicate the ACA and participant access to quality care and an adequate network of providers.
April 15, 2016
Employee Benefits & Executive Compensation — S Corporation Shareholder Premium Reimbursement Addressed in New IRS Information Letter — IRS Information Letter 2016-0021 discusses an existing exemption under Notice 2008-01 from certain ACA market reform requirements for an S Corporation, which pays for individual health insurance policy premiums for a 2% (or greater) S Corp shareholder, provided that the premium amount is included in the shareholder’s wages. The IRS also updated its web page about S Corporation Compensation and Medical Insurance Issues.
April 8, 2016
Employee Benefits & Executive Compensation – Court Treats Private Equity Funds as Part of a Controlled Group for Withdrawal Liability Purposes – Two private equity funds—Sun Fund III and Sun Fund IV—co-owned an operating company, Scott Brass, which had withdrawal liability to a multi-employer pension fund. Sun Fund III owned 30% and Sun Fund IV owned 70% of Scott Brass. In concluding that the two funds engaged in a “trade or business,” the court characterized them as a parent-subsidiary controlled group with Scott Brass although neither fund owned 80% or more of Scott Brass. The court reasoned that the “economic realities” of the arrangement, not pure ownership interests, controlled the analysis. As a result, the two private equity funds were jointly and severally liable for Scott Brass’s withdrawal liability.
April 1, 2016
Employee Benefits & Executive Compensation – IRS Issues Information Letter on Employers Funding Individual Health Policy Premiums – The IRS recently issued IRS Information Letter 2016-0019, which reiterated the ACA prohibition on employers paying the premiums on an employee’s individual health insurance coverage. Employers could, however, provide the payment as additional taxable compensation that the employee could use for any purpose (including the purchase of an individual health policy). Without citing specifics, the IRS questioned arrangements in which employers were able to reimburse an individual health policy. The agency also referred to Notice 2013-54 that acknowledged an employer’s ability to “combine” separate arrangements (that by themselves did not comply with market reform rules) with a group health plan to satisfy the market reform rules.
March 25, 2016
Employee Benefits & Executive Compensation – HHS has issued Final Rules for the 2017 Benefit and Payment Parameters. At roughly 150 pages, these “parameters” represent a lengthy set of health plan coverage reforms enacted under the ACA. The reforms heavily regulate “Exchange” based plans and their insurers and brokers, but they also impose many requirements on private fully-insured and self-insured plans and players. Although the rules state they are “final” (to be effective May 9, 2016), there are several reforms that the HHS is still studying and planning to issue further guidance; for example, rules regarding network adequacy, additional individual “hardship” exemptions from the shared-responsibility payments, and rules allowing employers to offer employees contiguous choice among benefit tiers options through federally-facilitated small employer plans.
March 18, 2016
Employee Benefits & Executive Compensation – DOL Releases Proposed Revisions to Summaries of Benefits and Coverage Materials – The Department of Labor released proposed revisions to templates, instructions, and related materials applicable to Summaries of Benefits and Coverage (SBCs) for plan or policy years beginning on or after January 1, 2017. The SBC web page delineated between materials that were proposed and those currently in effect. Comments are requested by March 28, 2016.
March 11, 2016
Employee Benefits & Executive Compensation – 2015 Reporting Guidance for HSAs, HRAs. The IRS has released an updated Publication 969 for use in preparing 2015 tax returns. This publication provides general information about Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs), Health Flexible Spending Accounts (health FSAs) and other account-based employee benefit programs, including updated dollar limits, qualification requirements, distribution rules and ancillary reporting requirements. The Publication also sends employers with HRA and health FSA programs to Notice 2013-54 and Notice 2015-17 for guidance about how the Affordable Care Act laws apply to such programs.