The Internal Revenue Service (IRS) recently announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans for 2015. Although many dollar limits currently in effect for 2014 will change, some limits will remain unchanged for 2015.
From today, 1 October 2014, employees and agency workers who have a “qualifying relationship” with a pregnant woman or her expected child are entitled to take unpaid time off during working hours to accompany the woman to two antenatal appointments.
This new right supplements the existing right of pregnant women to paid time off for such appointments.
The Affordable Care Act (ACA) imposes reporting requirements on certain employers offering minimum essential coverage and those large employers subject to the employer shared responsibility requirements. Recently issued draft forms indicate how employers will comply with these reporting requirements.
The full U.S. Court of Appeals for the D.C. Circuit has vacated the 2-1 panel decision issued July 22, 2014, in Halbig v. Burwell, which struck down the Internal Revenue Service (IRS) Rule providing for Affordable Care Act (ACA) premium tax credits to be available to lower income exchange customers, regardless of their state of residence. The plaintiffs’ brief is due October 3, 2014, and the government’s opposing brief is due a month later on November 3, 2014, to precede oral arguments on December 17, 2014. It is likely that the full D.C. Circuit would not render its opinion before mid- to late Spring 2015. This has the effect of preserving the status quo with respect to the availability of premium tax credits, at least until the full D.C. Circuit renders its decision.
Meanwhile, the plaintiffs have sought review by the Supreme Court of the United States in King v. Burwell, Halbig’s sister case in which the U.S. Court of Appeals for the Fourth Circuit upheld that same IRS Rule. The Clerk of the Supreme Court has granted the government an extension until October 3, 2014, to respond to the petition for certiorari. The plaintiffs have urged the highest court render its decision as quickly as possible to resolve the circuit split. If the Supreme Court accepts King for review before mid-January, it could issue a ruling in the current term, which is scheduled to end in late June 2015.
Among the highest profile legal challenges to the ACA, Halbig and King seek to invalidate a May 2012 IRS Rule providing that health insurance premium tax credits will be available to all taxpayers nationwide, regardless of whether they obtain coverage through a state-based exchange or a federally facilitated exchanges (FFE). The plaintiffs (represented by the same lawyers in both cases) argued that the plain language of the ACA limits the availability of premium tax credits to only those taxpayers who reside in the 14 states (plus the District of Columbia) that set up their own exchanges, and thus nullifies the IRS Rule’s application to the 36 states operating exchanges through the FFE. Plaintiffs’ argument is based on language providing that premium tax credits are only available for plans “enrolled in through an Exchange established by the State under section 1311 of the [ACA].” ACA § 1401(a), enacting 26 U.S.C. § 36B(c)(2)(A)(i) (emphasis added). The government counters that other provisions of the ACA make clear that the subsidies are to be made available in the FFE states as well.
There are also two similar cases awaiting decisions by federal trial courts on motions for summary judgment. First, in Pruitt v. Burwell, pending in federal district court in Muskogee, Oklahoma, the state complains that the availability of the premium tax credit in FFE states forces the state to choose between the costs of providing coverage to its employees or paying the IRS a significant financial penalty. Second, in Indiana v. IRS, pending in federal district court in Indianapolis, the state and 39 of its public school districts argue that the IRS Rule directly injures the [...]
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As federal and state agencies and courts further examine the implications of the Supreme Court of the United States’ ruling on same-sex marriage in U.S. v. Windsor, the laws and regulations governing employee benefits for employees’ same-sex spouses continue to be clarified. As a result, employers should monitor additional guidance as it is issued and continue to reevaluate the same-sex spousal benefits offered under their employee benefit plans.
The U.S. Department of Health and Human Services’ Office for Civil Rights (OCR) will soon begin a second phase of audits (Phase 2 Audits) of compliance with Health Insurance Portability and Accountability Act of 1996 (HIPAA) privacy, security and breach notification standards (HIPAA Standards) as required by the Health Information Technology for Economic and Clinical Health (HITECH) Act. Unlike the pilot audits during 2011 and 2012 (Phase 1 Audits), which focused on covered entities, OCR will conduct Phase 2 Audits of both covered entities and business associates. The Phase 2 Audit Program will focus on areas of greater risk to the security of protected health information (PHI) and pervasive noncompliance based on OCR’s Phase I Audit findings and observations, rather than a comprehensive review of all of the HIPAA Standards. The Phase 2 Audits are also intended to identify best practices and uncover risks and vulnerabilities that OCR has not identified through other enforcement activities. OCR will use the Phase 2 Audit findings to identify technical assistance that it should develop for covered entities and business associates. In circumstances where an audit reveals a serious compliance concern, OCR may initiate a compliance review of the audited organization that could lead to civil money penalties.
The following sections summarize OCR’s Phase 1 Audit findings, describe the Phase 2 Audit program and identify steps that covered entities and business associates should take to prepare for the Phase 2 Audits.
As the mid-way point of 2014 approaches, employers should actively turn their attention to several upcoming compliance obligations for the health and welfare benefit plans they sponsor. Following is a checklist of upcoming health and welfare compliance initiatives that require action by employers, including preparation for upcoming fees and penalties under the Affordable Care Act, the filing of required forms and distribution of relevant notices.
Effective 2014, if a taxpayer is not covered under minimum essential coverage for one or more months, then, unless an exemption applies, the taxpayer is liable for the individual shared responsibility payment on his return. The individual shared responsibility payment is the lesser of: (1) the sum of the monthly penalty amounts; or (2) the sum of the “monthly national average bronze plan premiums” for the “shared responsibility family.”
In recently published Revenue Procedure 2014-46, Sec. 3, the IRS provides that the monthly national average premium, for qualified health plans that have a bronze level of coverage and are offered through exchanges in 2014, is $204 per individual and $1,020 for a shared responsibility family with five or more members. For example, if the sum of the monthly penalty amount is $95 (or 1 percent of income) and the bronze level of coverage costs $204, the individual’s shared responsibility payment would be $95, unless the 1 percent is greater than $95.
The U.S. Court of Appeals for the District of Columbia struck down the Internal Revenue Service (IRS) rule providing for federal tax credits for health insurance purchased through federal exchanges, while the U.S. Court of Appeals for the Fourth Circuit upheld the same IRS rule. If en banc review in the appeals courts does not resolve the circuit split, the matter likely will go to the Supreme Court of the United States for review. Tax subsidies under the IRS rule should remain available until such review, which is not expected before June 2015.
On May 9, 2014, the Internal Revenue Service finalized regulations that govern the tax treatment of payments made by retirement plans to pay accident or health insurance premiums. Under the final regulations, accident or health insurance premium payments by qualified defined contribution plans are taxable distributions to the participant unless those payments are used to pay premiums for disability insurance that replace retirement plan contributions for disabled employees. The regulations apply for tax years beginning January 1, 2015, although taxpayers may elect to apply them to earlier years.
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