by Amy M. Gordon and Jamie A. Weyeneth
The new Michigan Health Insurance Claims Assessment Act imposes a 1-percent tax on “paid claims” for health-related services of employer-sponsored health and welfare plans.
To read the full article, please click here.
by Elizabeth A. Savard, Todd A. Solomon and Brian J. Tiemann
The Illinois Department of Revenue recently issued guidance reversing its position on the state income tax treatment of benefits for non-dependent civil union partners.
Federal law excludes amounts that an employer pays toward medical, dental or vision benefits for an employee and the employee’s spouse or dependents from the employee’s taxable income. However, because civil union partners are not recognized under federal law, employers that provide these same benefits to employees’ civil union partners must impute the fair market value of the coverage as income to the employee that is subject to federal income tax, unless the civil union partner otherwise qualifies as the employee’s “dependent” pursuant to Section 152 of the Internal Revenue Code.
The Illinois Department of Revenue previously indicated that Illinois would follow the federal approach in taxing the fair market value of employer-provided coverage for non-dependent civil union partners because state law did not provide an exemption from such taxation. However, recent guidance issued by the Department of Revenue reverses that position and indicates that employer-provided benefits for a non-dependent civil union partner are now exempt from Illinois state income taxation. Illinois civil union partners are directed to calculate their state income taxes by completing a mock federal income tax return as if they were married for purposes of federal law.
In addition, for federal tax purposes, employees may not make pre-tax contributions to a Section 125 cafeteria plan on behalf of a non-dependent civil union partner (i.e., contributions for the partner generally must be after-tax) and may not receive reimbursement for expenses of the non-dependent civil union partner from flexible spending accounts (FSAs), health reimbursement accounts (HRAs) or health savings accounts (HSAs). However, for Illinois state tax purposes, the employee now can be permitted to pay for the non-dependent civil union partner’s coverage on a pre-tax basis.
Employers providing medical, dental or vision benefits to civil union partners residing in Illinois should take action to structure their payroll systems to tax employees on the fair market value of coverage for employees’ non-dependent civil union partners for federal income tax purposes, but not for state purposes.
by Amy Gordon and Susan Nash
The Patient Protection and Affordable Care Act (PPACA) requires non-grandfathered group health plans to provide coverage for certain preventive services on a first dollar basis (i.e. without deductibles, co-payments, co-insurance or other cost-sharing). Interim final regulations provide an exemption for a very narrow subset of religious employers with respect to coverage of contraceptive services. To qualify for the exemption the entity must be a nonprofit religious employer that offers insurance to its employees. Many entities affiliated with religious institutions, such as hospitals and universities, do not meet this narrow exception.
Now, the U.S. Department of Health and Human Services (HHS) has provided additional guidance for nonprofit employers that do not cover contraceptive services under their current plans because of religious beliefs and that do not fit within the previous exemption. These employers will have an additional year, until August 1, 2013, to comply with the new law. Employers wishing to take advantage of the additional year will have to certify that they are eligible for this delayed implementation. The announcement also indicates that employers that do not offer coverage of contraceptive services will be required to provide notice to employees stating that such services are available with income-based support at sites such as community health centers, public clinics and hospitals.
by Amy Gordon, Susan Nash and Ashley McCarthy
The Internal Revenue Service (IRS) has issued revised guidance, Notice 2011-28, regarding the requirement under the Patient Protection and Affordable Care Act (PPACA) that employers report to employees the cost of their employer-sponsored group health plan coverage on Forms W-2. This requirement applies to calendar year 2012 W-2s, which employees will receive from their employer in 2013.
The guidance provided assistance on calculating aggregate reportable cost. Aggregate cost may be calculated in accordance with one of several methods including the “COBRA applicable premium” method, the “premium charged” method (for fully-insured coverage), or a “modified COBRA premium” method.
In addition to medical coverage, employers must include in the cost of employer-sponsored group health plan coverage, coverage under an Employee Assistance Program, wellness program coverage, on-site medical clinic coverage (but only aggregate reportable cost to the extent that the coverage is provided under a group health plan and the employer charges a premium for such coverage to beneficiaries of federal continuation coverage [e.g., COBRA]), Health Flexible Spending Account coverage (FSA), but only where the employer itself contributes to the FSA or otherwise provides flex credits through a Internal Revenue Code Section 125 cafeteria plan, and coverage under a dental plan or vision plan if such plans are not excepted from the Health Insurance Portability and Accountability Act (HIPAA). Employers do not need to include in the cost of employer-sponsored group coverage the cost of coverage under a dental plan or vision plan if such plans are excepted from HIPAA, amounts contributed to an Archer medical savings account (MSA) or a Health Savings Account, amounts of any salary reduction election to an FSA, the cost of coverage under a multiemployer plan, cost of coverage under a Health Reimbursement Arrangement not included in aggregate reportable income, and the cost of coverage provided under a self-insured group health plan that is not subject to federal continuation coverage requirements (i.e., a church plan).
by Amy M. Gordon, Todd A. Solomon and Brian J. Tiemann
The U.S. Department of Health and Human Services (HHS) issued a bulletin on December 16, 2011, outlining and requesting comments on its proposed regulatory approach to allow states to define what is an “essential health benefit.”
To read the full article, please click here.
Friday, November 18, 2011
10:00 – 11:00 am CST
As the year draws to a close, please join us for a focused and concise update on the most important employee benefit issues.
Mark your calendars
McDermott Will & Emery will present a 60-minute complimentary webcast, hosted by the leaders of our employee benefits and compensation practice, that will highlight key year-end considerations for:
Who should attend
All vice presidents of human resources, in-house counsel, compensation and benefits directors, chief financial officers and others responsible for overseeing corporate or executive benefits and/or retirement plans.
To register, please click here.
For more information, please contact McDermott Events.
by Todd A. Solomon, Brett R. Johnson and Kay Kemp
In Revenue Procedure 2011-49, the Internal Revenue Service (IRS) has modified the procedures by which it issues opinion and advisory letters to Master or Prototype (M&P) and Volume Submitter retirement plans (together, pre-approved plans). In addition, the guidance clarifies the limited types of employer modifications and amendments that can be made without causing an M&P or Volume Submitter plan to fail to be “identical” to an approved M&P or Volume Submitter plan (and, therefore, to fail to be covered by the pre-approved plan’s advisory or opinion letter). Acceptable changes include the following:
Prior guidance that allowed employers to modify or amend plans to correct typographical errors and/or cross-references has been eliminated.
The new guidance also provides that neither M&P opinion letters nor Volume Submitter advisory letters will cover hybrid plans, plans with section 401(h) accounts (medical benefits), or plans covered by Internal Revenue Code Section 414(x) (small employer combined defined benefit/defined contribution plans). Numerous other pre-approved plan filing requirements are specified in the guidance (revising Revenue Procedures 2005-16 and 2007-44), including, for example, requirements that amendments adopted by a pre-approved sponsor or practitioner on behalf of adopting employers must be provided to the adopting employers.
Mass submitters, sponsors, practitioners and adopting employers should review Revenue Procedure 2011-49 prior to undertaking opinion or advisory letter submissions or amendments. Please contact your regular McDermott lawyer if you have any questions regarding Revenue Procedure 2011-49.
by Raymond M. Fernando, Diane M. Morgenthaler and Adrienne Walker Porter
The IRS recently announced the 2012 cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans. Plan sponsors should update payroll and plan administration systems for the new 2012 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, like open enrollment materials and summary plan descriptions. Also, because 2012 marks the first year that the IRS has increased employee benefit plan limits since 2009, plan sponsors may want to consider updating plan documents to include the new cost-of-living adjustments, to the extent such adjustments are not automatically incorporated by cross-reference. Please click here for a full list of the 2012 IRS limits.
Tuesday, October 25, 2011 (7:30am breakfast and networking, 8:00am program)
Since June 1, 2011, Illinois has recognizee civil unions, and insured employee benefits plans in Illinois must offer a civil union partner the same benefits as offered to an opposite-sex married partner. Other states, like New York, have recently gone further, and offer full recognition of same-sex marriages. Although federal law defines marriage as between only a man and a woman under the Defense of Marriage Act, the federal government now has refused to defend this law, and efforts are underway to repeal this legislation. In the midst of all these changes, what is the status of these developments? What are the market trends and best benefit practices for same-sex partners and domestic partners? Come hear the answers from Todd Solomon, the expert who literally wrote the book on this topic, and from a national employer who has implemented a comprehensive domestic partner benefits strategy and domestic partner tax gross ups.
Speakers:
Cost Members: $30 Non-members: $50
Contact: Lynne McEvoy
Email: lynne.mcevoy@mcgladrey.com
Phone: 312.634.4490
Website: www.webnetwork.org
UBS Tower
One North Wacker Drive
2nd floor, Mighigan II ballroom
Chicago, IL 60606
by Susan M. Nash and Elizabeth A. Savard
Group health plans that offer prescription drug coverage are required to issue a notice of creditable or non-creditable coverage to Medicare-eligible participants and beneficiaries each year prior to the annual Medicare Part D open enrollment period. In the past, the Medicare Part D open enrollment period ran from November 15 through December 31, so the notice had to be provided by November 15. The Patient Protection and Affordable Care Act moved the Medicare Part D open enrollment period earlier, beginning in 2011, to October 15 through December 7. Therefore, this year’s notice of creditable or non-creditable coverage must be provided by October 15, 2011.
A plan’s notice of creditable or non-creditable coverage describes whether prescription drug coverage under the plan is "creditable" — i.e., expected to pay out at least as much as standard Medicare prescription drug coverage, on average for all participants. This information is designed to help Medicare-eligible individuals avoid late enrollment penalties, which can apply when an individual who does not have creditable coverage fails to enroll in Medicare Part D when first eligible.
Plan sponsors will need to update their notices of creditable or non-creditable coverage to reflect the new dates for the Medicare Part D open enrollment period. The Centers for Medicare and Medicaid Services have updated their model notices of creditable and non-creditable coverage to reflect the new dates. No other substantive changes were made to the model notices. The updated notices are available here.
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