USA: Alliant’s Employee Benefits Compliance & Fast Facts – March 31, 2017

April 10, 2017January 24, 2020

The following information was provided to us by Asinta Partner in the United States, Alliant.

San Francisco Health Care Security Ordinance Deadline Approaching

Employers covered by San Francisco’s Health Care Security Ordinance (HCSO) are required to submit the 2016 Employer Annual Reporting Form to the Office of Labor Standards Enforcement by May 1, 2017 to avoid penalties of $500 per quarter. Instructions for the form are available here, as well as a PDF preview of the form. To determine whether you are required to submit the form, fill out this short survey. Employers who were not covered by the HCSO in 2016 will be directed to a page indicating that they do not need to submit. Covered employers will be directed to the appropriate online form.

For more information, please view our comprehensive list of San Francisco Compliance Ordinances, or visit the HCSO Administrative Guide online.

Legislative Update

The House Committee on Education and Workforce has approved the following three bills. While we don’t normally track the status of legislation that has only been proposed, these pieces have appeared in several recent benefits-related publications and have generated some client questions. We will be sure to keep you posted if any of these bills become law.

Preserving Employee Wellness Programs Act (HR 1313): This is intended to simplify employer obligations with respect to their wellness programs. In short, plans in compliance with HIPAA and the ACA would be deemed compliant under the Americans with Disabilities Act and Genetic Information Non-Discrimination Act. As of 3/29/17, this bill has been introduced and referred to the Subcommittee on Health. It has not yet passed the House.
Self-Insurance Protection Act (HR 1304): This bill would amend the Public Health Service Act, ERISA, and the Internal Revenue Code to exclude stop-loss coverage from the definition of “health insurance coverage.” As of 3/29/17, this bill has only been introduced and has not yet passed the House.
Small Business Health Fairness Act (HR 1101): This bill would amend ERISA to provide for the establishment of “association health plans” (AHPs), and impose certain requirements about reserves and stop-loss coverage for self-funded AHPs. As of 3/29/17, this bill has passed the House but will still need to pass the Senate and President in order to become law.

1095 Software Glitch

The 2016 1095 instructions include two new series 1 indicator codes (1J and 1K) to indicate conditional offers of minimum essential coverage to a spouse. We are getting feedback that some reporting vendor software was not recognizing these new codes, meaning 1095s with Codes 1J or 1K on Line 14 were not validating properly. It appears these software errors have now been corrected. Please share this information with your clients as needed. Employers who are making conditional offers of spousal coverage (e.g., spouses are only eligible if they are not eligible for their own employer-sponsored group health coverage) may have encountered this problem and may need to get in touch with their vendor about correcting and/or resubmitting.

Extra! Extra! Read all about it!

The next compliance webinar will be on Tuesday, April 11 at 10 AM PST – less than two weeks away!! The webinar will be an in-depth look at the current state of the ACA with the fallout of the AHCA. Clients and prospects can register here and a PDF invite has also been attached.

Our latest podcast is available and is conveniently accessible on our website, along with other great resources such as webinar invitations and informative articles. In our latest podcast we discuss last week’s Capitol Hill chaos, the GOP’s decision to pull the AHCA before a vote, and whether repeal and replace efforts are over.

FAQ of the Week

I have a client who offers a carryover on their H-FSA. They have now termed an employee and are wondering what the rules are for COBRA for H-FSA funds. Specifically, while we know the employee can access funds contributed this year, what about funds that rolled over from the previous year? If the employee signs up for COBRA can they also access those funds while on COBRA?
Due to the ACA restrictions on dollar limits, most if not all H-FSAs are excepted benefits. Excepted benefit H-FSAs have a limited COBRA obligation. If the account is overspent, there’s no requirement to offer COBRA at all. If there are funds left in the account COBRA must be offered through the end of the plan year, but doesn’t need to be offered at open enrollment. Carryovers, which were introduced by IRS as an alternative to grace periods and to soften potential consequences under the use-it-or-lose-it rule, complicate the limited COBRA obligation. First, carryovers count when determining whether an account is overspent or not but do not get factored into the required COBRA premium. This will increase the number of underspent accounts. Second, if carryovers are available to active employees they must be available to COBRA qualified beneficiaries on the same terms. This potentially extends the COBRA coverage period beyond the end of the plan year in which the qualifying even occurred up to the full COBRA coverage period (most commonly 18 months). To try and address these issues some employers limit H-FSA carryovers to one year (to control the number of underspent accounts) and/or to employees making new H-FSA elections under the employer’s Cafeteria Plan

Example: Hannah elects salary reductions of $2,400 ($200/month) for 2017 under her employer’s calendar-year health FSA and carries over $500 in unused benefits from 2016. Thus, the H-FSA balance is $2,900. Hannah’s employment terminates on May 31, 2017. As of that date, she has submitted reimbursable H- FSA claims totaling $1,000. The H-FSA balance is now $1,900 ($2,900 minus $1,000).

Hannah’s account is underspent because the remaining H-FSA balance of $1,900 is greater than the maximum COBRA premium that she can be charged based on her 2017 election (not including the carryover amount). Specifically, the maximum COBRA premium that can be charged for the seven months remaining in the year is $1,428 (i.e., $200 × 7, plus the 2% add-on). Because Hannah has underspent her account, her employer must offer her COBRA coverage under the H-FSA. Also, if carryovers are not restricted for active employees they can’t be restricted for COBRA QB’s, so if Hannah has a balance remaining at the end of the plan year her coverage can continue for up to 18 months.

Thanks to Alliant for providing us with this content. If you have any questions regarding compliance in the United States, please get in contact with Alliant via their contact page here.