For large employers, the quest to reduce the cost of medical benefits relies in part on helping employees get healthier. Enter the “wellness program,” where employers offer incentives to employees and their families to be more proactive about their health in various ways, such as more exercise, quitting smoking, diagnosing high cholesterol and high blood pressure, and evaluating the risk of future health problems.
IRS Significantly Liberalizes Permitted Mid-Year Changes to Safe Harbor Plans
On January 29, 2016, the IRS issued Notice 2016-16 that provides guidance on mid-year changes to a safe harbor plan under sections 401(k) and 401(m) of the Internal Revenue Code. The guidance provides that a mid-year change either to a safe harbor plan or to a plan’s safe harbor notice does not violate the safe harbor rules, provided that applicable notice and election opportunity conditions are satisfied and the mid-year change is not a prohibited mid-year change, as described in the IRS Notice.
The IRS Notice doesn’t require any additional notice or election conditions for changes to information that is not required safe harbor notice content, even if that information is provided in a plan’s safe harbor notice. For purposes of the guidance, a mid-year change is a change that is first effective during the plan year, but not effective as of the beginning of the plan year, or a change that is effective as of the beginning of the plan year, but adopted after the beginning of the plan year.
Big Employer Win in Wellness Program Case EEOC v. Flambeau
For the past couple of years, the U.S. Equal Employment Opportunity Commission (EEOC) has been challenging employer wellness programs for their alleged violations of the Americans with Disabilities Act (ADA). The most recent EEOC challenge was in EEOC v. Flambeau, Inc., (No. 14-cv-638-bbc (December 31, 2015)). In this case, the U.S. District Court for the Western District of Wisconsin handed the EEOC another loss in a wellness case (and handed employers a big win) by holding that the ADA “safe harbor” provision for bona fide benefit plans allowed the Wisconsin plastics manufacturer to condition participation in its self-funded group health plan on a requirement that employees complete a health risk assessment (HRA) and undergo “biometric screening.”
An Ounce of Prevention…Is Tax-Free: IRS Expands Tax Relief to Pre-Data Breach Identity Theft Protection Services
As reported on Proskauer’s Tax Talks Blog, after last year’s customer data security breaches at major U.S. corporations, the IRS announced special tax relief for identity protection services provided to individuals affected by a security breach. In response to comments solicited in connection with that announcement, the Treasury Department and IRS have in Announcement 2016-02 extended that relief to no-cost identity protection services provided before a data breach.
EEOC Grapples with Proposed Rule Comments on Wellness Program; Additional Guidance Expected Soon
As we previously reported here, the Equal Employment Opportunity Commission (EEOC) released Proposed Rules on April 16, 2015 to provide guidance under the Americans with Disabilities Act (ADA) on permissible employer incentives for employee participation in wellness programs. Comments on the proposed rules were due on or before June 19, 2015. The EEOC received
IRS to Close “Loophole” on “Sub-Standard” Plans without Hospitalization or Physician Services Coverage
On November 4, 2014, the Internal Revenue Service (“IRS”) announced that it intends to close a perceived “loophole” in health care reform. This so-called loophole allows employers to offer low cost health plans that don’t cover inpatient hospitalization services or physician services (or both). If that coverage were treated as “minimum value” coverage, then employers could avoid all pay-or-play penalties with low cost coverage and covered individuals would not be able to benefit from premium assistance or subsidies in the health insurance Marketplace.
IRS to Amend Cafeteria Plan Regulations to Facilitate Enrollment in Marketplace Coverage
On Thursday, September 18, 2014, the Internal Revenue Service (“IRS”) released Notice 2014-55, which expands the cafeteria plan “change in status” rules to allow plans to offer employees an option to revoke their elections for employer-sponsored health coverage to purchase a qualified health plan through a Health Insurance Marketplace (“Marketplace”). The notice is effective immediately and will appear in IRB 2014-41, to be published Oct. 6, 2014.
The notice addresses two specific situations in which a plan could allow an employee to revoke a cafeteria plan election (other than a health FSA election): due to enrollment in the Marketplace; and due to a reduction in hours of service. This should be a welcome relief to employers that may have been struggling with how to allow employees to change coverage from under the employer’s plan to a Marketplace or other group health plan.
More Post-Windsor Tax Guidance: IRS Issues Letter Outlining Steps for Individuals to Obtain Tax Refunds for Same-Sex Spousal Health Coverage
July 21, 2014
On June 27, 2014, the IRS published a letter outlining the steps taxpayers should take in order to obtain a refund for taxes paid on the value of employer-sponsored health coverage provided to an employee’s same-sex spouse. The letter, originally dated February 24, 2014, is in response to an inquiry from
Coverage of Dependents: Final “Pay-or-Play” Regulations Exclude Stepchildren and Others; Extend Prior Transitional Relief
As previously reported, the IRS recently released final regulations on the Affordable Care Act’s (ACA) employer “shared responsibility” provisions, also known as the “pay-or-play” mandate. Under the mandate, in order to avoid potential penalties, an applicable large employer (generally, 50 or more full-time equivalent employees (100 or more in 2015)) must offer affordable, minimum value health coverage to its full-time employees and their “dependents.”
For purposes of the pay-or-play mandate, “dependents” are an employee’s natural or adopted children under age 26 (not spouses). The final regulations clarify that an employer may exclude employees’ stepchildren, foster children, and children who are non-U.S. citizens or nationals (with certain exceptions) from coverage under its group health plan without exposing itself to a potential penalty.
The final regulations also provide welcome news for employers who do not yet offer coverage their full-time employees’ dependents. An employer that is planning to offer dependent coverage has until the start of its 2016 plan year to do so, as long as it takes steps during its 2015 plan year.
New FAQs on ACA Extend Fully-Insured Expatriate Health Plan Transitional Relief by “At Least” Another Plan Year and Clarify Scope, 6-Month Requirement
As reported, the U.S. Labor Department, the U.S. Department of Health and Human Services and the U.S. Treasury Department (together, the “Departments”) recently issued additional FAQs regarding implementation of the market reform provisions of the Affordable Care Act (ACA). FAQs 6 and 7 include new guidance on the temporary transitional relief issued last year