Benefits Compliance Update for 12/1/2017
Posted on December 1st, 2017
As the end of 2017 nears, here is an update on several important topics of relevance for advisors and their employer clients:
IRS Enforcement of Play-or-Pay Has Begun
The biggest news regarding benefits compliance is that the IRS has started formal enforcement efforts regarding penalties for the employer mandate. Beginning in mid-November, the IRS has mailed a new Letter 226J to employers that IRS records indicate will owe an employer shared responsibility penalty (“ESRP”). This is the first formal enforcement of the employer mandate, which first took effect in 2015. Note that these initial letters relate to 2015 only – the IRS will apparently proceed with 2015 before doing any work regarding 2016. All enforcement efforts are based on the reporting forms submitted by Applicable Large Employers.
What you need to know now:
- These letters will go to some employers who may not ultimately owe a penalty. Employers will have 30 days from the date of the letter to provide a written response to contest a penalty. Employers can submit documentation along with their response, and employers can even request amendment of any reporting errors/omissions where needed.
- A sample letter is available here.
- You likely want to alert your large group clients that this process is happening and that a letter could be received. As a refresher, Play-or-Pay applied in 2015 only for employers who had 100 or more FT + FTE in 2014. The threshold decreased to 50 for the 2016 calendar year.
Confirmation: No End-of-Year Deadlines
To confirm, there are no compliance deadlines for 12/31, other than any responsibilities that an employer may have regarding open enrollment. The next big compliance deadline is 1/31/18, which is the date that employers must provide Forms 1095-C (or 1095-B if required) to applicable employees. The reporting deadlines are the same as last year and mirror employers’ W-2/W-3 deadlines.
Since the required contributions to reinsurance expired after 2016, no further payments are due. As you likely know, the Health Insurers Tax returns for 2018 after a one-year moratorium. That tax applies to providers of fully insured medical, dental, or vision plans, and the amount of the fee/tax is being built into 2018 premiums or added as a line on 2018 billing.
New IRS Guidance on QSEHRAs
You are likely aware that a new option for small employers for 2017 and beyond was created by law this time last year. The Qualified Small Employer Health Reimbursement Arrangement (“QSEHRA”) provides a vehicle for small employers to reimburse employees’ individual insurance premiums and other medical expenses on a tax-free basis. QSEHRA is only an option for small employers that are not Applicable Large Employers (under 50 FT + FTE) and that do not sponsor a group plan providing health coverage.
The law established a number of requirements to qualify as a QSEHRA, but until recently the IRS had not issued formal guidance to fill the gaps in the compliance framework of QSEHRAs. The IRS has released Notice 2017-67 with full and final guidance regarding QSEHRAs, addressing all of the relevant issues regarding the new model. The executive summary is that new guidance is restrictive and will likely discourage employers from adopting a QSEHRA now or later. That said, this remains the only way for an employer to provide non-group coverage on a tax-free basis, so it will continue to be an option for consideration for at least very small employers (including churches and nonprofits). A further summary of the new guidance is available if helpful to you or your team. Contact your Cason Group Sales Representative.
Finally, with respect to the President’s 10/12/17 Executive Order, nothing else has been formally issued by the agencies. We can expect further guidance before year-end on associational plans, short-term health policies, and HRAs generally.
2018 Compliance Checklist
Our December webinar for agents will be a direct distribution webinar addressing key compliance items for 2018. This will include an updated compliance checklist that we will make available to you soon.
Other helpful reference tools and options are available from our team for 2018. Contact your Sales Representative at The Cason Group for more details.
By Jason Cogdill, Attorney at Law, The Cason Group Compliance Partner