Capitol Benefits Group News & Updates
President Trump Orders Tax Deferment
On Aug. 8, 2020, President Donald J. Trump ordered the U.S. Department of Treasury (the Department) to defer collecting certain payroll taxes from Sept. 1 to Dec. 31, 2020. Because the order is for a deferral, the unpaid taxes will need to be recouped at a later time, unless the Department can find an avenue to eliminate the obligation to pay the taxes.
Eligibility for Deferred Payroll TaxesUnder the order, employers will be able to defer taxes that help pay for Social Security and Medicare for individuals who receive less than $4,000 during any bi-weekly pay period (the equivalent of $104,000 per year) on a pre-tax basis.
Affected taxes will be deferred without any penalties, interest, additional amount or addition to the tax. The White House’s position is that deferring this tax will alleviate the hardship of individuals affected by the economic consequences of the COVID-19 pandemic.
Implementation ObstaclesAt this time, it is still unclear whether employers will opt to release the affected payroll taxes to eligible employees for two reasons:
Implementing changes in payroll processes and procedures is not always a quick or easy process—an obstacle aggravated by the fact that the Department has a scarce few weeks to issue guidance to implement this presidential directive; and
There is a possibility that the deferred taxes will need to be collected at a future date.
Next Steps for Employers
Employers should actively monitor upcoming guidance from the Department of Treasury
Employers should balance the benefit of releasing affected taxes to eligible employees against the possibility of having to recoup those taxes later
Employers should take time to evaluate now how quickly they can alter their payroll practices and procedures in case they decide to opt for this payroll tax deferral
Summary of Four Presidential Executive Orders Issued Late Last Month
Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen: directs federally qualified health centers to pass along massive discounts on insulin and epinephrine received from drug companies to certain low-income Americans.
Executive Order on Increasing Drug Importation to Lower Prices for American Patients: intended to allow state plans for safe importation of certain drugs, authorize the re-importation of insulin products made in the United States, and create a pathway for widespread use of personal importation waivers at authorized pharmacies in the United States.
Executive Order on Access to Affordable Life-saving Medications: intended to prohibit secret deals between drug manufacturers and pharmacy benefit manager middlemen, ensuring patients directly benefit from available discounts at the pharmacy counter.
President Trump also announced a fourth executive order intended to ensure that the United States pays the lowest price available in economically comparable countries for Medicare Part B drugs. However, the order's implementation is delayed until Aug. 25, 2020, to give pharmaceutical executives a chance to propose an alternative.
ACA Premium Affordability for 2021 Announced — Slight Increase from Last Year
Under the Affordable Care Act's employer shared responsibility (pay or play) rules, applicable large employers-generally those who have 50 or more full-time employees (including full-time equivalent employees)-may be subject to a penalty if they do not offer affordable health insurance coverage that provides minimum value to their full-time employees and their dependents.
For plan years beginning in 2021, the Internal Revenue Service has announced that coverage will generally be considered affordable if the employee's required contribution for the lowest-cost self-only health plan offered is 9.83% or less of his or her household income for the taxable year. For plan years beginning in 2020, the applicable percentage is 9.78%.
Given that employers are unlikely to know an employee's household income, they may use a number of safe harbors to determine affordability, including reliance on Form W-2 wages.
2019 ACA Reporting is Due in Early 2020
The IRS has released draft 2020 versions of Forms 1094-C and 1095-C that employers will use in early 2021 to report on the group health insurance coverage they offered during the 2020 calendar year. Draft instructions related to these forms for the 2020 calendar year have not yet been released. In addition, draft 2020 versions of Forms 1094-B and 1095-B (and related instructions) are not available at this time.
The draft 2020 Forms 1094-C and 1095-C are substantially similar to the final 2019 versions. However, the draft Form 1095-C includes:
Additional codes in Code Series 1 related to offers of individual coverage health reimbursement arrangements (ICHRAs); and
A new section to enter the zip code used to determine affordability for an ICHRA, if one was offered to the employee.
Medical Plans Will Be Allowed Cost-sharing Changes without Losing Grandfather Status
On July 10, 2020, the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury (Departments) issued a proposed rule that would provide greater flexibility for grandfathered group health plans to make certain changes to cost-sharing requirements without losing grandfather status.
Specifically, the proposed rule would make the following amendments to current rules:
Flexibility for High Deductible Health Plans (HDHP): Grandfathered group health plans that are HDHPs would be allowed to increase certain cost-sharing amounts (such as deductibles) without losing grandfather status, to the extent necessary for maintaining HDHP status. According to the Departments, this change would help ensure that participants and beneficiaries of grandfathered HDHPs remain eligible to contribute to health savings accounts (HSAs).
Alternative inflation adjustment for fixed-amount cost-sharing increases: Permitted increases to certain fixed cost-sharing amounts (such as copayments, deductibles and out-of-pocket maximums) would be determined, in part, by reference to the greater of either the Consumer Price Index measure of medical inflation (which applies under existing rules) or the most recently published "premium adjustment percentage." This percentage is published annually by HHS and reflects the cumulative, historic growth from 2013 through the preceding calendar year in premiums for private health insurance, excluding Medigap and property and casualty insurance. According to the Departments, adding this alternate inflation measure would help grandfathered plans account for changes in the costs of health coverage over time.
The Departments also issued FAQs regarding the proposed rule. The proposal would not allow non-grandfathered plans to become grandfathered or to regain grandfather status, and also would not impact grandfathered individual health coverage.
2018 Final Rule Allows Short Term Limited Policies
to Last up to 12 Months
On July 17, 2020, a federal appeals court upheld a 2018 final rule expanding short-term, limited-duration insurance (STLDI) for purposes of the Affordable Care Act (ACA). The final rule:
Provides a maximum coverage period for STLDI of up to 12 months; and
Allows STLDI to continue for up to 36 months in total, taking into account renewals or extensions.
The plaintiffs in this case argued that extending the duration of STLDI is inconsistent with HIPAA's plain text and an unreasonable interpretation in light of the ACA's structure and purpose. However, the Court of Appeals for the District of Columbia upheld the final rule as a reasonable exercise of federal agencies' authority. The court ruled that federal agencies are entitled to deference in defining STLDI because Congress delegated the authority to define STLDI to those federal agencies. The court also concluded that the interpretation of STLDI in the final rule was reasonable, pointing out that, between 1997 and 2016, STLDI had historically been defined under HIPAA as lasting up to 12 months in duration.
DHS Announces Final Form I-9 Exception
The U.S. Department of Homeland Security (DHS) has announced that the exemption for the physical inspection of Form I-9 documents has been extended to August 19, 2020.
Physical Inspection
Employers must complete and sign Section 2 of Form I-9 within three business days of the employee's first day of employment. Employers are required to physically examine the documents the employee presents from the list of acceptable documents to prove his or her employment eligibility.
Remote Verification Because of COVID-19, DHS is allowing employers that are operating remotely to conduct a remote verification of approved I-9 documents. The exemption also applies to new hires affected by quarantine or lockdown protocols. The exemption does not apply to employers that have employees physically present at a work location.
Under the exemption, employers must complete a remote inspection of approved documents within three business days and enter "COVID-19" as the reason for the physical inspection delay. Employers that use this exemption must also keep written documentation of their remote onboarding and telework policy for each employee.
Within three days of when normal operations resume, all employees who were onboarded using remote verification must present their approved documents for a physical inspection. Employers should add "documents physically examined" with the date of inspection to affected I-9 forms.
In Case You Missed It! Access the COBRA Training Recording
Access the live recording and video from the ‘COBRA Compliance for Employers’ training session that was offered on July 8th. This training focuses on the complex rules regarding COBRA coverage. Our attorney partners discuss key compliance issues related to COBRA and give practical tips for avoiding common errors. If you have specific questions about COBRA rules and how they apply or don’t apply to your group’s benefits, please reach out directly to your Capitol Benefits Group team!
Do you know the complex rules regarding COBRA coverage? In this webinar, our attorneys discuss key compliance issues related to COBRA and give practical tips for avoiding common errors.
Please check this HR Training Video: Click Here