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Employee Benefits Plan Limits for 2021

12/1/2020

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Many employee benefits are subject to annual dollar limits that are periodically updated for inflation by the IRS.

The IRS typically announces the dollar limits that will apply for the next calendar year well in advance of the beginning of that year. This gives employers time to update their plan designs and make sure their plan administration will be consistent with the new limits. Although some of the limits will increase for 2021, most of the limits remain the same.

Increased Limits

For plan years beginning on or after Jan. 1, 2021, the following limits have increased:
  • Health savings account contributions:
    • Single coverage—$3,600 (up $50)
    • Family coverage—$7,200 (up $100)
  • High deductible health plan (HDHP) out-of-pocket maximum limit:
    • Single coverage—$7,000 (up $100)
      • Family coverage—$14,000 (up $200)
  • Tax exclusion for adoption assistance benefits—$14,440 (up $140)
Unchanged Limits

Certain limits will not change for 2021, including the flexible spending account salary reduction contribution limit, HDHP minimum deductible, 401(k) contribution limit and transportation fringe benefits monthly limits.
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Final Forms and Instructions for 2020 ACA Reporting Released

11/3/2020

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The Internal Revenue Service (IRS) released final 2020 forms and instructions for reporting under Internal Revenue Code (Code) Sections 6055 and 6056.
  • 2020 Form 1094-B and Form 1095-B (and related instructions) will be used by providers of minimum essential coverage (MEC), including self-insured plan sponsors that are not ALEs, to report under Section 6055.
  • 2020 Form 1094-C and Form 1095-C (and related instructions) will be used by applicable large employers (ALEs) to report under Section 6056, as well as for combined Section 6055 and 6056 reporting by ALEs who sponsor self-insured plans.
These forms and instructions include a number of changes and clarifications related to 2020 reporting.
  • The deadline for furnishing statements to individuals under Sections 6055 and 6056 has been extended to March 2, 2021.
  • Relief from penalties for reporting incorrect or incomplete information, and providing individual statements under Section 6055 only upon request, has been extended to 2020 reporting.
  • The “Plan Start Month” box is now required for 2020 reporting.
Changes were also made to Forms 1095-B and 1095-C related to offers of individual coverage health reimbursement arrangements (ICHRAs).

Employers should become familiar with these forms and instructions for reporting for the 2020 calendar year. Individual statements must be furnished by March 2, 2021, and IRS returns must be filed by Feb. 28, 2021 (March 31, 2021, if filed electronically).

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Supreme Court Vacancy May Affect ACA Litigation

10/2/2020

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Since 2017, the Affordable Care Act (ACA), has been the subject of numerous legal challenges. Several bills were introduced to repeal the law, although those efforts failed. The ACA has also been challenged in federal court. A lawsuit seeking to invalidate the ACA in its entirety is currently pending before the Supreme Court, with oral arguments scheduled for November.

On Sept. 18, 2020, U.S. Supreme Court Justice Ruth Bader Ginsburg passed away at the age of 87. Whether the court vacancy created by Justice Ginsburg’s death should be filled prior to the November election is the subject of much controversy. 
On Sept. 26, 2020, President Donald Trump nominated federal circuit court judge Amy Coney Barrett to fill the vacancy, and the Senate plans to hold a vote on this nomination. However, a number of Democrats in Congress believe that the nomination process should not take place until after the November election. 

If a new Supreme Court justice is confirmed before the election, it could greatly impact the outcome of that litigation. It is widely expected that President Trump’s nominee will have a more conservative viewpoint and would be more likely to invalidate the ACA. In contrast, a Supreme Court justice nominated by Democratic Party candidate Joe Biden would be more likely to uphold the ACA.

Until a nominee is ultimately confirmed, the practical impact of this decision remains to be seen. As a result, employers may want to closely monitor developments related to the Supreme Court nomination.
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Medicare Part D Notices Are Due Before Oct. 15, 2020

9/3/2020

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Each year, Medicare Part D requires group health plan sponsors to disclose to individuals who are eligible for Medicare Part D and to the Centers for Medicare and Medicaid Services (CMS) whether the health plan’s prescription drug coverage is creditable.

Plan sponsors must provide the annual disclosure notice to Medicare-eligible individuals before Oct. 15, 2020—the start date of the annual enrollment period for Medicare Part D. CMS has provided model disclosure notices for employers to use.

This notice is important because Medicare beneficiaries who are not covered by creditable prescription drug coverage and do not enroll in Medicare Part D when first eligible will likely pay higher premiums if they enroll at a later date. Although there are no specific penalties associated with this notice requirement, failing to provide the notice may be detrimental to employees.

Employers should confirm whether their health plans’ prescription drug coverage is creditable or non-creditable and prepare to send their Medicare Part D disclosure notices before Oct. 15, 2020. To make the process easier, employers often include Medicare Part D notices in open enrollment packets they send out prior to Oct. 15.
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Affordability Percentages Will Increase for 2021

8/3/2020

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The IRS recently issued Revenue Procedure 2020-36 to index the contribution percentages in 2021 for determining affordability of an employer’s plan under the Affordable Care Act (ACA).

For plan years beginning in 2021, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed:

  • 9.83% of the employee’s household income for the year, for purposes of both the pay or play rules and premium tax credit eligibility; and
  • 8.27% of the employee’s household income for the year, for purposes of an individual mandate exemption (adjusted under separate guidance). Although this penalty was reduced to zero in 2019, some individuals may need to claim an exemption for other purposes.
The updated affordability percentages are effective for taxable years and plan years beginning Jan. 1, 2021. This is a slight increase from the affordability contribution percentages for 2020. As a result, some employers may have additional flexibility in setting their employee contributions for 2021 to meet the adjusted percentage
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Medicare Part D Notices Are Due Before Oct. 15, 2020

8/3/2020

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Each year, Medicare Part D requires group health plan sponsors to disclose to individuals who are eligible for Medicare Part D and to the Centers for Medicare and Medicaid Services (CMS) whether the health plan’s prescription drug coverage is creditable.

Plan sponsors must provide the annual disclosure notice to Medicare-eligible individuals before Oct. 15, 2020—the start date of the annual enrollment period for Medicare Part D. CMS has provided model disclosure notices for employers to use.

This notice is important because Medicare beneficiaries who are not covered by creditable prescription drug coverage and do not enroll in Medicare Part D when first eligible will likely pay higher premiums if they enroll at a later date. Although there are no specific penalties associated with this notice requirement, failing to provide the notice may be detrimental to employees.

Employers should confirm whether their health plans’ prescription drug coverage is creditable or non-creditable and prepare to send their Medicare Part D disclosure notices before Oct. 15, 2020. To make the process easier, employers often include Medicare Part D notices in open enrollment packets they send out prior to Oct. 15.
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Federal Judge Upholds Hospital Transparency Rule

7/3/2020

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On Tuesday, June 23, 2020, District Judge Carl Nichols ruled in favor of the Trump administration’s final rule requiring hospitals to disclose their negotiated prices. The rule was released on Nov. 15, 2019, and set to take effect Jan. 1, 2021.

However, in December 2019, the American Hospital Association (AHA) filed a lawsuit attempting to block the rule’s implementation, stating that the requirement to disclose negotiated prices violated their First Amendment rights.

Nichols ruled that it was within the Department of Health and Human Services’ (HHS) scope to require the disclosure of these negotiated rates, rejecting the AHA’s claims.

What’s included in the final rule?
Hospitals will be required to provide easily accessible billing information to patients. This means having all standard charges available online and in one single data file that can be “read by other computer systems,” according to a Centers for Medicare & Medicaid Services (CMS) press release.

The charges listed would include “the gross charges, payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient, and the minimum and maximum negotiated charges,” according to the initial press release about the final rule.

As part of the final rule, CMS was granted more authority over enforcement. Specifically, the department has greater capability to audit hospitals and issue fines of $300 per day to those who are noncompliant.

What’s next?
The rule won’t be effective until Jan. 1, 2021. In that time, hospitals will be working to make the applicable data available online, if it isn’t already. The AHA is expected to appeal the ruling, which could potentially delay the rule’s effective date. ​
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HSA Limits Increase for 2021

6/7/2020

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​The IRS recently released Revenue Procedure 2020-32 to provide the inflation-adjusted limits for health savings accounts (HSAs) and high deductible health plans (HDHPs) for 2021. The IRS is required to publish these limits by June 1 of each year.

These limits include:

  • The maximum HSA contribution limit;
  • The minimum deductible amount for HDHPs; and
  • The maximum out-of-pocket expense limit for HDHPs.
These limits vary based on whether an individual has self-only or family coverage under an HDHP.

Eligible individuals with self-only HDHP coverage will be able to contribute $3,600 to their HSAs for 2021, up from $3,550 for 2020. Eligible individuals with family HDHP coverage will be able to contribute $7,200 to their HSAs for 2021, up from $7,100 for 2020. Individuals who are age 55 or older are permitted to make an additional $1,000 “catch-up” contribution to their HSAs.

The minimum deductible amount for HDHPs remains the same for 2021 plan years ($1,400 for self-only coverage and $2,800 for family coverage). However, the HDHP maximum out-of-pocket expense limit increases to $7,000 for self-only coverage and $14,000 for family coverage.

Employers that sponsor HDHPs should review their plan’s cost-sharing limits (minimum deductibles and maximum out-of-pocket expense limit) when preparing for the plan year beginning in 2021. Also, employers that allow employees to make pre-tax HSA contributions should update their plan communications for the increased contribution limits.

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DOL Now Fully Enforcing FFCRA Paid Leave Rules for Coronavirus

5/3/2020

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After observing a 30-day non-enforcement period to help employers come into compliance with new paid leave rules, the U.S. Department of Labor (DOL) has announced that it is fully enforcing all provisions of the Families First Coronavirus Response Act (FFCRA).

The FFCRA requires private employers with fewer than 500 employees and certain government employers to provide paid leave for their employees, either for the employees’ own health needs or to care for others, for reasons related to the coronavirus (COVID-19) pandemic. These requirements apply for employee leave taken between April 1 and Dec. 31, 2020.

Now that the temporary policy has expired, the DOL is fully enforcing the FFCRA. Employers may still face retroactive penalties for violations committed during the non-enforcement period under certain circumstances. According to the DOL’s frequently asked questions (FAQs) about the FFCRA, the agency will retroactively enforce violations back to the effective date of April 1, 2020, if employers have not remedied the violations. Penalties for FFCRA violations include civil lawsuits and criminal charges punishable by imprisonment and fines of up to $10,000.

The laws take effect within 15 days of passage; the leave benefits will expire on Dec. 31, 2020.
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DOL Increases Civil Penalty Amounts for 2020

3/3/2020

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The Department of Labor (DOL) recently released its 2020 inflation-adjusted civil monetary penalties that may be assessed on employers for violations of a wide range of federal laws, including:
  • The Fair Labor Standards Act (FLSA);
  • The Employee Retirement Income Security Act (ERISA);
  • The Family and Medical Leave Act (FMLA); and
  • The Occupational Safety and Health Act (OSH Act).
To maintain their deterrent effect, the DOL is required to adjust these penalties for inflation no later than Jan. 15 of each year. Key penalty increases include the following:
  • The maximum penalty for violations of federal minimum wage or overtime requirements increases from $2,014 to $2,050 per violation.
  • The maximum penalty for failing to file a Form 5500 for an employee benefit plan increases from $2,194 to $2,233 per day.
  • The maximum penalty for violations of the poster requirement under the FMLA increases from $173 to $176 per each offense.
Employers should become familiar with the new penalty amounts and review their pay practices, benefit plan administration and safety protocols to ensure compliance with federal requirements.
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