IRS Releases Notice 2014-55 Providing for Additional Election Changes Events (Cafeteria Plan)

The IRS released Notice 2014-55 which provides additional permitted election changes for health coverage under Code Section 125 cafeteria plans. This notice provides two specific situations in which a cafeteria plan participant may wish to revoke, during a plan year, the employee's election for employer-sponsored health coverage under the cafeteria plan in order to purchase a Qualified Health Plan through a Marketplace.

IRS Increases ACA's Affordability Percentages for 2015

On July 24, 2014, the IRS released Revenue Procedure 2014-37 to index the Affordable Care Act's (ACA) affordability percentages for 2015 under the employer mandate. The IRS also adjusted upward the income level under which employees are exempt from the ACA's individual mandate.

Employer Mandate Adjustment
An applicable large employer's health coverage will be considered affordable for plan Years beginning in 2015 under employer mandate if the employee's required contribution to the plan does not exceed 9.56 percent of the employee's household income for the year, up from 9.5 percent. This increase also applies to the three safe harbors that the IRS created in the regulations.

The reason for the increase is that the employer mandate was originally meant to take effect in 2014 but was subsequently delayed until 2015 or 2016, depending on employer size.

Individual Mandate Adjustment
Revenue Procedure 2014-37 also adjusts the affordability percentage for the exemption from the individual mandate for individuals who lack access to affordable minimum essential coverage. For plan years beginning in 2015, coverage is unaffordable for purposes of the individual mandate if it exceeds 8.05% of household income (as opposed to 8% originally).

This change stems from the requirement that the IRS must adjust the affordability percentage to reflect the excess of the rate of premium growth over the rate of income growth for the preceding calendar year, with each subsequent plan year being adjust accordingly.

For a copy of Revenue Procedure 2014-37, please click on the link below:
http://www.irs.gov/pub/irs-drop/rp-14-37.pdf

Health Reform Questions - Reimbursing Individual Market Premiums

Question: Can an employer reimburse its employees for premiums on a pre-tax basis for purchasing individual market medical coverage?

Answer: No. In IRS Notice 2013-54 & Technical Release 2013-3, the IRS and DOL prohibit the reimbursement of premiums for individual medical policies from health reimbursement arrangements and premium only plans.

Recently, the IRS issued a Frequently Asked Questions (FAQ) list that reiterates earlier guidance disallowing pre-tax employer reimbursements for employee health care premiums. The FAQ also calls attention to the $100 per day, per employee penalty for non-compliance.

Administration announces proposal to clarify availability of Health Insurance Marketplace coverage to workers eligible for COBRA

On May 2, 2014, the Obama administration announced updates to model notices informing workers of their eligibility to continue health-care coverage through the Consolidated Omnibus Budget Reconciliation Act. The updates make it clear to workers that if they are eligible for COBRA continuation coverage when leaving a job, they may choose to instead purchase coverage through the Health Insurance Marketplace.

“In many cases, workers eligible for COBRA continuation coverage can save significant sums of money by instead purchasing health insurance through the Marketplace,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. “COBRA continues to play an important role in helping workers and families maintain coverage after a job loss, and it is important that workers know that in some cases there is a Marketplace option as well.”

Statement Of The Virginia Bureau Of Insurance Regarding Further Extension Of Individual And Small Group Health Insurance Plans

On March 5, 2014, the Obama Administration proposed a further suspension of the enforcement of certain provisions of the federal Affordable Care Act (ACA) and urged state insurance regulators to allow health insurance carriers to offer renewal of certain non-ACA compliant health insurance plans such that they could remain in effect into 2017.

Following this announcement, the State Corporation Commission's Bureau of Insurance (Bureau) has undertaken a legal and regulatory analysis of the extension proposal.

Virginia state insurance laws were changed to conform to various provisions of the ACA effective January 1, 2014. Therefore, in the absence of specific authorization by the General Assembly, insurance carriers remain subject to conforming Virginia law.

The Bureau previously encouraged carriers to offer policyholders the opportunity to "early renew" their existing insurance plans before January I, 2014, when the new Virginia provisions became effective. This allowed policyholders to continue existing coverage into 2014.

Policyholders with non-ACA compliant policies expiring in 2014 are advised to evaluate all available options tor health insurance coverage in 2014 to replace their coverage that may be expiring due to implementation of the ACA and conforming Virginia law.

Transitional Relief Extended through 2016

When the Obama Administration announced the transitional relief policy that allows individual and small group, fully insured, non-grandfathered policyholders to maintain their 2013 medical coverage through 2014, it indicated it would assess the policy and the specified timeframe.

The Centers for Medicare and Medicaid Services (CMS) issued a memo that it will extend the transitional policy for two years, for policy years beginning on, after or before Oct. 1, 2016, with the possibility of adding a one year extension then, if appropriate.

The transitional relief also applies to large businesses that currently purchase insurance in the large group market if, as of Jan. 1, 2016, they will be redefined by the Affordable Care Act (ACA) as small businesses purchasing insurance in the small group market.

As with the earlier transitional relief policy, State governments and health insurance issuers will have the option to offer the transitional relief or not participate.

Employer Mandate Delayed for some Employers

On February 10th, 2014, the Obama administration announced that it would postpone enforcement of a federal requirement for medium-size employers to provide health insurance to employees and allow larger employers more flexibility in how they provide coverage.

The "employer mandate," (also known as the “Play or Pay” requirements) which was originally supposed to take effect last month, had already been delayed to January 1st, 2015, and now the administration says that employers with 50 to 99 employees will not have to comply until 2016.

In addition, the requirement would be put into effect gradually for employers with 100 or more employees. Employers in this category will need to offer coverage to 70 percent of full-time employees in 2015 and 95 percent in 2016 and later years, or they will be subject to tax penalties.

Please review the attached Health Care Reform Hot Topic for more information. 
Highlights:

• No mandate for small group employers (2-50) is scheduled at this time.
• Compliance for medium-sized group employers (50-99) is delayed until 2016.
• Compliance for large-sized group employers (100+) is still delayed until 2015.
• Certain 2014 transition relief is extended, including relief for non-calendar year plans.
• The requirement to offer coverage to 95 percent of full-time employees will be phased in over two years.
• Full-time status is clarified for certain groups.