In our Q2 Insurance Brief we discuss the following topics:
HCSO Annual Reports
2018 PCORI Fees
The Department of Labor (DOL) has updated its model notice for employers to provide information on eligibility for premium assistance under Medicaid or the Children's Health Insurance Program (CHIP). Employers that provide health insurance coverage in states with premium assistance through Medicaid or CHIP must provide employees with the Employer CHIP notice annually before the start of each plan year. An employer can choose to provide the notice on its own or concurrent with the furnishing of:
Materials notifying the employee of health plan eligibility;
Materials provided to the employee in connection with an open season or election process conducted under the plan; or
The summary plan description (SPD).
The updated model notice includes information on how employees can contact their state for additional information and how to apply for premium assistance. This version expires 12/31/2019.
Annual Adjustments to Employee Benefit Plan Penalties
As background, legislation enacted in 2015 requires annual adjustments to certain penalty amounts by January 15 of each year. Due to a lapse in funding, publication of adjustments for 2019 was delayed and therefore the effective date is later than prior years. The 2019 adjustments will be effective for penalties assessed after January 23, 2019, with respect to violations occurring after November 2, 2015. Here are highlights:
Form 5500. The maximum penalty for failing to file Form 5500 increases from $2,140 to $2,194 per day that the Form 5500 is late.
Group Health Plans. The maximum penalty for failing to provide the summary of benefits and coverage (SBC) required under health care reform increases from $1,128 to $1,156 per failure. Violations of the Genetic Information Nondiscrimination Act (GINA), such as establishing eligibility rules based on genetic information or requesting genetic information for underwriting purposes, and failures relating to disclosures regarding the availability of Medicaid or CHIP assistance may result in penalties of $117 per participant per day, up from $114.
•401(k) Plans. For plans with automatic contribution arrangements, penalties for failure to provide the required ERISA § 514(e) preemption notice to participants increase from $1,693 to $1,736 per day. Penalties for failing to provide blackout notices (required in advance of certain periods during which participants may not change their investments or take loans or distributions) or notices of diversification rights increase from $136 to $139 per day. And the maximum penalty for failure to comply with the ERISA § 209(b) recordkeeping and reporting requirements increases from $29 to $30 per employee.
The affected penalties relate to a wide range of compliance issues. But not all violations will give rise to the highest permitted penalty. In some instances, the DOL has discretion to impose lower penalties, such as under programs designed to encourage Form 5500 filing.
For a complete listing of penalties contact your Brown & Brown account team.
HCSO Annual Reports
The 2018 Annual Reporting Form is now available online. Register here to attend an instructional webinar on how to complete the 2018 form to be held Thursday, April 4th at 10:00 PST. A recording of the webinar will be posted on this page by Tuesday, April 9th.
Deadline: April 30, 2019. Failure to meet the deadline can result in penalties of $500 per quarter.
As a reminder: you are not a "covered employer" under the HCSO and you should not submit the Form if (1) you are a private employer and you employed fewer than 20 persons, (including those employed outside of San Francisco) in each of the four calendar quarters of 2018; or (2) ; you are a non-profit corporation and you employed fewer than 50 persons (including those employed outside of San Francisco) in each of the four calendar quarters of 2018; or (3) if you did not have any employees in San Francisco in 2018. If you are not required to submit the Form, no further action is required.
2018 Expenditure Rates were $1.89 for medium employers (20-99) and $2.83 for large employers (100+).
2019 Expenditure Rates are $1.95 for medium employers (20-99) and $2.93 for large employers (100+).
If you have any questions please visit the Office of Labor Standards Enforcement's HCSO website to access the text of the HCSO, the implementing regulations, answers to “Frequently Asked Questions,” and other helpful forms and notices. You can also contact the OLSE by phone at (415) 554-7892 or by email at firstname.lastname@example.org.
2018 PCORI FEES
The Patient Centered Outcomes and Research Institute (PCORI) fee, also known as the Comparative Effectiveness Research (CER) fee, is due annually using IRS form 720 by July 31st.
Background: This fee applies to both insured and self-insured medical plans. It is based on the number of covered lives—employees and dependents. For insured plans, the fee is paid by the carrier and included in premiums. For self-insured plans, the employer plan sponsor must calculate and pay the fee. The fee is based on the average number of covered lives for the 12-month policy period that ended in the preceding year.
Rates: For policies ending between January 1, 2018 through September 30, 2018, the cost is $2.39 per person. For policies ending between October 1, 2018 through December 31, 2018 the fee is $2.45.
Counting Methods: There are three allowable counting methods for self-insured policies. Once chosen, the plan sponsor must use only the one method for that reporting year. Here are the options:
Actual Count Method. Plan sponsors calculate the sum of lives covered for each day of the plan year and then divide that sum by the number of days in the year. This count includes employees plus dependents.
Snapshot Method. Plan sponsors calculate the sum of the lives covered on one or more dates in each quarter of the plan year and then divide that number by the number of dates used. Each date must be within three days of the date used for the first quarter. E.g. If using February 15th (1st quarter), then must use a day between May 12 – 18th (2nd quarter). Under this method, the plan sponsor can count the number of covered employees and multiply that number by 2.35 to obtain the spouse and dependents count.
The 5500 Method. By adding the total number of employee lives on the first day of the plan year to the total number of lives on the last day of the plan year as reported on the Form 5500 (without dividing by 2). Can only use this method if the 5500 for that plan year is filed no later than the due date for the fee imposed for that plan year. E.g. Calendar plan year 2018, the 5500 is due by 7/31/19, and the employer obtains an automatic 2 ½ month extension. The employer is not eligible to use the Form 5500 method because they did not file by the 7/31 fee due date.
Health Reimbursement Account (HRA). An HRA that only provides excepted benefits (e.g. dental and vision) is excluded. In the event the employer has a self-funded medical plan and a medical HRA with the same Plan year, the fee will only be payable on the self-funded medical plan. If the employer has a fully-insured medical plan and a HRA covering the same group, the fee is payable on the HRA. Most HRA third-party administrators are able to provide the covered lives count required to make payment.
Retiree Coverage: The fee applies to health insurance policies and self-insured health plans that provide accident and health coverage to retirees, including retiree-only policies and plans.
COBRA continuation coverage: COBRA and similar continuation coverage (Cal-COBRA, for example) must be taken into account when determining the PCORI fee.
If you have any questions regarding your PCORI Fees or filings, please contact your B&B Account Team.