Quarterly Insurance Brief: April 2020
Updated: Sep 15, 2020
In this Issue:
FSA, HSA, and HRA Changes; HCSO Annual Reports Cancelled; ACA Court Challenge; DOL Increases Penalties for 2020
FSA, HSA and HRA Changes
On March 11, the IRS posted Notice 2020-15 on IRS.gov, saying that health plans that otherwise qualify as HDHPs will not lose that status merely because they cover the cost of testing for or treatment of COVID-19 before plan deductibles have been met. The IRS also noted that, as in the past, any vaccination costs continue to count as preventive care and can be paid for by an HDHP.
The IRS then advised that high-deductible health plans (HDHPs) can pay for 2019 Novel Coronavirus (COVID-19)-related testing and treatment, without jeopardizing their status. This also means that an individual with an HDHP that covers these costs may continue to contribute to a HSA.
In IRS Notice 2020-18, the IRS postponed the April 15, 2020 due date for filing federal income tax returns and making federal income tax payments to July 15, 2020, in response to the ongoing COVID-19 emergency. The IRS has now issued FAQ guidance regarding the relief provided in Notice 2020-18.
One of the FAQs explains that the extended tax return filing deadline gives taxpayers more time to make HSA contributions for 2019. The FAQ notes that HSA contributions for a particular year may be made at any time during that year or by the tax return filing due date for that year. Because the due date for filing federal income tax returns for 2019 is now July 15, 2020, HSA contributions for 2019 can be made at any time up to July 15, 2020.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed into law on March 27th contains important provisions that will affect health savings accounts (HSAs), health reimbursement arrangements (HRAs) and flexible spending accounts (FSAs).
HSA-qualified health plans can now cover telehealth and other remote care service expenses below the HDHP statutory deductible limit, or at no or low-cost sharing, without affecting an account holder’s ability to continue contributing to their HSA. This provision will last until December 31, 2021.
Over-the-counter drugs and medicines can be paid for or reimbursed through an FSA, HRA, or HSA without a doctor’s prescription.
Menstrual care products are now considered a qualified medical expense and are eligible for payment or reimbursement through an FSA, HRA or HSA. All expenses incurred after December 31, 2019 qualify, and the provision has no expiration date.
Some of the Sec. 125 and HRA third-party administrators are developing amendment templates for employers to use. Each client should review their Sec. 125 and HRA summary plan description (SPD) and Plan documents to determine if they need to be amended. Documents that reference the Internal Revenue Code for what is allowed to be reimbursed will not need to be amended. Once the templates are available, we will share them.
HCSO Annual Reports Cancelled
The Office of Labor Standards Enforcement announced on March 24th that the City is cancelling the employer requirement to submit the 2019 Annual Reporting Form for the Health Care Security Ordinance (HCSO). Normally this would have been due April 30th.
In their email they state “All other requirement of the HCSO and FCO are still in effect for employers covered by these ordinances. Visit our website at www.sfgov.org/olse for more information about San Francisco labor laws during the COVID-19 emergency.”
ACA Court Challenge
On March 2, 2020, the United States Supreme Court agreed to hear a legal challenge to the Affordable Care Act (ACA). The case involved is Texas v. Azar, a lawsuit challenging the constitutionality of the ACA’s individual mandate.
Texas v. Azar was filed in 2018 by 18 states after the individual mandate penalty was eliminated. In December 2019, a federal appeals court ruled in the case that the individual mandate is unconstitutional and directed the lower court to determine whether the rest of the ACA can remain in place.
The Supreme Court had previously denied a request from the U.S. House of Representatives and several Democratic-controlled states to review the case on an expedited basis. The Supreme Court has now agreed to hear the case on its regular schedule, based on the argument that the lower court rulings create uncertainty about the ACA’s future. It is expected that the Court will hear arguments in the fall and a decision will be issued in the spring or summer of 2021.
This is the third time the Supreme Court has reviewed the ACA’s constitutionality. In 2012, the Supreme Court upheld the ACA on the basis that the individual mandate is a valid tax. In 2015, the Supreme Court upheld the constitutionality of the ACA’s health insurance Exchange subsidies.
While this legal challenge is pending, all existing ACA provisions will continue to be applicable and enforced. This challenge does not impact Exchange enrollment, the ACA’s employer shared responsibility (pay or play) penalties and related reporting requirements, or any other applicable ACA requirement.
DOL Increases Penalties for 2020
On January 15, 2020, the Department of Labor (DOL) 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 Employee Retirement Income Security Act (ERISA).
To maintain their deterrent effect, the DOL is required to adjust these penalties for inflation, no later than January 15 of each year. Key penalty increases include the following:
Requirement: Failure to file an annual report (Form 5500) with the DOL (unless a filing exemption applies)
2019 Penalty Amount: Up to $2,194 per day
2020 Penalty Amount: Up to $2,233 per day
Requirement: Failure to furnish plan-related information requested by the DOL (*Under ERISA, administrators of employee benefit plans must furnish to the DOL, upon request, any documents relating to the employee benefit plan.)
2019 Penalty Amount: Up to $156 per day, but not to exceed $1,566 per request
2020 Penalty Amount: Up to $159 per day, but not to exceed $1,594 per request
Requirement: Failure to provide the annual notice regarding CHIP coverage opportunities
2019 Penalty Amount: Up to $117 per day for each failure (each employee is a separate violation)
2020 Penalty Amount: Up to $119 per day for each failure (each employee is a separate violation)
Requirement: Failure to provide summary of benefits and coverage (SBC)
2019 Penalty Amount: Up to $1,156 per failure
2020 Penalty Amount: Up to $1,176 per failure
If you have any questions, please reach out to your Sec. 125 administrator or your Brown & Brown Account Team.
The information the newsletter is intended to provide accurate and authoritative information on legislative and market news. It is distributed with the understanding that Brown & Brown is not rendering tax or legal advice. Employers should consult their attorneys or tax advisors for specific compliance information and assistance.