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Topic: Asking for a Friend: Midyear Election Change Edition
Offering benefits to employees on a pre-tax basis is only allowed under a Section 125 plan, and those rules limit when employees may change their annual elections.
Join us for a brief refresher on the midyear election change event rules — both mandatory and permissible. We’ll also discuss common employer pitfalls and practical implications of administering qualifying events.
Note: The speakers will answer as many questions as possible during the webinar. If your question isn’t answered, reach out to your advisor for further assistance.
Date/Time: May 15, 2024
3:00 to 4:00 p.m. ET
This program is pending approval for 1.0 (general) recertification credit hours toward PHR, SPHR and GPHR recertification through the HR Certification Institute. For more information about certification or recertification, visit the HR Certification Institute website at hrci.org.
Note: Those listening to a recorded webinar will not be eligible for credit.
Unless an exception applies, each ERISA group health plan must file an annual report with the DOL via Form 5500 (Annual Return/Report of Employee Benefit Plan). The Form 5500 must be submitted electronically by the last day of the seventh month following the end of the plan year (e.g., July 31 for a calendar-year plan). A two-and-a-half-month extension of the Form 5500 due date will be automatically granted by filing a Form 5558 (Application for Extension of Time to File Certain Employee Plan Returns) on or before the normal due date.
The 2023 Form 5500 and instructions are accessible on the DOL website.
One important exception to the Form 5500 filing is for plans with fewer than 100 participants as of the beginning of the plan year that are unfunded, fully insured, or a combination of unfunded and fully insured. “Unfunded” refers to a plan that pays benefits from the employer’s general assets (and not through a trust or other funding vehicle). Additionally, group health plans sponsored by a government or church organization typically do not require a Form 5500 filing since these plans are not subject to ERISA.
Plans must maintain sufficient records to document information required by the plan’s Form 5500 for at least six years after the filing date of the Form 5500. As a practical matter, this means that records should be retained for approximately eight years from their creation, which considers the plan year for which the form is being filed and the subsequent filing period.
For further information on the Form 5500 filing and content, please ask your broker or consultant for a copy of the NFP publication Form 5500: A Guide for Employers.
The ACA imposed the PCOR fee on health plans to support clinical effectiveness research. The PCOR fee, which applies to plan years ending on or after October 1, 2012, and before October 1, 2029, is generally due by July 31 of the calendar year following the close of the plan year.
PCOR fees must be reported annually on Form 720, Quarterly Federal Excise Tax Return, for the second quarter of the calendar year. Plan sponsors that are subject to PCOR fees and no other types of excise taxes should file Form 720 only for the second quarter.
Generally, the PCOR fee is assessed based on the number of covered lives, which include enrolled employees, retirees, and COBRA participants and their enrolled spouses, domestic partners, and dependents. The fee for policy and plan years ending on or after October 1, 2022, but before October 1, 2023, is calculated based on the applicable rate of $3.00, multiplied by the average number of covered lives under the plan. For plan years ending on or after October 1, 2023, but before October 1, 2024, the fee is increased to the applicable rate of $3.22, multiplied by the average number of covered lives under the plan.
As a reminder, the insurer is responsible for filing and paying the fee for a fully insured plan. The employer plan sponsor is responsible for filing for a self-insured plan, including an HRA or point solution program that provides medical care. But stand-alone dental or vision plans and health FSAs that qualify as excepted benefits would not be subject to the PCOR fee.
According to the IRS, the fee is tax-deductible as a business expense. ERISA plan assets should not be used to pay the fee.
For further information regarding the PCOR fee and filing, please ask your broker or consultant for a copy of the NFP publication ACA: A Quick Reference Guide to the PCOR Fee.
The CAA, 2021 requires fully insured and self-insured group health plans to annually report certain information regarding prescription drug and healthcare spending to CMS. Reporting for the 2023 calendar year (termed the “reference year”) is due by June 1, 2024.
As in prior years, the data must be submitted to the Health Insurance Oversight System (HIOS) in files and formats specified by CMS. Detailed information regarding the reporting requirements, including the 2023 RxDC Instructions, FAQs, and a HIOS portal user guide, is available on the CMS website.
Employers should work closely with their carriers, TPAs, PBMs, and other vendors, as applicable, to ensure the required information is provided timely and accurately. In some cases, an employer that sponsors a self-insured plan may need to submit data directly to HIOS. In other situations, the carrier, TPA, or other service provider may agree to submit information on behalf of the plan. However, the employer will still need to provide certain data (e.g., the average monthly premium paid by employers and employees), and the employer should respond promptly to requests from service providers for requested information. Failure to timely respond to a request may result in the employer being required to submit the RxDC data on their own. Employers should also request written confirmation from their carrier, TPA, or service provider of the timely RxDC reporting submission.
Individuals who were HSA-eligible in 2023 have until the tax filing deadline, April 15, 2024, to make or receive 2023 HSA contributions. The 2023 HSA contribution limit is $3,850 for self-only HDHP coverage and $7,750 for any tier of HDHP coverage other than self-only. Employer HSA contributions, if any, are included in the applicable limit. Those aged 55 and older are permitted an additional catch-up contribution of $1,000. As indicated below, April 15, 2024, is also the deadline for individuals to remove 2023 excess contributions (i.e., contributions exceeding their permitted maximum) from their HSA to avoid potential penalties.
Under the HSA monthly contribution rule, an individual’s maximum 2023 annual contribution is limited by the number of months they were HSA-eligible during the calendar year. HSA eligibility is determined on the first day of each month. As a reminder, to be HSA-eligible, an individual must be covered by a qualified HDHP, not be eligible to be claimed as a tax dependent of another, not be covered by Medicare or other impermissible coverage (i.e., coverage providing benefits before the statutory HDHP minimum deductible is met, absent a specific exception).
There is an exception to the monthly contribution rule known as the full or last month contribution rule. Under the full contribution rule, an individual who was HSA-eligible on December 1, 2023, is permitted to contribute up to the full statutory limit for the year based on their HDHP coverage tier. However, if the individual does not remain HSA-eligible through December of the following year (i.e., December 2024), the amount exceeding their permitted maximum under the monthly contribution rule becomes taxable as income and subject to an additional 10% penalty tax.
Individuals who contributed more than their allowable HSA contribution amount for 2023 should remove the excess contributions and associated earnings by April 15, 2024. The excess and earnings will be subject to income tax. If an individual fails to remove the excess contribution by the income tax filing deadline, an additional 6% penalty applies for each tax year the excess remains in the account. Accordingly, employees who were not eligible for a contribution or contributed more than their permitted maximum through their employer’s cafeteria plan should notify their employer and work with the HSA custodian to remove the excess contribution. Employees should consult with their tax advisors for specific tax advice and guidance.
For further information, please see IRS Publication 969, and ask your broker or consultant for a copy of the NFP publication Health Savings Accounts: A Guide for Employers.
Applicable large employers (ALEs) (employers with 50 or more full-time employees (FTEs), including full-time equivalent employees in the prior year) must comply with IRC Section 6056 reporting in early 2024. Specifically, ALEs must complete and distribute Form 1095-C to full-time employees by March 1, 2024. The form should include details regarding whether the employee was offered minimum value, affordable coverage during 2023.
The forms may be mailed, electronically delivered, or delivered by hand (although proof of delivery in some manner is recommended). Remember that there is a special rule for electronic delivery of Form 1095-C: the employee must affirmatively consent to delivery of the form. Consent to receive Form 1095-C in electronic format must be given in a manner that reasonably demonstrates that the recipient is able to access the statement in the electronic format in which it will be furnished. Alternatively, consent may be given in a paper document that is confirmed electronically.
Employers who sponsored a self-insured plan during 2023 must comply with Section 6055 reporting in 2024. Self-insured ALEs must complete Section III of Form 1095-C detailing which months the employee (and any applicable spouse and dependents) had coverage under the employer's plan. If the self-insured employer has fewer than 50 FTEs, it must complete and distribute a Form 1095-B with such information. Again, the forms must be delivered to employees by March 1, 2024.
An alternative method for distributing Form 1095-B is available to self-insured employers with fewer than 50 FTEs. These employers are permitted to post a clear and conspicuous notice on their website of the document's availability and the necessary contact information to request it. Any such request must be fulfilled within 30 days. This alternative is not available for Form 1095-C. Employers must also file these forms with the IRS by February 28, 2024, if filing by paper, and April 1, 2024, if filing electronically. The filing must include the transmittal Form 1094-C (if filing Forms 1095-C) or Form 1094-B (if filing Forms 1095-B). Importantly, beginning this year, employers that file 10 or more returns of any type (e.g., counting Forms 1095, W-2, and 1099 together) to the IRS in a calendar year must do so electronically absent a hardship waiver. Please see our article for more information on this change.
Additionally, employers with employees located in states with individual mandates may also have to comply with state reporting requirements and should be aware of the applicable deadlines. For further information on ACA and/or state reporting requirements, please ask your broker or consultant for a copy of the NFP publications ACA: Employer Mandate Reporting Requirements and State Individual Mandate Reporting Requirements.
2023 Form 1094-C »
2023 Form 1095-C »
2023 Form 1094-B »
2023 Form 1095-B »
2023 Instructions for Forms 1094-C and 1095-C »
2023 Instructions for Forms 1094-B and 1095-B »
Annually, large employers must report the aggregate cost of group health coverage provided to employees on Form W-2. The coverage must be reported on a calendar-year basis, regardless of the ERISA plan year or policy year. The reporting is intended for informational purposes.
Currently, this ACA requirement applies to employers that filed 250 or more Form W-2s in the prior calendar year. Employer aggregation rules do not apply for this purpose. In other words, the number of Form W-2s is calculated separately without consideration of controlled groups. Self-insured plans that are not subject to COBRA (including church plans), multiemployer, plans and Indian tribal governments are exempt from the Form W-2 reporting requirement.
For more information, please ask your broker or consultant for a copy of our ACA: Form W-2 Reporting Requirement publication.
Hawaii’s Department of Labor and Industrial Relations recently announced the 2024 Temporary Disability Insurance (TDI) maximum weekly benefit and contribution amounts.
The weekly benefit amount remains 58% of an employee's average weekly wages. However, the maximum benefit amount was increased to $798 per week in 2024 from $765 per week in 2023.
Further, an employer may withhold TDI contributions of one-half the premium cost but not more than 0.5% of the employee's weekly wage, with the maximum not exceeding $6.87 per week in 2024 (increased from $6.59 per week in 2023).
Employers with employees in Hawaii should consult with their payroll vendors and disability insurers to ensure that the appropriate contributions will be withheld starting January 1, 2024, and that the new maximum weekly benefit is reflected for the claims paid in 2024.
For further information, please ask your NFP consultant for a copy of our Quick Reference Chart: Statutory Disability & Paid Family and Medical Leave Programs publication.
State of Hawaii – 2024 Maximum Weekly Wage Based and Maximum Weekly Benefit Amount »
The California Employment Development Department (EDD) has published the 2024 maximum weekly benefits amount and employee contribution rate for the State Disability Insurance Program (SDI), which is comprised of disability insurance (DI) and paid family leave (PFL), effective January 1, 2024.
The maximum weekly benefit remains the same as in 2023 at $1,620. Further, the 2024 employee contribution rate for the DI and PFL increased from 0.9% to 1.1%.
As an important reminder, effective January 1, 2024, the SDI taxable wage cap was lifted (i.e., the SDI employee contribution rate is applied against all earnings without a limit).
The Transparency in Coverage Final Rule (TiC) requires non-grandfathered group health plans and carriers to make personalized out-of-pocket cost information available to participants through an internet-based self-service tool. The purpose of the self-service tool is to provide participants with real-time, accurate estimates of their cost-sharing liability for healthcare items and services from different providers so they can shop and compare healthcare costs. The format may be like an explanation of benefits, but the participant receives the information prior to receiving care.
Importantly, the TiC provided phased-in effective dates for the internet self-service tool requirement. For 2023 plan years, 500 “shoppable” items and services were required to be available through the tool. For plan years beginning on or after January 1, 2024, all items and services, including prescription drugs and durable medical equipment, must be made available.
As a practical matter, most group health plan sponsors have arranged with their carriers or TPAs to assist with fulfilling these requirements. Fully insured plans can contract with their carrier to assume liability for the tool disclosures. Self-insured plans can contract with TPAs or other vendors but remain responsible for satisfying the requirements. Accordingly, group health plan sponsors should consult with their carriers or TPAs to ensure full implementation of the self-service tool requirement is on schedule.
For further information, please review the Transparency in Coverage Final Rule, Fact Sheet, and our prior FAQ.
The Transparency in Coverage Final Rule (TiC) requires non-grandfathered group health plans and carriers to make personalized out-of-pocket cost information available to participants through an internet-based self-service tool. The purpose of the self-service tool is to provide participants with real-time, accurate estimates of their cost-sharing liability for healthcare items and services from different providers so they can shop and compare healthcare costs. The format may be like an Explanation of Benefits, but the participant receives the information prior to receiving care.
Importantly, the TiC provided phased-in effective dates for the internet self-service tool requirement. For 2023 plan years, 500 “shoppable” items and services were required to be available through the tool. For plan years beginning on or after January 1, 2024, all covered items and services, including prescription drugs and durable medical equipment, must be made available.
As a practical matter, most group health plan sponsors have arranged with their carriers or TPAs to assist with fulfilling these requirements. Fully insured plans can contract with their carrier to assume liability for the tool disclosures. Self-insured plans can contract with TPAs or other vendors but remain responsible for satisfying the requirements. Accordingly, group health plan sponsors should consult with their carriers or TPAs to ensure full implementation of the self-service tool requirement is on schedule.
For further information, please review the Transparency in Coverage Final Rule, Fact Sheet and our prior December 20, 2022, FAQ.
On November 15, 2023, the Employment Department announced the Paid Family and Medical Leave Insurance (Paid Leave Oregon) contribution rates for 2024. The Paid Leave Oregon contribution rate for 2024 is 1% of employee wages up to the federal Social Security taxable wage maximum ($168,600 in 2024). Both employers and employees pay contributions to the Paid Leave Oregon Trust Fund, which are divided between employees and employers, with 60% of the rate paid by employees and 40% by employers.
Oregon Employment Department Announces 2024 Rates for Paid Leave Oregon and Unemployment Insurance »
NFP Corp. and its subsidiaries do not provide legal or tax advice. Compliance, regulatory and related content is for general informational purposes and is not guaranteed to be accurate or complete. You should consult an attorney or tax professional regarding the application or potential implications of laws, regulations or policies to your specific circumstances.