New IRS Guidance Throws a Pass to Certain Universities That Pay Coaches Compensation in Excess of $1,000,000

In Notice 2019-09 (“Notice”), the IRS provides relief from the new excise tax to certain colleges and universities that pay their “covered employees” more than $1 million per year or pay excess parachute payments.  Specifically, the Notice provides that the new excise tax under Code Section 4960 does not apply to a governmental entity (including a state college or university) that is not tax-exempt under Code Section 501(a) and does not exclude income under Code Section 115(l).  Therefore, those state universities that do not rely on either of these statutory exemptions from income are not subject to Code Section 4960 even if they pay their coaches (or other covered employees) more than $1 million.   Read More ›

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EEOC Removes 30% Incentive Safe Harbor from Wellness Program Regulations

The Equal Employment Opportunity Commission (the “EEOC”) issued final rules, published in the Federal Register on December 20, 2018, that remove the 30% incentive provisions from the EEOC’s wellness program regulations governing the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”).  The final rules are effective January 1, 2019.  As a reminder, the ADA rules previously provided that a wellness program that asks questions about employees’ health or includes medical examinations is not voluntary if the incentive to encourage employee participation in the program exceeds 30% of the total cost of self-only coverage.  The GINA rules previously provided that an employer may not offer an incentive that exceeds 30% of the total cost of self-only coverage to an employee to encourage a spouse’s participation in a health risk assessment under a wellness program. Read More ›

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Texas Judge Declares the Affordable Care Act Unconstitutional – What’s Next?

As reported in our “2018 End of Year Plan Sponsor “To Do” List (Part 1) Health & Welfare,” the Tax Cuts and Jobs Act repealed the individual mandate, which spawned a lawsuit challenging the whole of the Affordable Care Act (“ACA”).  The lawsuit, filed in the Northern District of Texas in February 2018 by the Texas and Wisconsin Attorneys General, leading a 20-state coalition, alleged that because the repeal of the individual mandate “renders legally impossible the Supreme Court’s prior savings construction of the Affordable Care Act’s core provision – the individual mandate – the Court should hold that all of the ACA is unlawful and enjoin its operations.” The plaintiffs argued that not only is the individual mandate now unlawful, but also that this core provision is not severable from the rest of the ACA. Read More ›

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A Holiday Surprise – IRS Extends Certain ACA Reporting Deadlines and Transition Relief

The IRS delivered welcome news to employers preparing to meet the Affordable Care Act’s (“ACA”) information reporting deadlines in early 2019 for the 2018 calendar year. In Notice 2018-94 (the “Notice”), the IRS extended the employer’s deadline to furnish Forms 1095-B and 1095-C to employees. The new deadlines are provided below.

Original Distribution Deadline Extended Distribution Deadline
Form 1095-B (to employees) January 31, 2019 March 4, 2019
Form 1095-C (to employees) January 31, 2019 March 4, 2019

It is important to note that the Notice does not extend the deadline for filing Forms with the IRS. The deadline to file with the IRS remains February 28, 2019 (for paper filings) and April 1, 2019 (for electronic filings). Read More ›

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Reminder for SBCs – Yes, Please!

The Affordable Care Act’s requirement that group health plans provide summaries of benefits and coverage (“SBCs”) to applicants and enrollees at various times is not new.  Nevertheless, because of the steep penalties for noncompliance (i.e., $1,000 per failure with respect to each participant or beneficiary and an excise tax of $100 per day with respect to each individual to whom such failure relates) we think it’s worthy of another blog post.  See our July 19, 2012 Newsletter Summary of Benefits and Coverage for Group Health Plans and follow-up August 11, 2016 blog post Departments Finally Publish Updated SBC Template and Instructions for additional background information. Read More ›

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Making Limits Greater Again – IRS Issues Guidance on Cost of Living Adjustments

The IRS recently announced cost-of-living adjustments for 2019 in Notice 2018-83 and related guidance.  The key dollar limits for qualified retirement plans and health and welfare plans are noted below.

Qualified Retirement Plan Dollar Limits

  2018 2019
Limit on Section 401(k) deferrals (Section 402(g)) $18,500 $19,000
Dollar limitation for catch-up contributions (Section 414(v)(2)(B)(i)) $6,000 $6,000
Limit on deferrals for government and tax-exempt organization deferred compensation plans (Section 457(e)(15)) $18,500 $19,000
Annual benefit limitation for a defined benefit plan (Section 415(b)(1)(A)) $220,000 $225,000
Limitation on annual contributions to a defined contribution plan (Section 415(c)(1)(A)) $55,000 $56,000
Limitation on compensation that may be considered by qualified retirement plans (Section 401(a)(17)) $275,000 $280,000
Dollar amount for the definition of highly compensated employee (Section 414(q)(1)(B)) $120,000 $125,000
Dollar amount for the definition of a key employee in a top-heavy plan (Section 416(i)(1)(A)(i)) $175,000 $180,000
Dollar amount for determining the maximum account balance in an ESOP subject to a five-year distribution period (Section 409(o)(1)(C)(ii)) $1,105,000 $1,130,000
SIMPLE retirement account limitation (Section 408(p)(2)(E)) $12,500 $13,000
Social Security Taxable Wage Base $128,700 $132,900

Health and Welfare Plan Dollar Limits

  2018 2018
Annual Cost Sharing Limit (self-only coverage) $7,350 $7,900
Annual Cost Sharing Limit (other than self-only coverage) $14,700 $15,800
HDHP Out-of-Pocket Maximum (self-only coverage) $6,650 $6,750
HDHP Out-of-Pocket Maximum (family coverage) $13,300 $13,500
Annual HDHP Deductible (self-only coverage) Not less than $1,350 Not less than $1,350
Annual HDHP Deductible (family coverage) Not less than $2,700 Not less than $2,700
Maximum Annual HSA Contributions (self-only coverage) $3,450 $3,500
Maximum Annual HSA Contributions (family coverage) $6,900 $7,000
Maximum HSA Catch-Up Contribution $1,000 $1,000
Health Flexible Spending Account Maximum $2,650 $2,700
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Zombie Benefits – Are Health Reimbursements Arrangements (“HRAs”) Back From the Dead?

The Affordable Care Act (“ACA”) has not been kind to health reimbursement arrangements (“HRAs”).  Many employers got rid of HRAs, or integrated them with a major medical plan, in order to avoid significant penalties under the ACA.  At one point it appeared that after-tax HRAs did not have to comply with the ACA.  However, as noted in our March 11, 2015 SW Benefits Blog, “IRS Issues More Guidance On Employers That Pay For Individual Health Insurance Policies for Employees – Gives Limited Relief to Small Employers,” the IRS clarified that even after-tax HRAs are also subject to the ACA rules.

The proposed regulations that were published in the Federal Register on October 29, 2018 breathe new life into HRAs.  Read More ›

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IRS Issues Updated Tax Notice for Qualified Retirement Plan Distributions

The Internal Revenue Service (“IRS”) recently released guidance that contains two updated safe harbor notices that retirement plans may use to satisfy the requirements of the Internal Revenue Code (the “Code”) to provide an advance notice to a participant prior to the date on which the participant receives a distribution that meets the requirements for an eligible rollover distribution.  This notice is commonly referred to as the “402(f) Notice” after the relevant section of the Code that requires the notice to be provided.

The IRS guidance contains two model notices, one that may be used when distributions are not from a Roth account and a second model notice that may be used for distributions that are from a Roth account. Read More ›

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A New Perspective on Student Loan Repayment Benefits

On August 17, 2018, the Internal Revenue Service (the “Service”) published a Private Letter Ruling (the “PLR”) describing a unique student loan repayment program in the context of a qualified retirement plan.

Proposed Student Loan Repayment Program

As described in the PLR, an Employer sponsors a Section 401(k) defined contribution plan that permits elective deferrals. The plan requires the Employer to make a matching contribution equal to 5% of an eligible employee’s compensation for a given pay period if such employee makes an elective contribution of at least 2% of his or her compensation during the same period.

The Employer proposed to amend the plan to incorporate a student loan repayment program (the “Program”). Read More ›

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New Plan Year, New Wellness Program – Some Things to Keep in Mind

As a follow-up to our recent blog Count Down to Open Enrollment – Some Quick Thoughts, below is a little more detail on how seemingly simple wellness program design changes can have significant legal consequences.

  • HIPAA – Employers feeling extra generous this plan year may want to increase their wellness program’s financial incentive.  It is important that such employers remain mindful of the limitations under HIPAA, i.e., 30% of the total cost of health plan coverage, or 50% for programs designed to prevent or reduce tobacco use.  As noted in our previous blog “Wellness Rules Under the ADA – Will There Ever Be Certainty?
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