IRS Finalizes Regulations Simplifying 83(b) Filing Requirements

On July 23rd of last year, I blogged on a set of proposed regulations eliminating the requirement that a taxpayer attach a copy of his or her Section 83(b) election to their individual tax return.  This July, the IRS made the proposed rule final and the final regulations eliminate the requirement that a taxpayer attach a copy of their Section 83(b) election to their tax return for the year in which the restricted property was transferred. This change should be welcomed by taxpayers who file electronic federal tax returns because commercial software does not consistently allow taxpayers to attach a copy of the Section 83(b) election to an electronically filed return. Read More ›

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Transitioning to Coverage: Three Things to Know About the New Transgender Healthcare Regulations

On May 18, 2016, the Department of Health and Human Services (“HHS”) issued final regulations implementing the nondiscrimination provisions of the Affordable Care Act. As we discussed in our March 30, 2016 blog, the rule prohibits discrimination on the basis of sex and gender identity in the provision of health programs.  In application, the final regulations prohibit the categorical refusal of coverage to transgender participants and require that individuals be treated consistent with their self-selected gender identity.

  1. When are the final regulations effective?

The final rule generally is effective July 18, 2016. However, group health plans and health insurance need not be modified to comply with the new nondiscrimination rules until the first day of the first plan year (in the individual market, policy year) beginning on or after January 1, 2017. Read More ›

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Five Lawsuits Filed Against DOL’s Fiduciary Rule (so far)

As we previously discussed in our May 19, 2016 SW Benefits Update, the Department of Labor (“DOL”) recently issued final regulations on fiduciary conflicts of interest in retirement programs.  Since 2010 when the DOL first proposed regulations addressing self-interested advice to retirement plan and IRA participants, the rule has been widely criticized by some in the financial services industry as being overly broad.

Both Congress and industry and trade groups have been unhappy with the DOL’s rulemaking in this area and have threatened further action since the rule was first proposed. On May 24, the Senate passed a resolution to block the fiduciary rule, which President Obama vetoed on June 8. Read More ›

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EAPs That Meet Four Requirements May Avoid Application of Health Care Reform

Benefits provided through an employee assistance program (“EAP”) may be considered group health plan coverage, which would subject the EAP to the health care reform requirements mandated by HIPAA and the Health Care Reform Act, unless the EAP meets the criteria for being “excepted benefits.”

In September 2013, the IRS, HHS, and DOL collectively issued Notice 2013-54, which stated that, through 2014, benefits provided through an EAP were considered excepted benefits if the EAP did not provide “significant benefits in the nature of medical care.”  The notice did not elaborate on the terms “significant” or “medical care,” but the notice permitted employers to use a reasonable, good faith interpretation of these terms.  Read More ›

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Final Regs on Health Care Reform Large Employer Penalties May Help Employers Who Hire Employees From Staffing Firms

As explained in my Checklist for Employers, a large employer will have to pay a subsection (a) penalty for any month if it does not offer “minimum essential coverage” (“MEC”) to substantially all (i.e., 70% for 2015 and 95% for future years) of its full-time employees and their dependents if one or more full-time employees receive a premium tax credit to help pay for coverage on a Marketplace.

For purposes of the forgoing rule, employers must take into consideration each of their common law employees. Oftentimes, employees that an employer hires from a staffing firm may be the employer’s common law employees.  Read More ›

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IRS Clarifies Conditions that Constitute a Substantial Risk of Forfeiture Under Section 83

The IRS recently released final regulations (“Final Regulations”) clarifying the conditions that constitute a substantial risk of forfeiture for purposes of Section 83 of the Internal Revenue Code.  As some of you know, Section 83 generally provides that property transferred in connection with the performance of services will be not be taxed until the date on which the property is no longer subject to a “substantial risk of forfeiture.”  Common “substantial risks of forfeiture” for purposes of Section 83 are continued employment (i.e., time-based vesting conditions) and performance (i.e., performance-based vesting conditions).

The Final Regulations clarify that (i) except as expressly provided in the regulations, a substantial risk of forfeiture may be established only though service conditions related to the purpose of the property transfer, (ii) in determining whether a substantial risk of forfeiture exists, both the likelihood that the forfeiture event will occur and the likelihood that the forfeiture event will be enforced must be considered, (iii) except as expressly provided in the regulations, transfer restrictions (including restrictions that carry the potential for disgorgement of the transferred property) do not constitute a substantial risk of forfeiture, and (iv) a substantial risk of forfeiture due to liability under the SEC short-swing profit rules do not extend beyond the six month period described in the SEC rules. Read More ›

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What the heck is MEC?

Health care reform is confusing.  There are so many new terms and concepts.  One concept that has been getting a lot of attention lately is MEC.  MEC stands for “minimum essential coverage” and is a fancy name for basic health coverage. MEC is important for two main reasons —

  • First, starting in 2014, individuals who don’t have MEC, and don’t qualify for an exemption, will have to pay a penalty tax.
  • Second, starting in 2015, large employers who don’t offer MEC to substantially all of their full-time employees and their dependents (i.e., natural and adopted children) will have to pay a nasty penalty under Code Section 4890H(a) (the “subsection (a) penalty”).
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Final Regs on Health Care Reform Large Employer Penalties Keep Many Transition Rules

The proposed regulations included many helpful transition rules.  Although I hoped that the transition rules would be extended, I really didn’t think they would be.  The good news is — I thought wrong.  A package of limited transition rules that applied to 2014 under the proposed regulations has been extended to 2015, including:

  • Special 6 month rule for determining status as a large employer:  Rather than being required to use the full 12 months of 2014 to measure whether it has 50 full-time employees (or equivalents), an employer may determine its status as a large employer by using a period of at least six consecutive calendar months (as chosen by the employer) during 2014.
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Final Regs on Health Care Reform Large Employer Penalties Include New Transition Relief Easing Employers Into Compliance

The IRS issued final regulations implementing the employer shared responsibility penalties on February 12, 2014.  As promised in an earlier post, I have updated our Checklist for Employers to reflect the final regulations.  Although the Checklist explains many of the transition rules, below is a summary of what I think are two of the most important new rules:

  • Transition relief for employers with 50-99 employees in 2014:  The large employer penalties will generally apply to employers with 100 or more full-time employees starting in 2015 and employers with 50 or more full-time employees starting in 2016. This new rule is great news for employers with 50-99 employees in 2014. 
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