The 95 Percent Test: Gearing up for Another Round of Employer Shared Responsibility Penalties

Late last year, the Internal Revenue Service (the “Service”) began enforcing penalties with respect to failures to comply with the employer shared responsibility provisions of Section 4980H of the Internal Revenue Code.  In the coming months, the Service is expected to begin assessing penalties with respect to such failures occurring in calendar year 2016.  These penalties are of two varieties:

  1. Section 4980H(a) penalties are assessed for any month in which an applicable large employer (“ALE”) does not offer minimum essential coverage to substantially all (95% for 2016 and future years) of its full-time employees and their dependents and at least one full-time employee receives a premium tax credit. 
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Congress Eases Restrictions on Hardship Distributions

We previously reported on certain changes made to the hardship distribution rules for qualified retirement plans by the Tax Cuts and Jobs Act.  Since then, Congress has made additional and significant changes to those same hardship distribution rules by the passage of the Bipartisan Budget Act (the “BBA”).  The BBA loosens various restrictions on a participant’s ability to request and receive a hardship distribution.  In particular, the BBA provides:

  1. Effective for plan years beginning after December 31, 2018, participants may receive hardship distributions comprised of employee elective deferrals, employer contributions and earnings on both.  Traditionally, hardship distributions were limited to employee elective deferrals and did not include qualified nonelective contributions, qualified matching contributions, safe harbor contributions or earnings on the same.
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IRS Announces Reduction in Family HSA Contribution Limit for 2018

In Revenue Procedure 2018-18, the Internal Revenue Service announced a reduction in the HSA contribution limit for family coverage in 2018 to $6,850 from $6,900.  The self-only HSA contribution limit for 2018 remains unchanged at $3,450.

This change is a technical result of the Tax Cuts and Jobs Act, which adjusted the method for calculating inflation. Although the reduction may appear somewhat small, it may cause certain employees to inadvertently contribute over the limit.  For instance, an employee who front-loads his or her annual contribution may have already exceeded the new limit.

The IRS has not issued any transition relief for excess contributions made in 2018 by employees relying on the original contribution limit announced in Revenue Procedure 2017-37Read More ›

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Approaching Deadlines for Affordable Care Act Reporting

As we recently reported in our “2017 End of the Year Plan Sponsor To Do List,” applicable large employers must continue to submit to the IRS and to employees information regarding offers of health coverage made to full-time employees in 2017.

The IRS recently published Notice 2018-06 (the “Notice”), which contains some relief with respect to the required reporting.  In particular, the Notice extends the deadline to distribute Forms 1095-C to employees and continues the application of good faith transition relief.  The Notice does not extend the deadline for filing Forms 1094-C or 1095-C with the IRS.

Extension of Deadline to Furnish Forms 1095-C to Employees

The Notice extends the deadline for furnishing Forms 1095-C to employees from January 31, 2018 to March 2, 2018 Read More ›

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IRS Announces 2018 Cost of Living Adjustments

This post has been updated as of June 7, 2018, to reflect the revised maximum annual HSA contribution limit for family coverage set out in Revenue Procedures 2018-18 and 2018-27.

The IRS recently announced cost-of-living adjustments for 2018 in Notice 2017-64 and related guidance.  The key dollar limits for qualified retirement plans and health and welfare plans are noted below.

Qualified Retirement Plan Dollar Limits

  2017 2018
Limit on Section 401(k) deferrals (Section 402(g)) $18,000 $18,500
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)) $18,000 $18,500
Annual benefit limitation for a defined benefit plan (Section 415(b)(1)(A)) $215,000 $220,000
Limitation on annual contributions to a defined contribution plan (Section 415(c)(1)(A)) $54,000 $55,000
Limitation on compensation that may be considered by qualified retirement plans (Section 401(a)(17)) $270,000 $275,000
Dollar amount for the definition of highly compensated employee (Section 414(q)(1)(B)) $120,000 $120,000
Dollar amount for the definition of a key employee in a top-heavy plan (Section 416(i)(1)(A)(i)) $175,000 $175,000
Dollar amount for determining the maximum account balance in an ESOP subject to a five-year distribution period (Section 409(o)(1)(C)(ii)) $1,080,000 $1,105,000
SIMPLE retirement account limitation (Section 408(p)(2)(E)) $12,500 $12,500
Social Security Taxable Wage Base $127,200 $128,700

Health and Welfare Plan Dollar Limits

  2017 2018
Annual Cost Sharing Limit (self-only coverage) $7,150 $7,350
Annual Cost Sharing Limit (other than self-only coverage) $14,300 $14,700
HDHP Out-of-Pocket Maximum (self-only coverage) $6,550 $6,650
HDHP Out-of-Pocket Maximum (family coverage) $13,100 $13,300
Annual HDHP Deductible (self-only coverage) Not less than $1,300 Not less than $1,350
Annual HDHP Deductible (family coverage) Not less than $2,600 Not less than $2,700
Maximum Annual HSA Contributions (self-only coverage) $3,400 $3,450
Maximum Annual HSA Contributions (family coverage) $6,750 $6,900*
Maximum HSA Catch-Up Contribution $1,000 $1,000
Health Flexible Spending Account Maximum $2,600 $2,650

* The maximum annual HSA contribution for family coverage was reduced from $6,900 to $6,850 by Revenue Procedure 2018-18.  Read More ›

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Transgender Benefits Revisited?

In a series of tweets published on July 26, 2017, President Trump announced a ban on transgender service in the armed forces.  In the wake of this reversal of government policy, employers may question the current state of transgender benefits and whether additional changes are forthcoming.

On May 18, 2016, the Department of Health and Human Services (“HHS”) issued final regulations implementing the nondiscrimination provisions of the Affordable Care Act (“Section 1557”), which prohibit, in part, the categorical refusal of coverage to transgender participants and require that individuals be treated consistent with their self-selected gender identity.  As a result of these changes, many employer group health plans started covering an array of transgender benefits ranging from mental health counseling to gender reassignment surgery. Read More ›

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“Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs” – House Passes Financial Reform Bill

On June 8, the House of Representatives passed the Financial CHOICE Act of 2017 in a bid to reform the financial regulatory system created by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The bill, which passed the chamber on a vote of 233 to 186, has received support from the Trump Administration but is expected to face resistance in the Senate. 

If passed and signed into law, the bill would relax Dodd-Frank capital requirements, scale back the authority of the Consumer Financial Protection Bureau and repeal the Volcker Rule, which limits the ability of banks to engage in proprietary trading.        Read More ›

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Full Steam Ahead: IRS Moves Forward to Collect Affordable Care Act Penalties

As efforts to reform the Affordable Care Act (the “ACA”) stall in Congress, a recent government report suggests that the Internal Revenue Service is preparing to identify and collect employer shared responsibility penalties.

The Treasury Inspector General for Tax Administration issued the report, Affordable Care Act: Assessment of Efforts to Implement the Employer Shared Responsibility Provision, two weeks after House leadership retracted a bid to repeal and replace the ACA.

The report indicates that the IRS processed over 400,000 Forms 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) and nearly 110 million Forms 1095-C (Employer-Provided Health Insurance Offer and Coverage) as of last October.  Read More ›

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A Rule Deferred: Department of Labor Delays Implementation of Fiduciary Rule

As we previously discussed in our May 19, 2016 SW Benefits Update, the Department of Labor (the “Department”) previously issued final regulations on fiduciary conflicts of interest in retirement programs.  The rules, which focus on curbing self-interested advice to retirement plan and IRA participants, were slated to become effective April 10, 2017.

However, the Department has proposed a delay to the rules of at least 180 days beyond the original effective date and will seek public comment on the rules.  The proposed deferral arises from an executive memorandum dated February 3, 2017, in which President Trump instructs the Department to conduct an “updated economic and legal analysis concerning the likely impact of the fiduciary rule.”  That memorandum signals that the fiduciary rule “may not be consistent with the policies of [the Trump] Administration.”  Accordingly, the fate of the rules in their present form remain uncertain. Read More ›

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A Little Breathing Room: IRS Extends ACA Reporting Deadline and Good Faith Penalty Relief

The IRS delivered welcome news to employers gearing up to meet the Affordable Care Act’s (“ACA”) information reporting deadlines for the 2016 calendar year. In Notice 2016-70, the IRS extended the deadline to furnish Forms 1095-B and 1095-C to employees.  The new deadlines are provided below.

  Old Distribution Deadline New Distribution Deadline
Form 1095-B (to employees) January 31, 2017 March 2, 2017
Form 1095-C (to employees) January 31, 2017 March 2, 2017

Importantly, the Notice does not extend the deadline for filing Forms with the IRS.  The deadline to file with the IRS remains February 28, 2016 (for paper filings) and March 31, 2017 (for electronic filings). Read More ›

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