EAPs Pose Compliance Complications

Employee Assistance Plans (EAPs) are popular employer-sponsored plans that help employees address personal and work related problems that impact their health or job performance. Benefits provided by EAPs are varied in both scope and breadth. Benefits may include:

  • Mental health referral services
  • Mental health counseling
  • Financial counseling
  • Drug or alcohol abuse counseling
  • Assistance with addressing major life events.

The wide variety of EAPs allow employers to find a plan that is both affordable and of value to employees. But, this variety also makes it difficult to determine the compliance requirements that surround an EAP. And, sometimes EAP services may even be included in life or disability packages.

ERISA

To determine if an EAP is subject to ERISA, it depends on whether the plan provides medical care. If a plan provides medical care it is subject to ERISA. The federal Department of Labor (DOL) has issued advisory opinions that an EAP with trained counselors who provide counseling services is providing medical care. Of note, the trained counselors do not have to be doctors or psychologists to meet this threshold.

A plan that only provides referrals to counselors may not be deemed to “provide medical care” and may, therefore, not be an ERISA plan. However, if the service providers that make the referrals are trained in a field related to the EAP’s services, this could mean that the plan would be deemed to provide medical benefits.

ERISA also applies only when a plan is “established or maintained” by an employer. If the employer doesn’t contribute to the cost of the EAP or otherwise endorse the EAP, it may not be considered as “established or maintained” by the employer.

If a determination is made that the plan is subject to ERISA, then the plan is subject to ERISA’s plan document, Summary Plan Description (SPD) requirements and other ERISA provisions. Of note, information provided by the EAP vendor may not be sufficient to meet ERISA requirements.

COBRA

If the plan provides counseling it would be considered a group health plan that is subject to COBRA. EAPs are generally offered to all employees, even those who may not participate in the employer-provided health plan. As such, an EAP subject to COBRA requires that the COBRA initial notice be provided to all EAP-eligible employees.

To determine the applicable COBRA premium, employers should determine the premium attributable to the health care related benefits only. For example, the premium attributable to job counseling or financial counseling services would not be included in the COBRA premium.

Open enrollment presents yet another challenge. If an employee continues EAP coverage under this scenario, but the employee was eligible for the group health plan, but not enrolled, then an opportunity to elect the health plan would be required.

Employers may limit eligibility for the EAP to those employees who enroll in the group health plan to avoid this COBRA complication. But, limiting coverage to those participating in the group health plan poses ACA problems as the next paragraphs illustrate. Alternatively, the EAP’s benefits may continue after what would be a qualifying event for 36 months. As a result, there would be no loss of EAP coverage and no COBRA trigger.

Affordable Care Act (ACA)

EAPs posed particular problems after enactment of the ACA. The DOL and Treasury departments issued rules that EAPs would be considered “excepted benefits” and, therefore, exempt from the ACA.

An EAP is considered an “excepted benefit” if four requirements are met:

  1. They must not provide significant benefits in the form of medical care. The amount, scope, and duration of covered services will be considered in evaluating compliance with this requirement.
  2. EAP benefits may not be coordinated with group health plan benefits
    1. EAP participants may not be required to use or exhaust EAP benefits before they are eligible for group health plan benefits
    2. Eligibility for EAP benefits may not be made dependent on participation in another group health plan
  3. No employee premiums or contributions can be required for participating in an EAP
  4. An EAP that is an excepted benefit may not impose cost-sharing requirements.

The final rule that includes these requirements is here.

Health Savings Accounts (HSAs)

Since EAP plans often include coverage for services irrespective of the employer’s high deductible health plan (HDHP), this raises the concern that an EAP could cause a person to lose eligibility to contribute to an HSA. The IRS has provided guidance that an EAP is not a health plan if it does not provide “significant benefits in the nature of medical care or treatment.”

IRS Notice 2004-33 Q&A number 10 addresses this concern.

Caution Required

As with many compliance issues in employee benefits, the facts and circumstances are critical to assessing compliance. And, the “right” answer may not be clear or apparent.

Counting Employees Not as Easy as 1…2…3

Most children can count to 10 in preschool. The average child can count to 200 at age six. But, employee benefit professionals know that counting – when counting employees — is anything but easy.

The reason that counting employees isn’t easy is that it depends why they’re being counted. Different laws at the federal and state level count employees in different ways. This is particularly true for laws that impact employee benefits.

The Affordable Care Act (ACA) requires that employers count employees to determine whether an employer is an “applicable large employer” or ALE.  An ALE is subject to the employer shared responsibility requirements of the law. First an employer needs to consider if the firm is part of a controlled group. Then, an employer must determine the number of full-time and full-time equivalent employees. Employers must make this determination of ALE status each year. The IRS guidance on determining ALE status can be found here.

COBRA, the federal employee continuation law requires a different method of counting employees. COBRA requires that employers count full-time and part-time employees. A part-time employee is counted as a fraction equal to the number of hours worked divided by the hours an employee must work to be considered full-time. A more detailed explanation of counting employees for COBRA purposes can be found in An Employer’s Guide to Group Health Continuation Coverage Under COBRA.

State continuation laws may count employees differently than COBRA.

Medicare Secondary Payer (MSP) provisions require yet another counting method. The MSP provision applies to group health plans of employers with 20 or more employees. Generally speaking, MSP looks to employees on the payroll. But, the technical aspects of counting employees are more involved as Section 10.3 of the Medicare Secondary Payer (MSP) Manual Chapter 2 reveals.

Form 5500 filing requirements for welfare plans add yet another counting complication. A welfare benefit plan that covered fewer than 100 participants as of the beginning of the plan year may be exempt from the filing requirements. The instructions for Form 5500 provide the details.

Other laws or regulations that may require different counting methods include:

  • Family and Medical Leave Act (FMLA)
  • Pregnancy Discrimination Act (PDA)
  • Age Discrimination Employment Act (ADEA)
  • PCORI fee
  • Form W-2 cost of health benefits requirement
  • Numerous other federal and state laws.

IRS Releases New Employer Reporting Forms

First the “bad news”…

Employers hoping that the IRS will relax ACA employer requirements may find the recent release of the draft 2017 employer reporting forms disheartening.

Many had hoped that President Trump’s Executive Order directing the Department of the Treasury to review tax regulations to reduce the tax regulatory burdens would include ACA’s employer reporting requirements and attendant penalties. However, the Treasury Department’s Notice 2017-38 regarding the review of regulations to identify regulatory burdens notably did not include any reference to ACA compliance.

Now the “good news” (sort of)…

The draft 2017 reporting forms have few changes. Sections related to expired transition relief have been deleted. Consistency in the forms from last year is good news for employers who have figured out how to complete the forms from the prior years. Changes may still be in the offing once instructions for the forms are published and the forms are finalized.

The draft forms are:

Form 1094-B

Form 1095-B

Form 1094-C

Form 1095-C

And, the “no news”…

There still haven’t been any signs that the IRS is sending notices to employers that they owe penalties under the “pay or play” provisions of the ACA. Some pundits believe that employers may see any demands for payments before the close of 2017.

In the meantime…

Employers should continue to comply with the requirements of the ACA.

Marketplace Broker Training Different for New and Returning Brokers

Brokers who pursue federal marketplace training this year will pursue a different path if they are new to the marketplace or renewing their registration.

A returning broker who can use the streamlined refresher training is one who was registered for the marketplace in 2017. To ensure eligibility for refresher training a broker should confirm that their NPN appears on the Agent and Broker FFM Registration Completion List for plan year 2017. This list is available here.

A new broker is one who is completing marketplace training and registration for the first time. A new broker is also one who may have participated in the marketplace in a prior plan year but did not complete registration and training for the 2017 plan year. New brokers are required to complete the full individual marketplace training for plan year 2018.

CMS has a presentation slide deck that new brokers should review in advance of attempting to register for the federal exchange. They will find this deck particularly helpful as it walks through creation of the CMS Enterprise Portal account and other required steps. The deck is available here.

The slide deck also contains instructions for brokers who wish to use an approved vendor for training. Vendors are required to offer five continuing education credits in federal marketplace states.

Marketplace training and registration is no longer available for the 2017 plan year. In fact, the system entered the “go-dark” period on July 21, 2017 in order to prepare for the launch of training for the 2018 plan year.

CMS has a resources page for agents and brokers. It can be accessed here.

Other resources that may be useful include:

New agent and broker guide to registration and training.

Returning agent and broker guide to registration and training.

Slide deck for returning agents and brokers.

How to Survive a Department of Labor Health Plan Audit

Ask anyone to choose a root canal or an IRS audit and the choice will be no surprise – root canal. Many employers would choose a root canal over a Department of Labor (DOL) health plan audit, too.

A DOL health plan audit can be triggered by a complaint or luck! In any event, notice of a DOL health plan audit calls for immediate attention from the employer.

The scope of documents that the DOL can review is broad, in large part due to the DOL’s responsibility to enforce a number of complex laws including:

  • ERISA
  • COBRA
  • HIPAA
  • PPACA.

In fact, the appendix to one DOL audit request listed 26 items for the employer to provide. Employers generally have 30 days to assemble the documentation requested for the audit.

If this information sounds like a really bad dream, the DOL has provided a lifeline. This lifeline is the self-compliance tool that is intended to help employers assess whether their plans are in compliance with the various laws. As importantly, assembling the documentation called for by the compliance tool would go a long way to making a health plan audit request more manageable.

Warning, this tool is comprehensive with 68 pages covering 93 questions!

Which brings back the idea of choices. Which is preferable, assembling the documents called for in the self audit over a period of weeks or months or scrambling when a DOL auditor is knocking on the door?

Cadillac Tax Still Looms

The Cadillac tax, the 40% excise tax on some health plans under the ACA, is still rolling along. As such, employers may want to take steps to avoid the tax which, as of now, will apply beginning in 2020.

The AHCA currently being debated in Congress repeals many of the ACA taxes. Importantly, it does not repeal the Cadillac tax instead deferring it to 2026. And neither does  the just released Senate bill,  the Better Care Reconciliation Act of 2017, which delays the tax until 2026.

Plans subject to the tax in 2020 will be those that cost more than $10,800 for individuals and $29,100 for families. The Cadillac tax was initially projected to affect 3% of health plans. Recent estimates project that it will hit 47% of plans by 2020.

Assuming that the tax will be enforced in 2020 gives employers a rather short timeline to make plan changes to avoid the tax. If employers want to ease the impact of significant changes to their benefits they have only one or two renewal cycles to do so.  Some employers are already increasing deductibles or out-of-pocket limits to reduce premiums to avoid the tax.

NAHU has developed an infographic that outlines the concerns with the Cadillac tax.

IRS information on the ACA tax provisions including the Cadillac tax can be found here.

The Congressional Budget Office discussion of private health insurance premiums and federal policy referenced in NAHU’s infographic is here.

Compliance Cornered’s previous post on this topic is here.

Caution — Affordability Percentage Declining for 2018

Employers who are beginning assessing their plans for 2018 may need to revisit their contribution strategy if they are subject to the employer responsibility requirements of the ACA. Employers who are “applicable large employers” (ALEs) must ensure that coverage is “affordable” in order to avoid the ACA’s employer penalty.

Employer sponsored coverage was initially defined as an employee contribution for self-only coverage of no more than 9.5% of  the employee’s household income. The safe harbor established by the IRS affirmed that employers don’t know an employee’s household income; substituting the use of Form W-2 wages.

The affordability percentage is indexed and, as such, has gradually increased reaching 9.69% in 2017. However, 2018’s limit will decrease to 9.56%. As a result, even if an employer’s health plan premium doesn’t increase, the employer may have to up the employer’s contribution to keep coverage affordable. See the simplified example below:

Year       Affordability %   Annual W-2     Affordability      Max. Contribution

2017      9.69%                   $45,000               4360.50               $363.38

2018      9.56%                   $45,000               4302.00               $358.50

Employers who use the federal poverty level safe harbor will benefit from an increase in the federal poverty level to offset the affordability percentage decrease. The maximum monthly contribution using the FPL safe harbor will increase as shown below.

Federal Poverty Level Safe Harbor

Year                  Prior Year FPL   Affordability %   Maximum Monthly Contribution

2017                     $11,880               9.69%                   $95.93

2018                     $12,060               9.56%                   $96.08

With the daily news of Congressional deliberations to “repeal and replace” the ACA, some wonder if compliance with the ACA is still required. Unless and until legislation is passed by the House and Senate and signed by the President, compliance with the provisions of the ACA is recommended.

The IRS Revenue Procedure announcing the 2018 affordability measure is here.

Will Window Shopping Save SHOP?

On May 15, 2017 the Centers for Medicare and Medicaid Services (CMS) announced plans to change how employers can shop in the federal SHOP (FF-SHOP) marketplace. The announcement proposes that federally facilitated SHOP plans will no longer offer online enrollment for plan years beginning in 2018. Instead, employers can use the federal SHOP to “window shop” for plans and obtain a determination of SHOP eligibility. This announcement follows through on discussions in the 2018 Notice of Benefit and Payment Parameters first published last summer.

Online enrollment in SHOP qualified plans would be done via direct insurer enrollment. This would mean that employers wishing to offer plans with multiple insurers will have to obtain quotes from each insurer and then enroll directly through each insurer. And, employers will be billed separately by each insurer for their enrolled employees.

The announcement notes that as of January 2017 there were approximately 7,600 employers with active FF-SHOP coverage covering about 39,000 individuals. Enrollment is well below the Congressional Budget Office (CBO) estimate for enrollment in 2017, initially projected to be 4 million enrollees nationwide.

Employers who want to use the small employer tax credit must create an account at HealthCare.gov to determine their eligibility for SHOP and the tax credit. Employers will be able to review available plans and prices on the site.

Brokers are expected to be integral to future success of the FF-SHOP. The announcement specifically refers to agents or brokers registered with SHOP as assisting employers. Brokers interested in working with the federal SHOP must still complete the Privacy and Security agreement to be a registered FF-SHOP broker. As a registered FF-SHOP broker they will also be listed in the “find an agent” feature at HealthCare.gov.

Another change made in the 2018 Notice of Benefit and Payment Parameters first published last summer may peak more interest in the SHOP. The requirement was that a federal exchange would only certify a QHP to offer coverage in the individual market if the issuer offered through the SHOP at least one silver and one gold plan when the insurer had at least a 20 percent share of the small group market in the state measured by earned premium. This policy known as the “tying policy,” was eliminated for 2018.

The change to “window shopping” will also mean that FF-SHOP qualified plans will no pay the 3.5% user fee for the plans.

HSAs and Medicare Conflicts

Employees who have enjoyed the benefit of health savings accounts (HSAs) may be in for a taxing surprise when they enroll in Medicare. That’s because Medicare enrollment disqualifies someone from contributing to an HSA.

Working employees may sign up for premium free Medicare Part A when they are first eligible for coverage at age 65. Signing up for Part A or signing up for social security, which triggers enrollment in Part A, requires a person to cease making HSA contributions. A person who signs up for social security is automatically signed up for Medicare Part A.

By claiming social security benefits after age 65, an automatic retroactive coverage period for Part A is triggered. The retroactive period is limited to six months or the entitlement date for Medicare, whichever is shorter. HSA contributions made during this Part A retroactive period may result in an IRS penalty.

Working aged employees or spouses can delay enrollment in Medicare Parts A and B if they are enrolled in an employer group health plan. Before considering this option, it’s important to understand whether the employer plan will assume coordination with Medicare benefits. If Medicare is the primary payer, the employee could have to pay the expenses that Medicare would have paid out of their own pocket.

Employees should discuss their Medicare and HSA options with their benefits advisor and accountant well in advance of reaching age 65.

Here are some resources that are helpful in understanding Medicare for employees:

Medicare.gov “I have employer coverage”

Coordination of Benefits brochure

Medicare & Other Health Benefits: Your Guide to Who Pays First

Health Savings Accounts (HSA) and Medicare

Medicare Part A & Part B sign up periods

IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans

ACA Employer Reporting Compliance Still Required

Mark Twain has been quoted as saying, “The rumors of my death have been greatly exaggerated.” One could use this same phrase to describe the penalties that employers face for noncompliance with the ACA’s employer reporting requirements.

President Trump’s first executive order signed on January 20th may be the “rumor” that ACA compliance is stayed. The order includes the following statement:

“Sec. 2.  To the maximum extent permitted by law, the Secretary of Health and Human Services (Secretary) and the heads of all other executive departments and agencies (agencies) with authorities and responsibilities under the Act shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”

Despite this order, the law still stands, as well as the pages of regulations published to implement the law. Whether the order can be used by any federal agency to waive penalties is unclear and could result in legal action.

The recent release of a TIGTA report may indicate that the IRS is still moving forward in its efforts to assess penalties on noncompliant employers. TIGTA is the Treasury Inspector General for Tax Administration. TIGTA issued a final report on April 7, 2017 titled: Affordable Care Act: Assessment of Efforts to Implement the Employer Shared Responsibility Provision. The report can be read here.

The report found that the IRS has had difficulty processing the ACA-related forms that employers have filed. Despite these delays some of the needed systems are expected to come online in May 2017.

Much of the 43 page report focuses on technical review and analysis of IRS processes. But, it is clear that progress is being made to implement the penalty assessment capabilities of the IRS that will identify noncompliant Applicable Large Employers (ALEs).

Employers are advised to continue to comply with the requirements of the ACA unless and until President Trump signs a law that ends them. Anything else amounts to “rumors.”