Health & Welfare Benefit Plan Updates for 2020 (Benefit Minute)
Set forth below are some recent updates as we begin 2020.
ACA Form 1095-B Relief
With the elimination of the individual mandate penalty as of January 1, 2019, the IRS is considering whether ACA reporting requirements should change for future years. In Notice 2019-63, the IRS stated that no penalty will be imposed on entities that do not provide a 2019 Form 1095-B (enrollment in minimum essential coverage) if:
- The reporting entity (generally an insurer or a small self-insured health plan) posts a notice prominently on its website stating that an enrolled individual may receive a copy of the Form 1095-B upon request.
- The reporting entity must provide the Form 1095-B to any enrolled individual who requests one within 30 days of the request.
While this relief means that the reporting entity will not have to automatically furnish the Form 1095-B to enrolled individuals, there is still a requirement to file the Form 1095-B information with the IRS by the applicable deadline.
Employers who are subject to the employer mandate remain responsible for providing a Form 1095-C to full-time employees by March 2, 2020 (and filing with the IRS by the appropriate deadline). Information regarding enrollment in self-insured health plans must still be completed on the Form 1095-C.
Further Consolidated Appropriations Act
The Further Consolidated Appropriations Act, the annual spending/budget law signed by President Trump on December 20, 2019 includes several items related to ACA taxes and other benefit provisions.
This fee, which is imposed on all fully insured and self-insured health plans, is used to compile and distribute comparative clinical effectiveness research findings. The fee was originally set to expire for plan years ending on or after October 1, 2019 but has been extended by 10 years (will apply to plan years ending on or before September 30, 2029). Certain plans (plan years ending in October 2019 through December 2019) that thought they had completed their final PCORI fee filing will have a payment requirement due July 31, 2020. The PCORI fee is $2.45 per covered individual for plan years ending October 2018 through September 2019. The fee in effect thereafter has not yet been announced by the IRS.
The 40% excise tax on high cost health plans (referred to as the cadillac tax) that was scheduled to go into effect in 2022 (after several delays) has been permanently repealed. While initially intended to reduce health care costs, the cadillac tax had more recently seen bipartisan opposition in Congress and was also opposed by major corporations, labor groups and patient advocacy organizations.
Health Insurer Tax (HIT)
This tax imposed on health insurance carriers was originally in effect from 2014 through 2016, was suspended for 2017, was in effect for 2018, was suspended for 2019, and back in effect for 2020. The spending/budget law permanently repeals the HIT as of January 1, 2021.
Medical Device Tax
This 2.3% excise tax on the value of certain medical devices was originally in effect from 2013 through 2015 and then suspended from 2016 through 2019. It has now been permanently repealed for medical device sales in 2020 and thereafter.
Paid Family & Medical Leave Tax Credit
This tax credit offers reimbursement of a percentage of employee wages in the form of a general business credit for employers who provide paid FMLA leave to qualifying employees and meet other requirements. The tax credit originally applied to wages paid in 2018 and 2019. It has now been extended to include wages paid in 2020.
Unrelated Business Income Tax on Qualified Transportation Benefits
Beginning in 2018, non-profit organizations were required to pay unrelated business income tax (UBIT) to the extent the non-profit provided qualified transportation fringe benefits (e.g. parking and transit passes) on a tax-favored basis to employees. Although additional guidance was subsequently issued, non-profit organizations remained concerned about the prospect of increased tax liability, the lack of clarity for determining the taxable amount of such benefits, and the additional administrative burdens. The spending/budget law retroactively repealed the UBIT requirement back to its original effective date, and non-profits can file an amended tax return to claim a refund for any taxes paid. There is no change in tax treatment for other employers.
Status of the ACA
In December 2018, a Texas District Court judge ruled that the individual mandate was unconstitutional on the basis that it could no longer be upheld as a tax once the mandate penalty was zero. He also ruled that the individual mandate was so closely tied to other ACA provisions that the entire ACA was invalid. However, the decision allowed the ACA to remain intact pending appeal.
One year later, on December 18, 2019, the Fifth Circuit Court of Appeals issued its opinion on the case. The majority agreed that the individual mandate without a penalty is unconstitutional because it can no longer be viewed as a tax (since it will no longer be producing revenue for the government). However, the Appeals Court did not rule on the question of whether this invalidates the ACA as a whole. Instead, they sent the case back to the Texas judge with instructions to explain “with more precision” which parts of the ACA cannot be separated from the individual mandate and to consider whether to prohibit enforcement of only those ACA provisions that injure the plaintiffs or to declare the ACA unconstitutional only as to the states and individuals involved in the lawsuit.
The U.S. House of Representatives and certain states asked the Supreme Court to weigh in on the constitutionality of the ACA’s individual mandate. They argued that this question is too important to wait for another ruling from the Texas District Court and the Appeals Court. The Administration and plaintiff states disagreed, stating there is “no emergency.” On January 21, 2020, the Supreme Court turned down the motion to fast track the case. This likely means that this issue will not be resolved by the Supreme Court until after the presidential election. In the meantime, the employer mandate and all other ACA provisions (including those that impact group health plans) remain in effect.