The IRS has started issuing Letter 226-J to employers who may have an Affordable Care Act Shared Responsibility excise tax for 2015. As these letters have a short 30-day response time, it’s important to make sure that a responsible and appropriate person in your organization is ready to receive and act on this letter. We recommend that you review Part 1 of your 2015 Form 1095-C and, in particular, Item 7 (which has the name of the person to contact). Be sure this person is still in your employ (at the address in the previous item numbers) and is ready to receive and act on any Letter 226-J. We are aware that some vendors put their own employees into Item 7 (which may result in a misdirected Letter 226-J). If the person listed on Item 7 is not a current employee at the addresses listed on the Form 1095-C, you should consider submitting a corrected Form 1095-C with the appropriate person and/or address. Follow the instructions on pages 4 and 5 for Form 1095-C regarding completing and submitting a corrected Form 1095-C (which can usually be done on paper, even if the initial Form 1095-C was filed electronically). For more information about Letter 226-J, please see our prior post, IRS Gears Up to Enforce ACA Shared Responsibility.
Two recent decisions, CNH Industrial N.V. v. Reese, 138 S. Ct. 761 (2018), and Cooper v. Honeywell International, Inc., 2018 WL 1190385 (6th Cir. Mar. 8, 2018), continue the trend favoring employers in litigation challenging the termination of retiree medical benefits.
In CNH, the collective bargaining agreement (CBA) provided healthcare benefits to employees who retired during its term. The CBA contained a general durational clause, which provided that all terms and conditions provided through the CBA would expire when the CBA expired. The CBA expired in 2004 and CNH sought to terminate retirees’ healthcare benefits. CNH retirees sued, claiming their benefits were vested. A district court granted judgment in the retirees’ favor and the US Court of Appeals for the Sixth Circuit affirmed. According to the Sixth Circuit, the durational clause was not dispositive and other language “tied” healthcare benefits to pension eligibility. These provisions rendered the CBA ambiguous, opening the door to extrinsic evidence, which the court concluded established vesting.
Join Morgan Lewis in March 2018 for these programs on a variety of topics in employee benefits and executive compensation.
- Disruption in Washington: Impact on Benefits and Compensation | March 8 | Pittsburgh | Seminar presented by Morgan Lewis and The ERISA Industry Committee (ERIC) | Morgan Lewis panelist is John Ferreira
- Hot Topics in Employee Benefits: What We’re Seeing | March 14 | Webinar presented by Andy Anderson, Craig Bitman, Brian Dougherty, Brian Hector, and Randall (Randy) McGeorge
Join Morgan Lewis in February 2018 for these programs addressing business developments that impact employee benefits and executive compensation.
Our outsourcing practice is hosting two upcoming webcasts:
- Outsourcing 2018: The Year Ahead | February 7 | Webinar presented by Ada Finkel, Edward Hansen, and Barbara Melby
- Intelligent Automation and the Future of Work | February 21 | Webinar presented by Morgan Lewis and KPMG LLP | Morgan Lewis panelist is Barbara Melby and KPMG panelist is Victoria Phelan
President Donald Trump signed the Federal Register Printing Savings Act of 2017 (the Act) on January 22 to end the two-day government shutdown. In addition to funding the government for two-and-a-half weeks, the Act delays the onset of the Affordable Care Act’s (ACA’s) “Cadillac Tax” by two more years. The Cadillac Tax was originally intended to go into effect in 2018, but President Obama delayed the effective date until 2020. The Act now delays the Cadillac Tax until 2022.
The Act also affects implementation of two other ACA taxes: the medical device tax has been delayed until 2020; and while the Health Insurance Tax will be collected this year, it will be suspended during 2019 and then come back in 2020. The Act also extends the Children’s Health Insurance Program funding for six years.
Our Tech & Sourcing @ Morgan Lewis blog, which covers issues relevant to technology, outsourcing, and commercial transactions, has posted about Claims by Vendor Personnel in Outsourcing Deals: Mitigating the Customer’s Risk. We invite you to read the post. If you have any questions about issues raised or other outsourcing matters, please feel free to reach out to the authors.
The US Department of Labor (DOL) recently announced that it is moving forward with implementing its final rule on disability claims procedures effective April 1, 2018. The final rule imposes procedural protections and consumer safeguards on disability claims similar to those that apply to group health plans under the Affordable Care Act.
What plans are subject to the final rule?
A benefit is a disability benefit, subject to the final rule, if the plan conditions its availability to the claimant upon a showing of disability. To be subject to the final rule, the important inquiry is not how a plan is characterized (as either a welfare plan or a pension plan) but rather how the determination for disability is made under the terms of the plan. For example, if a claims adjudicator must make a determination of disability in order to decide a claim, the plan is subject to the final rule. In contrast, if the determination of a disability is made by a party other than the plan itself (such as the Social Security Administration or the employer’s long-term disability plan), then a claim for such benefits is not treated as a disability claim and is not subject to the final rule. For example, if a pension plan determination for disability is conditioned on the determination for disability under the plan sponsor’s long-term disability plan, then the pension plan is not subject to the final rule. Note, however, that the long-term disability plan in this example is still subject to the final rule.
Join Morgan Lewis in January 2018 for these programs on a variety of topics in employee benefits and executive compensation:
Morgan Lewis Global Public Company Academy—2017 Proxy Disclosure Highlights | January 10 | Webinar presented by Amy Pandit, Patrick Rehfield, and David Zelikoff
The Internal Revenue Service (IRS) has released IRS Notice 2018-06, which provides a 30-day automatic extension to furnish to employees/covered individuals the 2017 IRS Forms 1095-B (Health Coverage) and 1095-C (Employer-Provided Health Insurance Offer and Coverage) from January 31, 2018 to March 2, 2018. This extension is similar to the extension issued in 2016 and does not impact the deadline to furnish transmittal Forms 1094-C and 1094-B and copies of the individual forms to the IRS. The deadline to file these forms remains February 28, 2018 (April 2, 2018, if filing electronically). The IRS still encourages employers to furnish the forms to employees/covered individuals as soon as possible.