Earlier this year, the US Equal Employment Opportunity Commission (EEOC) published a Notice of Proposed Rulemaking (NPRM) that addresses how Title I of the Americans with Disabilities Act (ADA) applies to employer wellness programs that are integrated with a group health plan. Although the EEOC has previously initiated litigation associated with wellness programs, it has never released any related regulations and has come under significant pressure from employers and Congress to address when wellness programs are “voluntary” under the ADA.
The US Department of Health and Human Services’ Office for Civil Rights (OCR) is gearing up for the second phase of Health Insurance Portability and Accountability Act (HIPAA) audits. As reported in trade press, a government official announced that the audits may be rolled out shortly. The OCR has chosen a vendor to conduct the audits and has started verifying contact information for potential auditees.
We will continue to monitor for a written announcement and/or guidance from the OCR. In the meantime, HIPAA-covered entities should review (and update as necessary) their policies and procedures and make sure that their workforce members are trained to comply with HIPAA’s privacy and security rule requirements.
On July 31, US President Barack Obama extended the funding for US highways when he signed H.R. 3236 (now Public Law No. 114-41) into law, but tucked into the law were changes to some significant benefits-related tax filing dates and veterans’ benefit rules.
We describe the tax filing and veterans’ benefits changes below.
Tax Filing Dates
The new law includes a number of revised automatic extensions of the due dates for income tax and information returns, including the Form 5500 (the annual return for employee benefit plans) and the Form 990 series (the annual return for tax-exempt organizations).
Typically, Form 5500 returns for employee benefit plans are due the last day of the seventh month after a plan year ends. This is July 31 for calendar-year plans. Plans may file an extension of this filing date, which, under current law, is limited to a two and a half month extension (or October 15) for a calendar-year plan. The new law requires the US Treasury Secretary to modify Treasury regulations to provide an automatic extension of the 5500 filing due date of three and a half months (or until November 15) for calendar-year plans.
On July 30, the Internal Revenue Service (IRS) released Notice 2015-52 (the Notice) addressing issues raised by the excise tax on high cost employer-sponsored health coverage (often referred to as the “Cadillac tax”). Beginning in 2018, the Cadillac tax is a nondeductible 40% excise tax on the aggregate cost of applicable employer-sponsored health coverage in excess of a baseline amount of $10,200 (for self-only coverage) and $27,500 (for family coverage). The guidance in Notice 2015-52 supplements Notice 2015-15, which was issued in February 2015.
The development of guidance on the Cadillac tax can be seen as a case study in how a federal agency develops regulations for a dysfunctional statutory provision. In less partisan times, we may have expected a technical corrections bill or follow–on legislation, but for a variety of reasons—not the least of which is the partisan political climate—we don’t anticipate that a legislative fix or repeal of the Cadillac tax is likely, at least prior to the 2016 election.
As we were posting, the IRS released draft instructions for 2015 ACA reporting. These draft instructions confirm that for 2015 reporting, ALEs that contribute to multiemployer health plans need only to receive confirmation from each such plan of three things: that the plan (1) offers minimum essential coverage that is affordable, (2) provides minimum value to individuals who satisfy the plan’s eligibility conditions, and (3) offers minimum essential coverage to those individuals’ dependents. The ALEs do not need more detailed information from the multiemployer plans to complete their 2015 reports. This IRS clarification is welcome guidance to ALEs that contribute to one or more multiemployer plans, as it simplifies their preparation for 2015 reporting.
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The Affordable Care Act (ACA) reporting requirements are in full force for 2015. These reporting rules require both applicable large employers (ALEs, which are generally employers with 50 or more full-time employees) and other entities that provide minimum essential health coverage—including multiemployer health plans—to gather and report certain information to the IRS and covered individuals. These entities must report 2015 health coverage information to individuals by February 1, 2016 (the annual due date is January 31, but the date is adjusted for 2016 because January 31 is a Sunday) and to the IRS by the end of February or March 2016, depending on the number of reports.
Identifying and capturing the required information can be a daunting task for an ALE. ALEs must collect a significant amount of data for each full-time employee (i.e., an employee who works on average 30 or more hours a week or 130 or more hours a month) for each month of 2015. This information includes: (i) each month that an employee enrolled in coverage (or the reason an employee was not enrolled); (ii) each month an employee was offered minimum essential coverage providing minimum value; (iii) each month that minimum essential coverage was offered to the employee’s spouse and/or dependent children under age 26; and (iv) the dollar amount of the employee’s share of the lowest cost monthly premium for self-only coverage providing minimum value that was offered.
The US Supreme Court’s recent decision recognizing a constitutionally protected right for same-sex couples to marry, Obergefell et al. v. Hodges, was an important step forward for lesbian, gay, bisexual, and transgender (LGBT) rights, but it did not address other types of potential discrimination against LGBT individuals. Specifically, in the absence of a federal law that expressly protects employees from discrimination based on sexual orientation, and in the absence in many places in the United States of any similar state laws or municipal ordinances, employees who marry their same-sex partners arguably can still be subjected to workplace discrimination without remedy, thus burdening their newly protected right to marry. A proposed federal law that would bar sexual orientation discrimination in the workplace, the Employee Non-Discrimination Act (ENDA), is languishing in Congress, and its passage is uncertain.
As many expected it would, the Obama administration has stepped into this regulatory vacuum. On July 15, in Complainant v. Anthony Foxx, Secretary, Department of Transportation (Federal Aviation Administration), the Equal Employment Opportunity Commission (EEOC) reversed a prior decision based on timeliness, and determined that an air traffic controller’s allegations of discrimination based on sexual orientation against his employer, the Federal Aviation Administration, stated a valid claim of discrimination based on sex under Title VII of the Civil Rights Act of 1964, as amended. This decision builds on a prior decision from 2012 in which the EEOC determined that transgender employees were protected from discrimination under Title VII. In Foxx, the EEOC analyzed Title VII and relevant case law and concluded that discrimination against an employee based on the gender of his or her spouse or partner is discrimination based on sex, which is prohibited by Title VII: “[W]e conclude that sexual orientation is inherently a ‘sex-based consideration,’ and an allegation of discrimination based on sexual orientation is necessarily an allegation of sex discrimination under Title VII. A complainant alleging that an agency took his or her sexual orientation into account in an employment action necessarily alleges that the agency took his or her sex into account.”
What should employers be thinking about in the benefits arena now that the US Supreme Court has ruled in Obergefell v. Hodges that all states must issue marriage licenses to same-sex couples and fully recognize same-sex marriages lawfully performed out of state?
We suggest that employers consider whether the following plan design changes, health plan amendments, and/or administrative modifications are necessary: