July was a busy month in the employee benefits world.
The U.S. Supreme Court (Supreme Court) upheld the religious exemption and moral exemption final rules to the Patient Protection and Affordable Care Act (ACA) contraceptive mandate. The Internal Revenue Service (IRS) released the indexed 2021 ACA affordability percentage.
The President signed a law extending the Paycheck Protection Program (PPP) application deadline. The IRS released draft ACA reporting forms for 2020. The Department of Health and Human Services (HHS), the Department of Labor (DOL), and the Department of the Treasury (Treasury) (collectively, the Departments) released proposed rules on grandfathered health plans.
A U.S. court of appeals upheld the short-term limited duration insurance (STLDI) final rule. HHS published a revised confidentiality of substance use disorder patient records final rule. The IRS issued a private letter ruling on health reimbursement arrangement (HRA) and profit-sharing plan contributions. The IRS also issued an information letter on submitting claims for dependent care assistance plan (DCAP) reimbursement.
The DOL published new Family and Medical Leave Act (FMLA) forms and released requests for information on Paid Leave and FMLA. The President issued four executive orders on drug pricing.
Supreme Court Upholds Religious Exemption and Moral
Exemption to the ACA Contraceptive Mandate
On July 8, 2020, the Supreme Court reversedthe 3rd Circuit decision and held that the Departments had the authority to issue the final regulations and ordered the nationwide preliminary injunction to be dissolved.
As background, the ACA requires that non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual health insurance coverage provide coverage of certain specified preventive services, including contraceptive services, without cost sharing. The Departments released two final rules on November 7, 2018, regarding contraceptive coverage exemptions based on religious beliefsandmoral beliefs. These rules finalize the Departments’ interim final rules that were published on October 13, 2017.
The plaintiff and the federal government asked the Supreme Court to hear an appeal of the 3rd Circuit decision. On January 17, 2020, the Supreme Court grantedreview of the 3rd Circuit decision and consolidated this case with a similar casedecided by the 3rd Circuit, affirming a nationwide preliminary injunction prohibiting implementation of the two final rules.
IRS Releases the Indexed 2021 Affordability Percentage
The IRS releasedthe indexed affordability percentage of 9.83% for plan years beginning in 2021. An employer uses the affordability percentage to determine whether it has offered affordable coverage under the ACA’s employer shared responsibility provisions to avoid Penalty B.
PPP Application Deadline Extended
On July 4, 2020, the President signed a lawextending the PPP application deadline allowing businesses to apply for the loan until August 8, 2020
As background, the PPP was established under the Coronavirus Aid, Relief and Economic Security Act (CARES Act) in order to provide small employers with an incentive to keep workers on their payroll during the COVID-19 crisis. Under the PPP, which is an extension of the Small Business Administration (SBA) Section 7(a) loan program, qualifying small businesses are eligible to borrow up to $10 million, in order to maintain their workforce during the covered period for the loan. All or a portion of the loan may be forgiven if the borrower follows the SBA guidelines. The Treasury has issued FAQs and the application form on its website. Information on the program is also available on the SBA website.
IRS Releases Draft ACA Reporting Forms for 2020
The IRS released draft 1094-B, 1095-B, 1094-C, and1095-Cforms. The draft 1094-B and 1094-C forms do not contain any substantive changes from the 2019 1094-B and 1094-C forms. Under the instructions section of the draft 1095-B form, an additional code “G” has been added, which would apply on line 8 to designate enrollment in an individual coverage health reimbursement arrangement (ICHRA).
The draft 1095-C form, under Part II, adds a data field for “employee’s age on January 1.” Also, under Part II, a line 17 has been added for “ZIP code,” which is the ZIP code used for determining affordability of an ICHRA or an employee’s primary residence ZIP code. The instructions for Part II add eight additional codes to reflect offers of ICHRA coverage. The instructions for Part II line 15 add information on how the required employee contribution is calculated to determine affordability of ICHRA coverage.
The Departments Release Proposed Rules on Grandfathered Health Plans
In response the President’s Executive Order 13765 “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal” issued on January 20, 2017, the Departments issued proposed rulesfor grandfathered health plans that would make changes to certain types of cost- sharing requirements without causing a loss of grandfathered status. The DOL also released a pressreleaseandfrequently asked questionsregarding the proposed rules. The proposed rules only address the requirements for grandfathered group health plans and grandfathered group health insurance coverage and would not apply to grandfathered individual health insurance coverage.
Public comments on the proposed rules are due by August 14, 2020. The proposed rules would apply to grandfathered group health plans and grandfathered group health insurance coverage beginning 30 days after the publication of any final rules.
U.S. Court of Appeals Upholds Short-Term Limited
Duration Insurance Final Rule
As background, on August 1, 2018, the Departments released a final rulethat amended the definition of short-term, limited-duration insurance (STLDI). HHS also released a fact sheeton the final rule. The final rule allows consumers to purchase STLDI policies that are less than 12 months in length and may be renewed for up to 36 months.
On July 18, 2019, the U.S. District Court for the District of Columbia (District Court) upheldthe STLDI final rule. The court found that the final rule did not exceed the regulatory authority that Congress delegated to the Departments to define STLDI as a category of insurance that is exempt from individual insurance regulations. The ruling was appealed.
On July 17, 2020, the U.S. Court of Appeals for the District of Columbia (Court of Appeals) upheldthe STLDI final rule. The Court of Appeals found that the final rule defining the duration of STLDI up to 364 days and exempting STLDI from the individual insurance regulations did not exceed the regulatory authority that Congress delegated to the Departments.
HHS Published a Revised Confidentiality of SUD Patient Records Final Rule
HHS published a revised Confidentiality of SUD Patient Records final rule. The final rule outlines confidentiality protections for patient records created by federally assisted substance use disorder treatment programs (SUD records). The CARES Act contained modifications to the SUD confidentiality laws that expanded the circumstances under which SUD records may be used and disclosed in accordance with the HIPAA rules regarding treatment, payment, and health care operations. HHS noted in the revised final rule that several of the provisions in the revised final rule will serve as interim transitional standards until regulations confirming to the CARES Act are released.
Under the final rules, if a patient consents to disclosure of SUD records for payment or health care operations, the recipient, such as a group health plan, may further disclose the information for payment or health care operations (which include care coordination and case management) to its contractors, subcontracts, and legal representatives without additional consent. The revised final rules contain a list of examples of activities that HHS considers to be payment and health care operation activities. The disclosure must be limited to the information necessary to carry out the purpose of the disclosure.
The revised final rules also provide that health plans may obtain SUD information without patient consent to periodically conduct audits or evaluations for purposes such as identifying agency or health plan actions or policy changes aimed at improving care and outcomes for patients (for example, provider education, recommending or requiring improved health care approaches); targeting limited resources more effectively to better care for patients; adjusting specific insurance components to facilitate adequate coverage and payment; and reviews of appropriateness of medical care, medical necessity, and utilization of services.
IRS – Private Letter Ruling on HRA and Profit-Sharing Plan Contributions
The IRS issued a private letter rulingin response to an inquiry regarding allocating employer contributions between a funded HRA and a qualified profit-sharing plan. A union requested the ruling on their proposed amendments to the HRA plan and profit-sharing plan that would create an employer contribution, part of which would be contributed to the HRA and the remaining portion would be allocated between the HRA and the profit-sharing plan according to the employee’s election before the beginning of the plan year. If an employee did not make an election, a default uniform fixed contribution would be allocated to the
profit-sharing plan and the remaining portion would be allocated to the HRA. The union inquired as to whether the proposed amendments would 1) cause the profit-sharing plan to be treated as offering a cash or deferred arrangement under IRC Section 401(k) and 2) affect the exclusion of the contributions and reimbursements under the HRA from gross income under IRC Sections 105(b) and 106.
The IRS concluded that the amendments would not create a cash or deferred arrangement under IRC Section 401(k) because the arrangement would not allow an employee to choose to receive the contributions in cash or some other taxable benefit. The IRS further concluded that the amendments would not affect the exclusion of the contributions and reimbursements under the HRA from gross income because the HRA complies with the IRS requirements for HRAs under Rev. Rul. 2002-41 and Notice
2002-45, including the requirements that contributions are paid solely by participating employers and not pursuant to salary reductions, that HRA funds may only be used for qualified medical expenses, and that HRA funds may not be used to provide other taxable or nontaxable benefits.
IRS Information Letter on Submitting Claims for DCAP Reimbursement
The IRS issued an information letterresponding to a DCAP participant’s inquiry regarding whether IRS regulations contain a hardship exemption if a participant submits claims late under the terms of the DCAP. In the information letter, the IRS states that it does not have authority, based on hardship or other reasons, to change the plan sponsor’s deadline for submitting claims after the plan year ends. The IRS does not specify deadlines for submitting claims for DCAP reimbursement. A plan is permitted to include a run-out period after the end of the plan year during which a participant can submit a claim for reimbursement and can provide a deadline for submitting a claim for reimbursement. The plan sponsor has sole discretion to determine the time for submitting claims after the end of the plan year. The IRS notes that the plan document should specify the time frame for submitting claims after the end of the plan year.
DOL Publishes New FMLA Forms
The DOL published the following new FMLA forms and published Q&Asregarding the new forms. An employer may use the new forms, but is not required to use the forms in order to comply with FMLA. An employer may continue to use the prior versions of the forms.
The DOL released a Request for Information(RFI) seeking information from the public regarding paid leave (family and medical leave to care for a family members health, or for one’s own health). The DOL is seeking information regarding the effectiveness of current state and employer provided paid leave programs, and how access or lack of access to paid leave programs impacts workers and their families. Written comments must be submitted on or before September 14, 2020.
The DOL also released an RFIseeking information from the public regarding the current FMLA regulations (not including the expanded FMLA provided under the FFCRA). The DOL is seeking information regarding what employees would like to see changed in the FMLA regulations to better effectuate the rights and obligations under FMLA. Also, the DOL is seeking information regarding what employers would like to see changed in the FMLA regulations to better effectuate the rights and obligations under FMLA. Written comments must be submitted on or before September 15, 2020.