by admin | Aug 22, 2022 | Blog
Congress has passed, and the President has signed, the Inflation Reduction Act of 2022. While the legislation largely focuses on climate change mitigation and deficit reduction, several provisions are of interest to group health plan sponsors and their advisors. Here they are as followed:
Enhanced Premium Tax Credit: The favorable premium tax credit rules adopted in the American Rescue Plan Act (ARPA) will now remain in effect through 2025. As background, the Affordable Care Act (ACA) created a refundable premium tax credit, which is available on a sliding-scale basis for individuals and families who are enrolled in an Exchange health plan and who are not eligible for other qualifying coverage or affordable employer-sponsored health insurance plans providing minimum value.
The ACA limits the credit to taxpayers with household income between 100% and 400% of the federal poverty line who purchase insurance through an Exchange health plan. ARPA eliminated the upper income limit for eligibility and increased the amount of the premium tax credit by decreasing, in all income bands, the percentage of household income that individuals must contribute for Exchange coverage. The adjusted percentage ranges from zero to 8.5%.
Medicare Prescription Drug Cost Reductions: Several cost reduction measures will benefit enrollees in Medicare Part D prescription drug coverage. Beginning in 2023, cost-sharing for insulin will be capped at $35 per month. Annual Part D out-of-pocket prescription drug costs will be capped at $2,000 starting in 2025. For the first time, the United States Department of Health and Human Services (HHS) will be authorized and required to negotiate certain Medicare drug prices with manufacturers beginning in 2026. In addition, starting in 2023, manufacturers must pay Medicare a rebate if average prices of certain drugs increase faster than inflation.
Note: Because the legislation does not include comparable prescription drug cost reductions for private plans, there is some concern that reduced costs for Medicare enrollees will result in increased costs for employer plans and participants as price increases are shifted to private plans to make up for lost revenue.
Insulin-Related HDHP Safe Harbor: The legislation amends to provide that plans will not lose their HDHP status by reason of failing to have a deductible for certain insulin products. This provision is effective for plan years beginning after December 31, 2022.
Note: The provision codifies and expands IRS guidance that allows HDHPs to provide insulin on a no-deductible or low-deductible basis under specified circumstances without adversely affecting HSA eligibility.
Source: Thomson Reuters
by admin | Aug 16, 2022 | Blog
The IRS has extended the deadlines for adopting retirement plan amendments to reflect certain provisions of the SECURE Act and the CARES Act. As background, under the SECURE Act, the plan amendment deadline for most plans is the last day of the first plan year beginning on or after January 1, 2022 (2024 for governmental and applicable collectively bargained plans). Similarly, the plan amendment deadline under the CARES Act is the end of the first plan year beginning on or after January 1, 2022.
For most plans, the notice extends the deadline to adopt applicable amendments until December 31, 2025. Later deadlines apply for governmental plans, but not collectively bargained plans. The notice revises previous guidance for certain required and discretionary SECURE Act amendments and for SECURE Act changes affecting safe harbor 401(k) plans. The extended deadlines also apply to amendments by defined contribution plans (including 401(k) plans) reflecting the waiver of required minimum distributions for 2020 under the CARES Act. Timely adopted amendments will not cause a plan to fail to satisfy the anti-cutback rules or ERISA so long as, in the interim, the plan operates as if a retroactive amendment were already in effect.
EBIA Comment: This notice does not extend the deadline for adopting retroactive amendments reflecting the CARES Act’s optional coronavirus-related distribution and loan relief—that deadline remains the last day of the first plan year beginning in 2022 (2024 for governmental plans). Keep in mind that, unlike the original deadline, which was determined with reference to the plan year, the extended deadline for most plans is a specific date, so non-calendar year plans receive less time than the general three-year extension. (Governmental plan deadlines are generally based on legislative sessions.)
Source: Thomson Reuters
by admin | Jul 27, 2022 | Blog
In connection with the move to all-electronic filing of Form 5300 as of July 1, 2022, the IRS has updated related forms and instructions. Form 5300 is no longer available through the IRS forms and publications database; instead, filers are directed to the pay.gov website, where a search for “5300” will lead to a page that includes an option to preview the form. Updates to the form’s instructions include details about electronic filing such as limitations on uploaded attachments and a note that Form 8717 is not needed for submissions through the website. The updated Form 8717 instructions specify that this form should no longer be used for Form 5300 (or Form 5310, for which electronic filing has been required since August 1, 2021) unless an additional payment for an insufficient user fee is needed. The IRS’s About Form 5300 page has also been updated to reflect the electronic filing requirement.
EBIA Comment: Electronic filing of Form 5300 is now mandatory for all determination letter applications, as the brief transition period during which paper submissions were still accepted has ended.
Source: Thomson Reuters
by admin | Jun 14, 2022 | Blog
The IRS recently provided a June 2022 status update announcing that it is on track to launch the new 1099 filing portal in early January 2023.
Section 2102 of the Taxpayer First Act (TFA) requires the IRS to develop an internet portal by January 1, 2023 that will allow taxpayers to electronically file 1099 forms. The portal is to be modeled after the Social Security Administration’s (SSA’s) Business Services Online (BSO) system that allows employers to electronically file W-2 forms. The new website will provide taxpayers with IRS resources and guidance, and allow them to prepare, file and distribute 1099 forms, and create and maintain tax records.
While no details were released, the IRS has discussed the plans of the 1099 filing portal which includes retiring legacy systems, like FIRE system though no termination has been announced. The new system is expected to accept all 1099 forms, including Form 1099-NEC (Nonemployee Compensation) and will permit users to key in or upload information. The system will also be compatible with the Combined Federal/State Filing (CFSF) program.
Source: Thomson Reuters
by admin | May 2, 2022 | Blog
The IRS has released an information letter responding to an inquiry from a qualified transportation plan participant whose employer decided to let him work from home permanently due to the COVID-19 pandemic. To avoid losing compensation reduction amounts he had previously set aside for parking, the participant asked whether his unused compensation reductions could be transferred to a health FSA under a cafeteria plan.
The letter explains that unused compensation reduction amounts under an employer’s qualified transportation plan can be carried over to subsequent periods under the plan and used for future commuting expenses, so long as the employee does not receive benefits that exceed the maximum excludable amount in any month. But cash refunds are not permitted, even to employees whose compensation reduction amounts exceed their need for qualified transportation fringe benefits. Furthermore, the Code prohibits cafeteria plans from offering qualified transportation fringe benefits, and IRS rules do not permit unused compensation reduction amounts under a qualified transportation plan to be transferred to a health FSA under a cafeteria plan. The letter also notes that COVID-19-related relief for FSAs gives employers the discretion to amend their cafeteria plans to permit midyear health FSA election changes for plan years ending in 2021.
EBIA Comment: The qualified transportation rules have proven sufficiently flexible to handle most situations resulting from the COVID-19 emergency. Most employers permit benefit election changes at least monthly, and plans can allow current participants to carry over unused balances indefinitely. Compensation reductions set aside for one qualified transportation benefit (e.g., parking) can even be used for a different transportation benefit (e.g., transit) if the plan permits and the maximum monthly benefit is not exceeded. But—as this participant’s request to transfer parking compensation reductions to a health FSA suggests—those options are not always sufficient. Because some risk of loss due to changing circumstances is unavoidable, employers should clearly articulate that risk to employees before they make compensation reduction elections.
Source: Thomson Reuters
