Group health plan sponsors are required to complete an online disclosure form with the Centers for Medicare & Medicaid Services (CMS) on an annual basis and at other select times, indicating whether the plan's prescription drug coverage is creditable or non-creditable. This disclosure requirement applies when an employer-sponsored group health plan provides prescription drug coverage to individuals who are eligible for coverage under Medicare Part D.
The plan sponsor must complete the online disclosure within 60 days after the beginning of the plan year. For calendar year health plans, the deadline for the annual online disclosure is normally March 1. However, since 2020 is a leap year, the deadline is February 29, 2020.
To determine if the CMS reporting requirement applies, employers should verify whether their group health plans cover any Medicare-eligible individuals (including active employees, disabled employees, COBRA participants, retirees and their covered spouses and dependents) at the start of each plan year.
Employers that are required to report to CMS should work with their advisors to determine whether their prescription drug coverage is creditable or non-creditable. They should also visit CMS’ creditable coverage website, which includes links to the online disclosure form and related instructions.
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2020 Health Plan Compliance Deadlines
Employers must comply with numerous reporting and disclosure requirements throughout the year in connection with their group health plans. The Compliance Overview explains key 2020 compliance deadlines for employer-sponsored group health plans. It also outlines group health plan notices that employers must provide annually. Often, employers furnish these notices with the plan’s enrollment materials during the annual open enrollment period. For non-calendar year plans, the deadlines will need to be adjusted to reflect each plan’s specific plan year.
As a reminder, the Affordable Care Act (ACA) reporting under Section 6055 and Section 6056 for the 2019 calendar year is due in early 2020. Specifically, reporting entities must:
- File returns with the IRS by Feb. 28, 2020 (or March 31, 2020, if filing electronically); and
- Furnish statements to individuals by March 2, 2020.
Despite the delay, the IRS is encouraging reporting entities to furnish statements as soon as they are able. No request or other documentation is required to take advantage of the extended deadline.
On Dec. 20, 2019, President Trump signed into law a spending bill that prevents a government shutdown and repeals the following three taxes and fees under the Affordable Care Act (ACA):
- The Cadillac tax on high-cost group health coverage, beginning in 2020;
- The medical devices excise tax, beginning in 2020; and
- The health insurance providers fee, beginning in 2021.
Cafeteria Plan Need Not Permit Midyear Election Changes
The IRS has issued an information letter that summarizes the permitted election change rules for cafeteria plans. The letter responds to an inquiry regarding an employee whose request to make a DCAP election change due to a “disrupted or unforeseeable childcare environment” was denied because it did not occur during the plan’s open enrollment period. The letter explains that a cafeteria plan’s terms, generally, must require that employees’ benefit elections be made before the period of coverage (typically, the plan year) and prohibit employees from changing their elections during the period of coverage. While plans may be designed to permit certain midyear election changes for employees who experience IRS-approved events, (e.g., a significant change in coverage or a significant increase or decrease in the cost of coverage) this is not required. Furthermore, plans must be operated in accordance with their terms. The letter concludes that if an employee is not allowed to make a midyear election change, it may be because the plan’s terms do not permit the change.
IRS Releases 2020 Version of Publication 15-B (Employer's Tax Guide to Fringe Benefits)
Publication 15-B has been revised for 2020 with a few changes that supplement and clarify its summaries of common fringe benefits. Here are highlights:
- Form 1099-NEC. The publication notes that the IRS has a new form for reporting nonemployee compensation. Form 1099-NEC will apply to nonemployee compensation paid in 2020 and is due February 1, 2021. Form 1099-MISC is used for nonemployee compensation paid in 2019.
- Qualified Nonpersonal Use Vehicles. The publication’s list of qualified nonpersonal use vehicles—i.e., vehicles that can be used tax-free for any purpose because they are generally unsuited to personal use—includes several clarifications. Marked police, fire, and public safety vehicles must be subject to a policy prohibiting personal use other than for commuting. Personal use of unmarked law enforcement vehicles must be authorized and related to a law enforcement function—vacations and recreation do not qualify. And the exclusion for buses applies only to the driver, not to riders.
- Company Cars. The publication includes the maximum vehicle value for determining whether the business standard mileage rate can be used in 2020 to value an automobile’s personal use. It also references a transition rule for 2018 and 2019 for vehicles with values in excess of the much lower pre-2018 maximum values.
- Employee Discounts. The publication explains that employers may provide excludable discounts indirectly through third parties and includes an example under which a manufacturer’s employees benefit from discounts given by a retail seller of the employer’s product.
- No-Additional-Cost Services. The publication clarifies that “substantial additional costs” that would prevent benefits provided under a reciprocal agreement from being excludable include lost revenue.
- Group-Term Life Insurance. A reminder has been added that if an employer provides former employees with taxable life insurance benefits, the employer need not collect the former employees’ share of their Social Security and Medicare taxes, but the employer still must pay its share
HHS Issues Proposed Notice of Benefit and Payment Parameters for 2021
On Jan. 31, 2020, the Department of Health and Human Services (HHS) published its proposed Notice of Benefit and Payment Parameters for 2021. This proposed rule describes benefit and payment parameters under the Affordable Care Act (ACA) that would be applicable for the 2021 benefit year. Proposed standards included in the rule relate to:
- Annual limitations on cost-sharing;
- The individual mandate’s affordability exemption; and
- Special enrollment periods (SEPs) in the Exchanges.
Supreme Court Declines to Expedite ACA Case
On Jan. 21, 2020, the United States Supreme Court denied motions to expedite consideration of Texas v. Azar, the lawsuit challenging the constitutionality of the Affordable Care Act’s (ACA) individual mandate.
This decision follows a federal appeals court ruling that the individual mandate is unconstitutional due to the elimination of the individual mandate penalty in 2019. The appeals court remanded the case to the lower court to determine whether the rest of the ACA can remain in place without the individual mandate. However, the U.S. House of Representatives and several states asked the Supreme Court to take up the case before the lower court issued a ruling.
This lawsuit was filed in 2018 by 18 states as a result of the 2017 tax reform law that eliminates the individual mandate penalty. In 2012, the U.S. Supreme Court upheld the ACA on the basis that the individual mandate is a valid tax. With the penalty’s elimination, the appeals court in this case determined that the individual mandate is no longer valid under the U.S. Constitution.
5 Employee Benefits Developments to Watch in 2020
Federal and State lawmakers are expected to make significant changes to existing employee benefit laws in this new year. This infographic highlights a few areas where plan managers may expect those changes to be made.
Department of Labor Adopts New Joint Employer Determination Test
On Jan. 12, 2020, the U.S. Department of Labor (DOL) announced a new four-factor balancing test to determine whether two or more organizations should be considered “joint employers” under the Fair Labor Standards Act (FLSA). The final rule establishing the new test becomes effective March 16, 2020.