On May 20, 2020, the IRS released Revenue Procedure 2020-32 to provide the inflation-adjusted limits for health savings accounts (HSAs) and high deductible health plans (HDHPs) for 2021. The IRS is required to publish these limits by June 1 of each year.
These limits include:
- The maximum HSA contribution limit;
- The minimum deductible amount for HDHPs; and
- The maximum out-of-pocket expense limit for HDHPs.
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PCORI Fees Due By July 31, 2020
The Affordable Care Act (ACA) requires health insurance issuers and sponsors of self-insured health plans to pay Patient-Centered Outcomes Research Institute fees (PCORI fees). If you sponsor a self-insured plan or are an employer with an HRA, you are required to file IRS Form 720 and submit the associated fees. For employers with a fully-insured health plan and a health reimbursement arrangement (HRA), the insurance carrier is required to report PCORI fees for the health plan, but the employer is required to report PCORI fees for the HRA. The fees are reported and paid annually using IRS Form 720 (Quarterly Federal Excise Tax Return).
For plan years ending in 2019, PCORI fees are due by July 31, 2020. The IRS instructions for filing form 720 include information about reporting and paying the PCORI fees.
You will need to report the average number of lives covered under the plan during that plan year. The fee is the applicable rate multiplied by the average number of lives covered under the plan for that plan year. This is reported on Part II of Form 720, line 133.
These fees were originally scheduled to expire for plan or policy years ending on or after October 1, 2019. However, a federal spending bill enacted at the end of 2019 extended the PCORI fees for an additional 10 years.
As a result, on June 8, 2020, the Internal Revenue Service (IRS) issued Notice 2020-44, which increases the PCORI fee amount for plan years ending on or after October 1, 2019, and before October 1, 2020, to $2.54 multiplied by the average number of lives covered under the plan. For plan years ending on or after October 1, 2018, and before October 1, 2019, the fee amount is $2.45.
It also provides transition relief for calculating the average number of lives covered under the plan or policy. Specifically, issuers and plan sponsors may use any reasonable method for calculating the average number of covered lives for this period, in addition to existing methods, so long as it is applied consistently for the duration of the plan year.
Form 720 can be found here.
No Statute of Limitations Applies for ACA Pay or Play Penalties
On February 21, 2020, the IRS Office of Chief Counsel released a memorandum clarifying that there is no applicable statute of limitations on pay or play penalty assessments under the Affordable Care Act (ACA). This means that there is no time limit for the IRS to issue a penalty assessment for employers that do not comply with the pay or play rules for a given year. As a result, ALEs will want to be sure that they are complying with these rules for each applicable year.
DOL Releases New Model Employer CHIP Notice
The Department of Labor (DOL), through its Employee Benefits Security Administration (EBSA), has released a new model Employer CHIP Notice with information current as of January 31, 2020.
As a reminder, the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) imposes an annual notice requirement on employers that maintain group health plans in states that provide premium assistance subsidies under a Medicaid plan or a Children’s Health Insurance Plan (CHIP). An employer can choose to provide the notice on its own or concurrent with the furnishing of:
- Materials notifying the employee of health plan eligibility;
- Materials provided to the employee in connection with an open season or election process conducted under the plan; or
- The summary plan description (SPD).
The DOL’s model notice, which employers may use for this disclosure, is updated periodically to reflect changes in the states that offer premium assistance subsidies. The DOL’s model Employer CHIP Notice includes information current as of January 31, 2020. Employers could also choose to prepare their own notices or modify the model notice. Employers should be sure to include at least the minimum relevant state contact information for any employee residing in a state with premium assistance.
Final Notice of Benefit and Payment Parameters for 2021
On May 7, 2020, the Department of Health and Human Services (HHS) released its final Notice of Benefit and Payment Parameters for 2021. This rule describes benefit and payment parameters under the Affordable Care Act (ACA) that apply for the 2021 benefit year.
Finalized standards in the rule include:
- Updated annual limitations on cost-sharing: The finalized 2021 maximum annual limit on cost sharing is $8,550 for self-only coverage and $17,100 for other than self-only coverage.
- The individual mandate’s affordability exemption: The finalized 2021 required contribution percentage is 8.27%.
- Special enrollment periods (SEPs) in the Exchanges: The final rule revises certain existing rules related to SEPs.
5500s due by July 31, 2020 for Calendar Year Plans
Plan administrators of ERISA employee benefit plans must file Form 5500 by the last day of the seventh month following the end of the plan year unless an extension has been granted. For those employers with calendar year plans, this means 5500s will be due by July 31st.
Form 5500 reports information on a plan’s financial condition, investments and operations. Form 5558 is used to apply for an extension of two and one-half months to file Form 5500.
Small health plans (fewer than 100 participants) that are fully insured, unfunded or a combination of insured/unfunded, are generally exempt from the Form 5500 filing requirement.
Please note that on April 9, 2020, the IRS issued Notice 2020-23 to extend key tax deadlines for individuals and businesses in response to the ongoing COVID-19 pandemic. That notice, in part, extended the Form 5500 filing deadline for ERISA-covered retirement and welfare plans that have an original or extended filing deadline on or after April 1, 2020, and before July 15, 2020. Those plans now have until July 15, 2020, to file their Forms 5500. Significantly, IRS Notice 2020-23 did not extend the filing deadline for 2019 Form 5500 filings for calendar year plans, which still are due by or before July 31, 2020.
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