Halloween is in the air!  As you prepare to greet trick-or-treaters, we thought you might enjoy some employee benefit plan “goodies” from the regulators.  Below is a summary of recent regulations affecting employee plans:

 HRAs, FSAs, and Individual Policies

Speaking of spooky topics, the IRS issued Notice 2013-54 in September on Friday the 13^th!

The IRS has disliked pre-tax treatment of individual policies for years, and PPACA gave the IRS an additional method to strike these arrangements.  This Notice requires that employees enroll in a group health plan in order to use an HRA or other “employer payment plan” to pay for coverage on a tax-free basis.    Otherwise, where an employee is not enrolled in a group health plan, the arrangement fails to satisfy PPACA’s annual limit prohibition and requirement to cover preventive health with no cost sharing.

Does the Notice remove all pretax treatment of premiums?  No, we are continuing to work with numerous planning strategies still permissible after the release of this Notice, including pretax of premium through group based private exchanges or other group based arrangements.

 Exchange Notice

Employers will not be subject to any fines or penalties for failing to provide the Exchange Notice to all current employees by October 1, 2013 (and to new employees hired on or after that date within 14 days of their start date).  While this DOL FAQ guidance is a welcome treat for employers, we still recommend providing the Exchange Notice to demonstrate good faith compliance and to educate your employees.

Information Returns & Individual Statements

The IRS recently published proposed rules for two reporting and individual statement requirements that will likely prove to be quite tricky:

• Insurance carriers and sponsors of self-funded plans providing minimum essential coverage must file an information return for each participant.  The return will contain specific identifying information about the participant and the employer along with information about the coverage (such as the employer’s share of premium).  In addition, carriers and self-funded plan sponsors must provide each participant with a written statement containing the information required to be shown on the information return filed with the IRS.
• Large employers subject to the pay or play penalties must file an information return for each full time employee.  The return will contain specific identifying information about the full time employee and the employer along with information about the coverage (such as a certification whether coverage is offered, the monthly premium for the lowest cost option, and length of any waiting period).  In addition, employers must provide each full time employee with a written statement containing the information required to be shown on the information return filed with the IRS.

The first reporting and statements are due in 2016 regarding coverage offered in 2015.  The deadline for filing the information returns with the IRS is February 28 of the following calendar year (March 31 if filed electronically).  The deadline for providing the written statement is January 31 of the following calendar year.  The IRS is considering proposals for simplified and combined reporting for these requirements.

DOMA Updates – DOL and IRS Guidance

The DOL issued guidance implementing the Supreme Court’s decision in U.S. v. Windsor.  Technical Release 2013-04 adopts a state-of-marriage approach versus state-of-domicile approach.  Therefore, the terms “spouse” and “marriage” in ERISA include same-sex individuals who are lawfully married in a state that recognizes same-sex marriages regardless of whether the couple lives in a state that does not recognize same-sex marriage.

The IRS adopted the same approach under Revenue Ruling 2013-17, which provides that same-sex marriages will be recognized for federal tax purposes if entered into in a state recognizing same-sex marriages.  Among other things, this guidance means that coverage provided to same-sex spouses should no longer be treated as taxable income.  The IRS also issued simplified procedures to allow employers to correct employment tax overpayments due to the change in tax treatment of coverage provided to same-sex spouses.

Deadlines for the simplified approaches are fast approaching.  For example, an employer may adjust overpayments relating to 3^rd quarter 2013 within this quarter without making any special filing provided any amounts required to be returned to employees are repaid by September 30.  Employers can still utilize the regular overpayment correction methods if they choose.

Don’t let these rules and regulations be spooky – contact our office so we can help you understand and navigate the employee benefits maze!