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Presented By |
Year in Review & 2018 Forecast
Adam Jensen, Vice President
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TODAY’S AGENDA
• ACA and Reporting• EEOC and Wellness• HIPAA and Phase 2 Audits• OSHA• NLRB• FLSA• I‐9s• 5500s• Tax Bill Update
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WHAT A YEAR!
2017- Go home, you’re drunk!
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ACA AND REPORTING
• 2017 saw several attempts to repeal, revise the ACA• Not exactly “smooth sailing”
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ACA AND REPORTING
GOP in‐fighting prevented the expected ACA repeal• Multiple attempts failed due to GOP internal squabbles.• ACA is still the law.
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ACA AND REPORTING
All ALEs were required to report• 50 or more Full Time Equivalents (FTEs) in 2016‐ Non‐ALEs did not report
• 50‐99 FTEs had to provide coverage and report in 2017!
• 100+ FTEs were required to provide coverage in 2017 AND must report‐ Section 6056 ALE reporting on IRS Form 1094‐C and 1095‐C
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ACA AND REPORTING
Individual Statement Deadline NOT Pushed Back• Unlike last year, the IRS has not delayed the 1095‐C reporting deadline!
• Employers are required to provide employees with 1095‐C no later than March 31, 2018 for the 2017 tax year
• ACA statements follow W‐2 deadlines
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ACA AND REPORTING
IRS Filing Deadline NOT Pushed Back Either• 2017 IRS electronic deadline STILL set for March 31, 2017
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ACA AND REPORTING
ACA Penalty Letters• IRS has begun to send out penalty letters for 2016 plan year.
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ACA AND REPORTING
ACA Penalty Letters• Certain employers have received letters from the IRS stating that they owe penalties for failing to meet the employer mandate for 2016.
• The first penalty, known as the “no coverage” penalty, is based on whether an applicable large employer (ALE) fails to offer group health plan coverage to at least 70% of its full‐time employees.
• The annual penalty is $2,000 per full‐time employee minus 80. The second penalty, known as the “unaffordability” penalty, applies when an employer offers coverage that fails to meet certain affordability and minimum value requirements. The annual penalty is $3,000 for each full‐time employee who receives a premium tax credit for marketplace coverage.
• In many instances, employers are receiving penalty letters even though they have met the reporting requirements of the law.
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ACA AND REPORTING
ACA Penalty Letters• If you receive a letter from the IRS stating that you owe a penalty, it is important that you contact your Cottingham & Butler representative immediately and provide copies of your 2015 1095‐C and 1094‐C forms. Cottingham & Butler will review the forms for accuracy and determine whether penalties appear to apply.
• Timeliness is vital, since the IRS notices have a 30‐day response deadline from the date of the notice.
• Failure to respond to the IRS notice or failing to respond in a timely fashion will result in the IRS assessing the amount of payment and issuing a notice and demand for payment via Notice CP220J.
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ACA AND REPORTING
ACA Penalty Letters
An employer must respond to the IRS immediately if it disagrees with the penalty by taking the following steps:
• Complete Response Form 14764. This form states that the employer disagrees in whole or partially with the IRS penalty calculation.
• Include a signed statement explaining why there is a disagreement with the calculation. Be sure to include any documentation, such as the 1094/1095 forms.
• Include any amendments to the 1094/1095 forms to correct invalid information on the 2015 forms, including any adjustments to codes utilized on tax credit earners.
• Return the completed Form 14764 and supporting documentation to the IRS within the 30‐day deadline.
• The IRS will acknowledge the employer’s response and will reply with a Letter 227 that details what further steps are necessary, if any.
• An employer may request a pre‐assessment conference with the IRS Office of Appeals, if it disagrees with the IRS position in the Letter 227.
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ACA AND REPORTING
Penalty relief NOT available in 2018 for 2017 tax year• IRS is not repeating this penalty relief in 2018 for the 2017 tax year, unlike prior years.
• Not able to avoid penalties by showing “good faith effort to comply”.• Incorrect or incomplete information or late filing can result in fines.
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ACA AND REPORTING
Future of ACA uncertain• Candidate Trump campaigned on the promise of repealing the ACA immediately after taking office.
• Executive order signed on first day of office has not had the anticipated effect.
• Congressional infighting has prevented GOP from passing repeals or reforms.
• Full repeal appears unlikely.• Further action via Executive Order likely given Congressional infighting.• GOP attempting to repeal Individual Mandate as part of tax bill.
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ACA AND REPORTING
What stays, what goes?
ACA feature likely to remain:• Elimination of Pre‐Existing Conditions.• Potential for 2‐tiered system: 1. Continuous coverage, no Pre‐Ex.2. Break in coverage, subject to Pre‐Ex.
• Supported by insurance industry to combat adverse selection/death spiral
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ACA AND REPORTING
What stays, what goes?
ACA feature likely to remain:• Ban on Rescissions• Guaranteed Issue• Guaranteed Renewal
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ACA AND REPORTING
What stays, what goes?
ACA feature likely to remain:• Elimination of Lifetime Dollar Limits (Annual Dollar Limits might return.)• Coverage to age 26• Coverage of clinical trials• Elimination of Prior Auth for OB/GYN, Pediatric Svcs, Out‐of‐Network ER Care
• Increased Wellness Incentives
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ACA AND REPORTING
What stays, what goes?
ACA features likely to go/change:• Employer Mandate (“Play or Pay”)• Reporting (possibly not right away), since reporting is needed for Individual Mandate, Play or Pay, and Subsidies. If any one of the three remain, some form of reporting will be needed.
• Individual Mandate (Just eliminated in tax bill)• Cadillac Tax
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ACA AND REPORTING
What stays, what goes?
ACA features likely to go/change:• Federal Operation of Exchanges/MarketPlaces(reinstate state high risk pools?)
• Medicaid Expansion (replace with block grants?)• Advanced Premium Tax Credits• Other ACA Taxes (Medicare Surtax, Medical Device Tax, Health Insurer Tax)
• OTC Ban, Dollar Cap for FSAs• Effect on IRS Guidance (Cash in lieu of benefits, etc.)
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ACA AND REPORTING
ACA Items on the fence:• Medical Loss Ratio/Limits on Carrier Profits (trade off for MarketPlace?)• Annual Dollar Limits• Preventive Care without Cost Sharing (Staying but changing?)• Section 1557 non‐discrimination rules
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ACA AND REPORTING
How quickly might this happen?• Multiple failures indicate not too quickly.• GOP may use Play or Pay penalties to generate pain to force change.• Any attempt most likely prior to 2018 mid‐term elections.• The ACA “is the law until is isn’t”; it’s in effect until repealed/replaced.
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ACA AND REPORTING
PCORI Fee
The applicable fee for plans reporting 07/31/2018 is going up:• $2.26 (up from $2.17) for plan years ending on or after Oct. 1, 2016 and before Oct. 1, 2017
• Filed using updated IRS Form 720• Self‐funded plans, including HRAs, must file• Fully‐insured plans filed by insurance carrier
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ACA AND REPORTING
Transitional Reinsurance Fee
Phased out with 2016 payment
Amount of Fee:• The fee was $27 per covered life for 2016.• Final installment was due in November.
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ACA AND REPORTING
Cadillac Tax• Imposes a 40% excise tax on any “excess benefit” provided to an employee, and provides that an excess benefit is the excess, if any, of the aggregate cost of the applicable coverage of the employee for the month over the applicable dollar limit for the employee for the month.
• The term “employee” includes “a former employee, surviving spouse, or other primary insured individual.”
• Fully‐insured carriers will pay tax, but will pass through to employers.• Self‐insured plan sponsors will pay directly.• Repeatedly delayed ‐ currently pushed back until 2020.
ACA AND REPORTING
Cadillac Tax• “Cost of coverage” determined using COBRA methodology• Coverage includes group medical coverage, FSA contributions, pre‐tax
employer and employee HSA contributions.• Dental and vision are excluded if provided via separate plan or separate
premium.
• Trigger amounts are $10,200 single and $27,500 other than single. Will be indexed before going into effect.
• Various adjustments will apply to increase these amounts. Treasury and IRS intend to include rules regarding these adjustments in proposed regulations and invite comments on the application and adjustment of the dollar limits.
• Adjustments for qualified retirees and high risk professions
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ACA AND REPORTING
Cadillac Tax• Tax is disliked by both parties, may well be repealed if adverse budgetary affect can be addressed.
• Hasn’t been repealed yet, since removing it would result in technical increase to budget deficit.
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ACA UPDATE
Contraception rollback halted• A Pennsylvania federal judge temporarily blocked the Trump administration’s rules dialing back the ACA’s contraception mandate through religious or moral exemptions for employers, saying the federal government failed to follow proper procedures in implementing the policies.
EEOC and Wellness
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BACKGROUND
EEOC and its tortured approach to wellness• EEOC has long had a very narrow view of ADA compliance• EEOC refused to issue official guidance regarding wellness programs and the ADA for years
• DOL, IRS, HHS issued proposed HIPAA wellness rules in 2006 and final wellness rules in 2013
Congress expanded wellness programs in 2010 as part of the Affordable Care Act (ACA)• General wellness incentives increased to 30% of cost of coverage• New incentive created for tobacco cessation of up to 20% of cost of coverage
One court case of note: Seff vs. Broward County• Federal trial court and federal appeals court side with employer• EEOC “doesn’t agree with court’s position”• Federal trial court in Orion case recently went the opposite way
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ADA WELLNESS RULES
History of ADA/GINA Wellness Rules• April 20, 2015 EEOC released its own proposed version of wellness rules based on its interpretation of ADA
• On May 16, 2016, EEOC issued final regulations governing the treatment of wellness programs under ADA and GINA
• Didn’t match up with the 2013 Final HIPAA Wellness Rules released by IRS, DOL, and HHS.
• Final rules effective January 1, 2017 imposed 30% incentive limit for self‐only coverage.
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COURT ACTION
EEOC Sent Back to the Drawing Board• On August 22, 2017 via a verdict in AARP v. EEOC, the U.S. District Court for the District of Columbia directed the EEOC to reconsider its regulation of employer‐sponsored wellness programs.
• AARP had contended that the incentives allowed under the EEOC’s regulations amounted to coercion and put workers at risk of discrimination.
• AARP had argued that the wellness rules were inconsistent with the ADA and GINA, which require that wellness plan participation be “voluntary.”
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COURT ACTION
EEOC Sent Back to the Drawing Board• AARP filed a motion to invalidate the EEOC’s rules for 2018, which maintains that allowing the regulations to remain in effect would be unfair to both employees and employers.
• EEOC argued that 2018 coverage rates have already been negotiated and employees will soon start signing up for 2018 coverage, that vacating wellness programs would create an “extraordinary burden” on employers.
• Rules stay in effect until the end of 2018.
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NEXT STEPS
• Employers are stuck with the current ADA, GINA rules until 2019.• 88% of employers with 500 workers or more offer some sort of wellness plan, according to a 2014 national survey by the benefits consultant Mercer.
• Of those, 42% offer employees incentives to undergo screening, and 23% tie incentives to actual results, such as reaching or making progress toward blood pressure or BMI targets.
• Most programs’ incentive structures do not extend past the 30% threshold, so there doesn’t seem to be a huge concern from an incentive design point of view.
• Biggest issue is the limit of 30% for self‐only coverage.
HIPAA Phase 2 Audits
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HIPAA PHASE 2 AUDITS
• A year ago, HHS Office for Civil Rights rolled out its Phase 2 HIPAA Audit Program.
• Desk audits assessed compliance by health plans and their business associates with the HIPAA privacy and security rules, and the HITECH Act breach notification rules.
• During Phase 2, the OCR conducted audits of about 200 covered entities and business associates.
• Initial round of desk audits were completed at the end of December 2016.
• Ongoing desk audits have continued now that the system has been tested.
• Increased risk to self funded employers since HHS keeps the fines it assesses and it now has a cost effective tool for auditing plans.
• Have been concentrating on health care providers and health systems. All Covered Entities should expect to be audited at some point.
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HIPAA PHASE 2 AUDITS
Audit selection criteria for an audit includes:• The entity’s size;• It’s affiliation, if any, with other health care organizations;• The type of entity and its relationship to individuals;• Whether an organization is public or private;• Geographic factors; and• Any ongoing enforcement activity with OCR.• OCR will not audit entities that have an open complaint investigation or are currently undergoing a compliance review.
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HIPAA PHASE 2 AUDITS
Employers must review their HIPAA Privacy and Security compliance and verify that they are in compliance.• Documentation of PHI flow• Policies, procedures, forms up to date• Documented training• Annual HIPAA Security IT audit• CMS position is that failure to conduct a HIPAA Security risk assessment is “willful neglect” under the regulations and subject to penalties of at least $50,000.
OSHA
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OSHA
On May 11, 2016, the Occupational Safety and Health Administration (OSHA) issued a final recordkeeping and reporting rule that requires employers to electronically submit their injury and illness reports.• Recordkeeping and reporting rules that were delayed until December 15, 2017.
• Trump administration also took action to permanently block the so‐called Volks Rule, which effectively extended OSHA's authority to issue citations for record‐keeping violations from six months to five years.
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OSHA
Anti‐retaliation Rules Recap• OSHA’s final rule also creates a new remedy for OSHA to pursue where it believes an employer either retaliates against employees for reporting work‐related injuries or illnesses or through a policy or procedure deters them from doing so. OSHA may penalize employers for violating the provisions of its new rule.
• Previously, OSHA could only act if an employee files a complaint within 30 days of the retaliation.
• Under the new regulation, OSHA will be able to cite an employer for retaliation even if the employee did not file a complaint, or if the employer has a program that deters or discourages reporting through the threat of retaliation.
• Specifically, employers must inform employees of their right to report work‐related injuries and illnesses free from retaliation. This obligation may be met by posting the OSHA Job Safety and Health — It’s The Law worker rights poster (www.osha.gov/Publications/poster.html).
• The anti‐retaliation provisions were scheduled to take effect in August 2016, but OSHA delayed enforcement until Dec. 1, 2016.
• Rules has been delayed partially due to a lawsuit filed by a number of business groups.
NLRB
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NLRB
Changes at National Labor Relations Board • NLRB had a democratic/pro‐labor majority during Obama administration and handed down a number of decisions that are regarded as pro‐labor.
• NLRB now has a 3‐2 Republican‐leaning majority.• President Trump nominated Peter Robb, a management‐side labor and employment lawyer to be the general counsel at the NLRB to replace Richard Griffin when his term expired in November of 2017.
• Robb issued a memorandum upon becoming general counsel freezing all enforcement actions and signaling that he would undue Obama‐era decisions.
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NLRB
Changes to a number of established standards
Browning‐Ferris, joint employment• Browning‐Ferris was a 2015 decision that imposed a vague indirect control standard in joint employment cases that made it easier for employers to be found to be joint employers.
• NLRB reinstated the prior “direct control” standard.
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NLRB
Changes to a number of established standards
Lutheran Heritage Village‐Livonia standard for weighing the legality of employee handbook policies• In place of the Lutheran Heritage “reasonably construe” standard, the Board established a new test: when evaluating a facially neutral policy, rule or handbook provision that, when reasonably interpreted, would potentially interfere with the exercise of NLRA rights, the Board will evaluate two things: (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications associated with the rule.
• Applying the new standard, the Board concluded that Boeing lawfully maintained a no‐camera rule that prohibited employees from using camera‐enabled devices to capture images or video without a valid business need and an approved camera permit.
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NLRB
Changes to a number of established standards
Board’s 2014 Election Rule under Review• NLRB has issued a Request for Information Regarding Representation Election Regulations to review the Board’s 2014 Election Rule, which modified the Board’s representation‐election procedures and made it much easier to establish union groups within employers.
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NLRB
Changes to a number of established standards
Specialty Healthcare's 'Micro‐Unit' Standard• On Friday, December 15, 2017, NLRB overturned the Obama administration allowing “micro‐units” of workers to unionize.
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NLRB
Changes to a number of established standards
Employer Duty to Bargain with Union• NLRB also overturned a 2016 ruling limiting the changes employers can implement in union workplaces, restoring a 50‐year‐old precedent that allows businesses to change policies without a union’s permission if they’ve taken similar actions before.
FLSA Overtime Rules
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FLSA OVERTIME RULES
FLSA Overtime Rules• New final overtime rules were set to go into effect 12/1/2016 but were delayed by injunction issued by federal judge in 5th Circuit case in Texas.
• Upon taking office, Pres. Trump signed an executive order mandating a 60‐day freeze on regulations that had not yet taken effect.
• 5th Circuit Ct of Appeals FLSA case tossed out Obama OT regulations.• New DOL Secretary Acosta testified before Congress and stated he believed a proper a test amount would be around $33,000 and appears to support a more modest increase in salary test amount.
• Trump administration restarted process with new request for comments.
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FLSA OVERTIME RULES
Overturned final OT rules included changes to:• Increased Salary Level Test• Use of Bonus Compensation• Automatic Increases• Increased HCE Exemption• Change to Duties Test
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FLSA OVERTIME RULES
Likely new OT rules to include:• Reasonable Increase to Salary Level Test• Use of Bonus Compensation for Salary Level Test• Reasonable Increase to HCE Exemption
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FLSA OVERTIME RULES
Now that Obama rules have been rolled back, businesses that already complied will find it difficult, if not impossible, to undo changes• Totally legal to revert to prior compensation, but hard to take back raises.
• “Horse is already out of the barn”, although could be recharacterized as bonuses.
• FLSA has built‐in small business exception already ‐ only applies to businesses with annual revenues of $500,000 or more.
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FLSA OVERTIME RULES
Potential FLSA strategies:• Since new Salary Test amount is likely to be at or near $33,000, start by going back and looking at how many employees are actually affected.‐ The higher the number of affected employees, the higher the risk.
• Determine whether employees failed the Duties Test, Salary Test, or both.‐ If they failed the duties test, employees actually should be non‐exempt.
• For employees who failed the Salary Test, consider minimum disruption strategies.
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FLSA OVERTIME RULES
• Because the FLSA rules center on who gets overtime and who does not, non‐exempt employees can still be paid a salary, they just are eligible for overtime.
• Non‐exempt employees can be paid by the hour, day, week, or by the piece.
• Stay tuned and listen for new set of Proposed Rules.
I-9
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I-9
New I‐9 Form• On July 17, 2017, USCIS released a revised version of Form I‐9, Employment Eligibility Verification.
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I-9
Form I‐9 Changes
Revisions to the Form I‐9 Instructions:• Changed the name of the Office of Special Counsel for Immigration‐Related Unfair Employment Practices to its new name, Immigrant and Employee Rights Section.
• Removed “the end of” from the phrase “the first day of employment.”
Revisions related to the List of Acceptable Documents on Form I‐9:• Added the Consular Report of Birth Abroad (Form FS‐240) to List C. Employers completing Form I‐9 on a computer may select Form FS‐240 from the drop‐down menus available in List C of Sections 2 and 3. E‐Verify users may also select Form FS‐240 when creating a case for an employee who has presented this document for Form I‐9.
• Combined all the certifications of report of birth issued by the Department of State (Form FS‐545, Form DS‐1350, and Form FS‐240) into selection C #2 in List C.
• Renumbered all List C documents except the Social Security card. For example, the employment authorization document issued by the Department of Homeland Security on List C changed from List C #8 to List C #7.
Form 5500
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5500
Major Changes• H&W plans with fewer than 100 participants required to file as of 2019 plan year
• Changes to data fields to permit data mining• Small plans should consider adopting an ERISA wrap document to combine plans into single ERISA plan number.
• IRS has been sending out penalty notices on delinquent plans!
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TAX BILL UPDATE
Tax Bill Compromise Announced• House and Senate conferees announced an agreement on a tax overhaul bill on Friday, December 15, 2017.
• ACA Individual Mandate penalty repealed.• Tuition benefits remain ‐ Section 127 benefit kept at $5,250 per year. Employers are still able to offer the separate Section 132 working condition fringe tax‐free educational benefit for work‐related educational expenses.
• Employers will get a tax credit of 12.5% to 25% of the wages paid to a qualified employee using FMLA, beginning with tax years after 2017.
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TAX BILL UPDATE
Tax Bill Compromise Continued• Eliminated the business deduction for qualified mass transit and parking benefits (except as necessary for ensuring the safety of an employee). Employees still can take pre‐tax, but no employer write off for subsidies.
• Dependent Care FSA Saved ‐ final bill preserves the tax treatment of dependent care flexible spending accounts of up to $5,000 per year under Section 129.
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TAX BILL UPDATE
Tax Bill Compromise Continued• Deferred Comp change – final bill amended Internal Revenue Code Section 162(m), which prohibits publicly held companies from deducting more than $1 million per year in compensation paid to senior executive officers, to eliminate the exemption for commission‐and performance‐based pay, and expands the scope of covered individuals to include an organization's CEO, CFO and three highest‐paid employees. This applies to taxable years beginning Jan. 1, 2018.
• Review compensation arrangements.• Consider accelerating bonus deductions‐ The final bill provides for a 21% corporate tax rate beginning in 2018, down from the current 35 % rate. The bill would not change the treatment of bonus deductions, but lower corporate rates may encourage companies to accelerate bonus deductions into 2017.
