American Benefits Council
Benefits Byte


December 23, 2014

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

Click here to read past issues on the Benefits Byte Archive page.

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Agencies Propose Regulations for Limited Wraparound Coverage as "Excepted Benefits"

On December 19, the U.S. departments of Treasury, Labor and Health and Human Services issued proposed regulations to amend regulations regarding excepted benefits coverage under ERISA, the Internal Revenue Code and the Public Health Service Act with respect to limited wraparound coverage.

The proposed regulations set out requirements under which limited benefits provided through a group health plan that wrap either eligible individual insurance or coverage under a Multi-State plan (limited wraparound coverage) constitute “excepted benefits.”  Excepted benefits are excluded from the portability provisions established under HIPAA as well as certain health plan requirements of the Patient Protection and Affordable Care Act (PPACA). Excepted benefits generally do not constitute “minimum essential coverage” under PPACA, and thus would not disqualify an individual for premium tax credits for the purchase of individual insurance through a health exchange.

Final rules with the criteria to qualify dental, vision and long-term care benefits and employee assistance programs as excepted benefits were issued on September 26, 2014 (see the September 29 Benefits Byte), but guidance on wraparound coverage was not included. The final regulations indicated that the agencies intended to publish regulations in the future for limited wrap around coverage that would address extensive comments received on proposed regulations issued on December 20, 2013. Wraparound coverage supplements core coverage and might provide such things as extra benefits, broader networks or cost-sharing reductions. As explained in the preamble, some group health sponsors have asked whether certain limited benefits that “wrap around” employer sponsored group health plan coverage could be considered an excepted benefit if such benefits are provided to employees for whom the employer’s group health plan is unaffordable and who instead obtain major medical coverage through the individual market, including the health insurance marketplaces (Exchanges). The Council filed February 24 written comments requesting clarifications regarding the proposed new wrap around coverage, as well as the definition of “supplemental benefits,” to help ensure that employees continue to have access to important supplemental coverage that may provide benefits not offered by an employer’s primary group health plan (see the February 26 Benefits Byte).

The new proposed rules would allow a group health plan to offer limited benefits that wrap around either eligible individual insurance or coverage under a plan established under the ACA's Multi-State Plan Program, a type of plan offered through the health-care law's marketplaces. They set out requirements for such wraparound coverage involving the scope of coverage, cost limits, nondiscrimination rules, plan eligibility requirements and reporting requirements. Under the proposed regulations, limited wraparound coverage would be permitted under a pilot program for a limited time. Specifically, this type of wraparound coverage could be offered as excepted benefits to coverage that is offered no later than December 31, 2017.

Comments on the proposed rule are due January 22, 2015. For more information, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

Council Comments on 2016 Benefit and Payment Parameters, Minimum Value Definition

In December 22 written comments, the Council urged against the expanded definition of “minimum value” included in the2016 Notice of Benefit and Payment Parameters proposed regulations. The proposed regulations were released by the U.S. Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS) on November 21 (See the November 24 Benefits Byte).

The proposed regulations formalize guidance provided in IRS Notice 2014-69 (released on November 4) addressing a glitch in the HHS minimum value (MV) calculator that generated a fair amount of media attention earlier this year. (See the Council’s November 4 Benefits Byte story for more details.) The calculator is intended to be used to determine whether an employer-sponsored plan provides 60 percent minimum value. According to HHS and the U.S. Department of the Treasury, the online MV calculator was improperly qualifying certain group health plan benefit designs that do not provide coverage for in-patient hospitalization services. The proposed regulations would require that, in order to satisfy minimum value, an employer-sponsored plan must provide substantial coverage of both in-patient hospital services and physician services. The proposed regulations would apply to employer-sponsored plans, including plans that are in the middle of a plan year, immediately on the effective date of the final regulations.

The Council letter expresses strong concerns with the definition of minimum value in the proposed regulations to the extent the same or a similar definition becomes applicable for Internal Revenue Code sections 36B and 4980H. Code Section 36B states that a plan provides minimum value if “the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs.” The Council letter argues that the existing regulatory definition of minimum value already goes beyond the statute by requiring a plan to measure its minimum value status by reference to a third-party plan. The proposed expansion of the minimum value definition propels employer requirements further down a path unsupported by the statute and could establish a precedent to impose essential health benefit mandates on employer-sponsored group health plans in order for such plans to be considered to provide “minimum value” to avoid the employer shared responsibility payments.

The letter also argues that the expanded definition would exacerbate current employer concerns regarding the 40 percent excise tax on high-cost plans by imposing additional benefit requirements on employers. The letter expresses concern that the existing regulatory minimum value definition already compounds the potential effect of the excise tax with the additional requirements beyond the statutory language. As a result, plans would be forced to juggle complying with the minimum value requirements of the employer shared responsibility provision of Code section 4980H and avoiding the 40 percent nondeductible excise tax.

For more information, contact Katy Spangler, senior vice president, health policy, at (202) 289-6700.

Proposed Regulations on PPACA Summary of Benefits and Coverage Issued

On December 22, the U.S. departments of Treasury, Labor and Health and Human Services issued proposed regulations on the summary of benefits and coverage (SBC) and the uniform glossary for group health plans and health insurance coverage in the group and individual markets under the Patient Protection and Affordable Care Act (PPACA). A fact sheet is available as well. 

The proposed regulations amend the final regulations released on February 9, 2012 (see the February 9, 2012 Benefits Byte) that implement the disclosure requirements under section 2715 of the Public Health Service Act to help individuals better understand their health coverage. According to the departments, the proposed regulations are designed to improve consumers’ access to important plan information and enable them to make informed choices when shopping for and renewing coverage, as well as to provide clarifications that will make it easier for health insurance issuers and group health plans to comply with providing this information.

The proposed rule would add features to make the SBC more user-friendly by streamlining and shortening its length, reducing it from about four double-sided pages to two-and-a-half. The rule would also amend the uniform glossary and add a third coverage example regarding a “simple foot fracture with emergency room visit”.  The proposed rule retains the two current coverage examples of “having a baby (normal delivery)” and “managing diabetes type 2” (for a well-controlled condition).

If finalized, the new requirements would be implemented for plan years on or after September 1, 2015. For more information, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

IRS Issues Guidance on Employee Plans Determination Letter Process in 2015

On December 19, the Internal Revenue Service (IRS) released Announcement 2015-01 to describe the changes to the employee plans determination process that will take effect in 2015. These changes are being adopted as part of a process improvement strategy designed to promote case processing efficiency.

The process is being updated by first checking determination letter applications for completeness upon receipt. For an application to be complete, it must include all of the information and documents required, including, but not limited to, a completed copy of the Procedural Requirements Checklist set forth in Forms 5300, 5307, 5310 and 5316. The Procedural Requirements Checklist is designed to assist applicants in the filing of a complete Application. If an application is incomplete, the IRS will contact the applicant in writing to request more information.

Applicants will have 30 days from the date of the letter to provide the information to the IRS, or the IRS will move to close the case. The IRS will keep the incomplete application and the user fee will not be refunded.  Applicants will need to submit a new on-cycle application and new user fee by the end of the plan's remedial amendment cycle, unless a later date is specified by the agency in the letter notifying the applicant that the case has closed. However, if the postmark and the response deadline are after the plan's remedial amendment cycle, the cycle will not be extended and the IRS will send a final disposition letter to the applicant.

The IRS will start accepting determination letter applications for Cycle E individually designed plans beginning February 1, 2015. Generally, an individually designed plan is in Cycle E if the last digit of the employer identification number of the plan sponsor is 5 or 0 (see the December 9 Benefits Byte for more information).

The changes will be reflected in Revenue Procedure 2015-6, the IRS's annual guidance on procedures for issuing employee plans determination letters. The guidance is set to be published in Internal Revenue Bulletin 2015-1, and will be effective on February 1, 2015.

For more information, contact Lynn Dudley, senior vice president, policy, or Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.

President Signs Tax "Extenders" Package Into Law

On December 19, President Obama signed the Tax Increase Prevention Act (H.R. 5771) into law. H.R. 5771 provides a short-term extension of more than 50 expiring tax breaks relating to individuals, families and employers.

H.R. 5771 includes a number of expiring tax provisions that affect employee benefit plans, including renewal of equal tax treatment for mass transit and parking benefits and allowing distributions from individual retirement plans for charitable purposes (see the December 3 Benefits Byte for more details).

For more information, contact Diann Howland, vice president, legislative affairs, at (202) 289-6700.


The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.

Notice: the information contained herein is general in nature. It is not, and should not be construed as, accounting, consulting, legal or tax advice or opinion provided by the American Benefits Council or any of its employees. As required by the IRS, we inform you that any information contained herein was not intended or written to be used or referred to, and cannot be used or referred to (i) for the purpose of avoiding penalties under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party any transaction or matter addressed herein (and any attachment).