February 18, 2015
- IRS Guidance Provides Limited Relief for 'Employer Payment Plans' Under PPACA
- PBGC Requests Input on Implementation of Multiemployer Pension Plan Provisions
- DOL Issues Extension of Comment Period on QPAM Extension
IRS Guidance Provides Limited Relief for 'Employer Payment Plans' Under PPACA
In Notice 2015-17, issued on February 18, the Internal Revenue Service (IRS) clarified and supplemented prior guidance on the tax treatment of “employer payment plans,” under which an employer reimburses an employee (or directly pays) all or some of the premium for an individual health insurance policy. Notice 2015-17 provides limited transition relief to employer payment plans offered by small employers, while also addressing S-corporation health care arrangements, Medicare premium health reimbursement arrangements (HRAs) and TRICARE-related HRAs.
As previously reported, Notice 2013-54, issued by the IRS in September 2013 concluded that arrangements constituting employer payment plans fail to comply with the PPACA market reforms (including the annual dollar limit and preventive services requirements) and may be subject to the excise tax under Internal Revenue Code Section 4980D ($100 per day per individual per violation). The newly released Notice 2015-17 reiterates this conclusion, but states that, “at the same time, the departments understand that some employers that had been offering health coverage through an employer payment plan may need additional time to obtain group health coverage or adopt a suitable alternative.”
Notice 2013-54 provides “limited transition relief” through June 30, 2015, for coverage sponsored by small employers (i.e., those that averaged fewer than 50 full-time employees (including full-time equivalent employees) on business days during the preceding calendar year). The notice clarifies that the relief does not extend to stand-alone HRAs or other arrangements to reimburse employees for medical expenses other than insurance premiums.
In addition, Notice 2015-17 addresses:
- Whether a 2-percent shareholder-employee healthcare arrangement is subject to the market reforms.
- Whether an employer that offers to reimburse Medicare premiums for its active employees creates an employer payment plan under Notice 2013-54;
- Whether an arrangement under which an employer reimburses (or pays directly) some or all of medical expenses for employees covered by TRICARE constitutes an HRA subject to the PPACA market reform requirements;
- Whether an arrangement under which an employer increases an employee’s compensation (but does not condition the payment of additional compensation on purchase of health coverage) is an employer payment plan; and
- Whether reimbursements or payments under an employer payment plan that are provided on an after-tax basis would cause the arrangement not to be a group health plan (and therefore not subject to the market reforms).
The Council has urged the Obama Administration to revise its position, arguing that the use of HRAs can help keep coverage affordable, even for large employers. Our A 2020 Vision public policy strategic plan included a recommendation that employers be permitted “to establish stand-alone Health Reimbursement Arrangements, or similar accounts, that can be used to purchase individual coverage.”
In the previous session of Congress, Representative Charles Boustany (R-LA) introduced the Small Business Healthcare Relief Act, which would prevent small businesses from being penalized for providing monetary assistance to their employees to purchase insurance on the individual market on a pre-tax basis (such as in an HRA). Senator Charles Grassley (R-IA) recently offered (and then withdrew) similar language as an amendment in the recent Senate Finance Committee markup of the Hire More Heroes Act.
PBGC Requests Input on Implementation of Multiemployer Pension Plan Provisions
On February 17, the Pension Benefit Guaranty Corporation (PBGC) issued a request for information (RFI) on future guidance to implement the multiemployer pension plan provisions included in the Consolidated and Further Continuing Appropriations Act, enacted in December 2014.
The RFI solicits public input on the application process to implement two new statutory provisions regarding multiemployer partitions (the segregation of a portion of multiemployer plan assets and liabilities ordered by the PBGC to reduce the chance of plan insolvency) and mergers enacted under the new law. Under the measure, a plan sponsor may apply to the PBGC to order a partition. The agency is required to make a determination no later than 270 days after the application was filed.
The measure also gives new authority to the PBGC to facilitate multiemployer plan mergers under certain requirements. Although not required by the law, the PBGC is considering guidance to provide advance notice that plan sponsors must demonstrate that they meet the criteria.
The notice follows another RFI issued by the Internal Revenue Service (IRS) on February 13 to implement the multiemployer pension plan benefit suspension provisions also included under the new law (see the February 13 Benefits Byte for more information). The IRS notice invites public comments for information on future guidance that would address implementation of the benefit suspensions, including: (1) how future guidance should address actuarial and other issues, (2) how a plan sponsor could identify which benefits are based on a disability, since reductions based on disabilities are prohibited, (3) practical issues to be considered for participants who have and have not retired, and (4)satisfying the requirement that notices of the proposed suspension are distributed to plan participants and beneficiaries concurrently with the submission of the application for approval.
The PBGC RFI specifically asks for input relating to plan sponsors applying both to PBGC for a partition (or facilitated merger) concurrently with an application for a benefit suspension and the IRS RFI notes that both agencies will coordinate on developing processes that will apply to applications falling within their respective jurisdictions.
Comments are due on both RFI issuances by April 6. For more information, contact Diann Howland, vice president, legislative affairs, or Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.
DOL Issues Extension of Comment Period on QPAM Extension
On February 18, the U.S. Department of Labor (DOL) Employee Benefits Security Administration (EBSA) published notice of an extension to the comment period on a proposed prohibited transaction exemption applicable to professional asset managers meeting detailed conditions, including the anti-criminal conviction rule. The comment period has been extended to March 2.
The Council has already filed written comments with EBSA, underscoring the importance of the qualified professional asset manager (QPAM) exemption to the ERISA prohibited transaction rules. The Council’s comments do not address the merits of the proposed exemption (see the January 5 Benefits Byte).