American Benefits Council
Benefits Byte


May 8, 2015

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.

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HHS Provides Additional Guidance on Maximum Out-of-Pocket Rules under PPACA

In question-and-answer guidance released on May 8, the U.S. Department of Health and Human Services (HHS) addressed certain issues stemming from the 2016 Notice of Benefit and Payment Parameters published on February 27.

As we reported in our March 10 Benefits Byte, the 2016 Notice addresses the application of the Patient Protection and Affordable Care Act’s (PPACA) cost-sharing limits to individuals with coverage other than self-only and a requirement that a plan cover in-patient hospitalization in order to satisfy the 60 percent minimum value (MV) standard.

The 2016 annual limitation on cost-sharing under PPACA for self-only coverage is $6,850. For non-self-only coverage, the maximum out-of-pocket (MOOP) limit will be $13,700. The preamble to the 2016 notice said that HHS is finalizing prior language stating that “the annual limitation on cost sharing for self-only coverage applies to all individuals regardless of whether the individual is covered by a self-only plan or is covered by a plan that is other than self-only.”

The new May 8 guidance fails to provide for any delay in the new requirement to offer an embedded MOOP limit for the 2016 policy year with respect to individual small group insurance, as many had hoped for. The guidance also fails to clarify whether the embedded MOOP requirement applies to large group insured and self-funded plans, which is unclear based upon the current state of the agencies’ rulemaking. The Council will continue to seek clarification from the respective federal agencies regarding whether the embedded MOOP requirement applies to large group insured and self-funded plans and, if so, when.

The new May 8 guidance does provide some clarification to issuers seeking to certify their individual and small group insured arrangements as qualified health plans. Specifically, the new FAQs provide guidance regarding how such issuers should enter information in the “Plans and Benefits” form template to accurately represent cost sharing. “If a plan is available as other than self-only coverage, an issuer must enter a per-person amount in addition to the per-group amount. The per-person amount for other than self-only coverage must be less than or equal to the annual limitation for self-only coverage ($6,850 in 2016) and for the specific cost-sharing reduction plan variations.”

The new May 8 guidance also appears to reiterate how plans may comply with the maximum out-of-pocket rules in connection with the offering of a family high deductible health plan (HDHP) with a $10,000 family deductible. HHS confirms that “an issuer can offer a family HDHP with a $10,000 family deductible, as long as it applies a maximum annual limitation on cost-sharing of $6,850 to each individual in the plan, even if the family $10,000 deductible has not yet been satisfied. This standard does not conflict with IRS rules on HDHPs.” As mentioned above, the guidance does not appear to provide clarity regarding whether the new embedded MOOP requirement applies to large group insured and self-insured plans.

For more information, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

IRS Chief Council Weighs In on 409A Corrections

In a memorandum published by the Internal Revenue Service (IRS) Office of Chief Counsel on April 14, the agency elaborated on its longstanding policy regarding corrections to errors in plan document compliance under Section 409A of the tax code.

Section 409A governs nonqualified deferred and “executive” compensation. In 2008, the IRS issued proposed regulations addressing how certain errors can be remedied before a deferred compensation amount vests, i.e., before the substantial risk of forfeiture on such amount lapses.

This methodology has been widely accepted in the years since, and the recent Chief Counsel Advice memorandum seems to confirm that a document error can be corrected in the year prior to the year of the lapse of the substantial risk of forfeiture, consistent with the proposed regulations.  However, a correction in the year of vesting will not be effective to avoid taxes and penalties under 409A.

An analysis of the memorandum, prepared by Groom Law Group, Chartered, is now available on the Council website. For more information on executive compensation matters, contact Lynn Dudley, senior vice president, global retirement and compensation policy, or Jan Jacobson, senior counsel, retirement policy, 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).