September 1, 2015
- New Benefits Blueprint Outlines Latest IRS Notice Requesting Comment on Implementation of the 40 Percent Tax on Health Benefits
- IRS Issues New Regulations for Determining ‘Minimum Value’ of Employer-Sponsored Health Coverage Requiring Inpatient Services
- IRS Issues Temporary, Proposed Regulations Regarding Votes on Multiemployer Benefit Cuts
- IRS Specifies New Pension Funding Requirements for Certain Charities, Co-ops
New Benefits Blueprint Outlines Latest IRS Notice Requesting Comment on Implementation of the 40 Percent Tax on Health Benefits
As we reported in the July 30 Benefits Byte, the U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) have issued Notice 2015-52, a second notice requesting comment on possible approaches for implementation of Code Section 4980I, the 40 percent excise tax to be imposed on high-cost health coverage under the Affordable Care Act (ACA).
Now available on the Council website is a new Benefits Blueprint, prepared by Groom Law Group, detailing the procedural and administrative issues spelled out in Notice 2015-52, including the identification of the taxpayers who may be liable for the excise tax, employer aggregation, the allocation of the tax among the applicable taxpayers, and matters concerning payment of the applicable tax.
The Council is currently preparing formal comments on Notice 2015-52, due on October 1. On Thursday, September 3, the Council will host a Benefits Briefing webinar to discuss the notice in greater detail and collect additional input from Council members. Click here to RSVP.
The IRS previously issued Notice 2015-16, requesting comment on issues related to defining applicable coverage and determining cost of coverage for purposes of the 40 percent tax. The Council submitted extensive comments on Notice 2015-16 (see the May 18 Benefits Byte for details).
Working with Congress and the Obama Administration to lessen the impact of the excise tax on employers remains a top priority for the Council as detailed in the July 28 Benefits Byte announcing the launch of the Alliance to Fight the 40. The Council will be submitting comments on Notice 2015-52. For more information or to share concerns or issues related to Notice 2015-52 or the 40% tax, contact Katy Spangler, senior vice president, health policy, or Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.
IRS Issues New Regulations for Determining ‘Minimum Value’ of Employer-Sponsored Health Coverage Requiring Inpatient Services
In a supplemental notice of proposed rulemaking released on August 31, the Internal Revenue Service (IRS) proposed new rules for determining whether health coverage under an employer-sponsored plan is considered to provide minimum value under the Affordable Care Act (ACA) for purposes of determining eligibility for the premium tax credit under Section 36B of the Internal Revenue Code. The changes are in accordance with prior IRS and HHS guidance stating that plans which fail to provide “substantial coverage” for in-patient hospitalization services or for physician services (or for both) do not provide minimum value. IRS has specifically requested comments on how a plan would determine if it provides “substantial coverage” of in-patient hospital and physician services under this rule.
Under the ACA, an employer-sponsored plan fails to offer 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 ACA also provides that employees may be eligible for premium tax credits even if offered employment-based coverage (which could result in an employer’s liability for an assessable payment) if that coverage is “unaffordable.” Unaffordability is generally defined as costing an employee more than 9.5 percent of household income. Failure to offer affordable, minimum value employer-sponsored coverage to full-time employees could subject applicable large employers to penalties under the ACA’s employer shared responsibility rules (if a full-time employee purchases individual insurance from an Exchange and qualifies for a premium tax credit).
In 2014, it was discovered that there was a “glitch” in HHS' minimum value calculator, which can be used by employer-sponsored plans to determine whether such plans meet the “minimum value” requirement under the ACA. The glitch allowed plans to be designed in a manner that technically met the minimum value requirements without providing any coverage for in-patient hospital services and/or physician services. In response, the IRS issued Notice 2014-69 on November 4, 2014. Notice 2014-69 advised that HHS's and IRS's position is that plans which fail to provide substantial coverage for in-patient hospitalization services or for physician services (or for both) do not provide minimum value in accordance with the statute, and that regulations to that effect would be issued in 2015. On February 27 of this year, HHS issued final regulations relating to the determination of minimum value. Those regulations provide that an eligible employer-sponsored plan provides minimum value only if, in addition to covering at least 60 percent of the total allowed costs of benefits provided under the plan, the plan benefits include substantial coverage of inpatient hospitalization and physician services.
The supplemental notice issued today withdraws in part the proposed rules issued in 2013 on minimum value coverage (which were never finalized) and replaces the withdrawn portion of the regulations by stating that when determining premium tax credit eligibility “an eligible employer-sponsored plan provides minimum value only if the plan’s share of the total allowed costs of benefits provided to an employee is at least 60 percent and the plan provides substantial coverage of inpatient hospital and physician services.” (Emphasis added) The IRS is specifically requesting comments on rules for determining whether a plan provides “substantial coverage” of inpatient hospital and physician services.
The Council provided written comments in December 2014 strongly opposing the adoption of the HHS proposed expansion of the minimum value definition as contrary to the clear language of the statute and congressional intent. The Council also expressed serious concerns that if adopted, the new definition would establish an untenable precedent in that it would impose essential health benefit mandates on employer-sponsored group health plans in order for such plans to be considered to provide “minimum value.” The Council will be reiterating these and other concerns in comments to the IRS on the supplemental Notice.
As proposed, this change will generally be effective for plan years beginning after November 3, 2014. However, there is limited relief for certain employers if, prior to November 4, 2014, they had entered into a binding written commitment to adopt a plan, or had begun enrolling employees in a plan, that now would not meet the minimum value requirements due to failure to provide substantial coverage for in-patient hospitalization services or for physician services. Such employers will not be subject to any penalties under the employer shared responsibility rules for plan years beginning on or before March 1, 2015, if those penalties were effectively a result of not having a minimum value plan under the revised rule. (However, an offer of coverage from such a plan will not preclude an employee from obtaining a premium tax credit, if the employee is otherwise eligible.)
The IRS is soliciting comments on the supplemental notice through November 2, 2015. For more information, or to provide input for the Council’s comment letter, contact Katy Spangler, senior vice president, health policy, or Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.
IRS Issues Temporary, Proposed Regulations Regarding Votes on Multiemployer Benefit Cuts
The Internal Revenue Service (IRS) has published temporary and proposed regulations governing the voting process for pension benefit cutbacks as permitted under multiemployer pension funding legislation enacted in December 2014.
The Multiemployer Pension Reform Act established a new process for multiemployer pension plans to propose a temporary or permanent reduction of pension benefits if the plan is projected to run out of money. The law specifically requires a vote to allow any “suspensions of benefits.”
The proposed regulations generally provide background on the relevant issues and announce a public hearing to be held on September 10.
The temporary regulations, which apply on and after June 17, 2015, and expire on June 15, 2018, specify that a participant vote requires the completion of three steps:
- A package of ballot materials must be distributed to eligible voters.
- Eligible voters cast their votes and the votes are collected and tabulated.
- The Treasury Department (in consultation with the Pension Benefit Guaranty Corporation (PBGC) and the U.S. Department of Labor) will determine whether a majority of the eligible voters has voted to reject the proposed suspension.
The temporary regulations also provide guidance regarding how the vote must be conducted, including the use of service providers to facilitate the process.
Officials with Treasury and the IRS said that they will not take applications to cut benefits until all the comments have been received and the regulations are final. For more information, contact For more information, contact Lynn Dudley, senior vice president, policy, Diann Howland, vice president, legislative affairs, or Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.
IRS Specifies New Pension Funding Requirements for Certain Charities, Co-ops
The Internal Revenue Service (IRS) issued Notice 2015-58 on August 28, providing guidance on certain issues relating to the application of The Cooperative and Small Employer Charity Pension Flexibility (CSEC) Act, enacted in April 2014.
The CSEC Act made permanent the exemption from Pension Protection Act funding rules for a grandfathered group of about 30 multiple-employer defined benefit plans maintained exclusively by charities or cooperatives. The measure also exempted these plans from the pre-PPA deficit reduction contribution requirements, adding some restrictions (such as a prohibition on benefit increases) in the event that the plan becomes less than 80 percent funded on a pre-PPA basis and allowed all “eligible charity plans” to elect into PPA either as of 2008 or 2014.
The Notice provides basic pension funding guidance for these plans as well as guidance regarding “eligible charity plans,” which includes multiple employer charity defined benefit plans and charity defined benefit plans maintained by related charities (such as a university and an affiliated hospital). The guidance generally includes definitions, basic funding rules, election rules and reporting rules.
For more information, contact Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.