American Benefits Council
Benefits Byte


April 29, 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.

Follow us on Twitter at @BenefitsCouncil

IRS Corrects Final PPACA Reporting Rules Under Code Section 6055; P4P Webinar Set for May 22

The Internal Revenue Service (IRS) has issued corrections to its final regulations on the reporting of minimum essential coverage (MEC) under Internal Revenue Code Section 6055, as amended by the Patient Protection and Affordable Care Act (PPACA).

Under Section 6055, as amended, every entity that provides MEC (including health insurance issuers and sponsors of a self-insured health plan) is required to file an annual return reporting specific information for each individual for whom MEC is provided. The information reported under Section 6055 can be used by individuals and the IRS to verify the months (if any) in which they were covered by MEC. This reporting facilitates compliance with, and administration of, PPACA provisions related to individual responsibility requirements and premium tax credits. Reporting becomes effective in 2015, with first reports due in early 2016.

Most notably, the IRS is officially revising Page 13223, second column, second full paragraph. The text that previously read:

“For example, a reporting entity that makes an unsuccessful initial solicitation for a [Taxpayer Identification Number (TIN)] in December 2014 must make a second solicitation by December 31, 2015. Assuming that request is also unsuccessful, the reporting entity would not be penalized if its section 6055 reporting submitted in early 2016 reported a date of birth in place of TIN for the individual in question. One additional solicitation must be made by December 31, 2016, to have acted in a responsible manner.”

… has now been corrected to read (emphasis added):

“For example, a reporting entity that makes an unsuccessful initial solicitation for a TIN in December 2015 must make the first annual solicitation by January 31, 2016. The second annual solicitation must be made by December 31, 2016, to have acted in a responsible manner. Assuming that request is also unsuccessful, the reporting entity would not be penalized if its section 6055 reporting submitted in early 2017 reported a date of birth in place of TIN for the individual in question.”

The Council will be covering these final regulations, as well as the final regulations addressing employer reporting of health insurance coverage (under Code Section 6056) in a “P4P … Preparing for PPACA” webinar scheduled for May 22 at 2 p.m. Eastern Time. A notice with registration information will be sent shortly. For more information, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

Council Requests Additional Clarifications to Minimum Essential Coverage 'Affordability' Rules Regarding Cafeteria Plans, Wellness Programs

In April 28 comments to the Internal Revenue Service (IRS), the Council addressed the treatment of contributions to a cafeteria plan and potential wellness program incentives for purposes of determining affordability of coverage under Internal Revenue Code Section 5000A, as added by the Patient Protection and Affordable Care Act (PPACA).

Under Code Section 5000A, nonexempt individuals must maintain “minimum essential coverage” (MEC) for themselves and any dependents (including coverage under an "eligible employer-sponsored plan”) or make a "shared responsibility payment" on their federal income tax return. Final regulations issued under Section 5000A in August 2013 provided implementation guidance regarding the maintenance of MEC and liability for the shared responsibility payment. In January of this year, IRS issued proposed regulations (simultaneously with Notice 2014-10), seeking to clarify the determination of the affordability of coverage under Section 5000A (See the January 28 Benefits Byte for more details). The proposed regulations specifically requested comment on the treatment of employer contributions under a Section 125 cafeteria plan for purposes of the individual mandate to the extent employees may not opt to receive the employer contributions as a taxable benefit, such as cash.

The Council’s April 28 comment letter recommends that the IRS adopt final regulations that:

  • Permit any contributions made to a cafeteria plan by an employer on behalf of a cafeteria plan participant to be taken into account in determining the affordability of the minimum essential coverage, so long as the cafeteria plan participant has the choice to use such contributions toward the purchase of the minimum essential coverage. This should be the case even if the cafeteria plan participant uses the contributions to purchase other permitted benefits offered via the cafeteria plan.
  • Allow plans to take into account all potential wellness program rewards in determining minimum value and affordability, not just rewards that are related to cessation of tobacco use as provided in the proposed regulations.

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

House Ways and Means Committee Takes Up Certain Tax 'Extenders'

In a “mark-up” session on April 29, the U.S. House of Representatives Ways and Means Committee approved a select number of tax ‘extender’ bills, renewing expired or expiring tax provisions.

Unlike the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act, approved by the Senate Finance Committee on April 2 (see the April 3 Benefits Byte), none of the measures approved by the committee directly affect employer-sponsored benefit programs. The committee approved the following tax extension bills:

  • H.R. 4429, to permanently extend the subpart F exemption for active financing income;
  • H.R. 4438, to simplify and make permanent the research credit;
  • H.R. 4453, to make permanent the reduced recognition period for built-in gains of S corporations;
  • H.R. 4454, to make permanent certain rules regarding basis adjustments to stock of S corporations making charitable contributions of property;
  • H.R. 4457, to permanently extend increased expensing limitations; and
  • H.R. 4464, to make permanent the look-through treatment of payments between related controlled foreign corporations.

Following the hearing, Committee Chairman Dave Camp (R-MI) – who introduced a prominent, comprehensive tax reform proposal earlier in the year – issued a statement, saying “The United States is the only country in the world that allows such important pieces of its tax code to expire on a regular basis. By making these six bipartisan policies permanent, businesses small and large will have the ability to plan for the future, invest in the economy, hire new workers, and invent new technologies and products.”

Prior to the session, the committee’s majority staff also posted on the official Ways and Means website an op-ed by the conservative Heritage Foundation, in which Curtis S. Dubay, Research Fellow in Tax and Economic Policy in the Thomas A. Roe Institute for Economic Policy Studies, argued against efforts to offset the costs of extending expiring provisions. “If handled properly, the tax extenders would be an opportunity for Congress to improve tax policy,” Dubay wrote. He also suggested that Congress should avoid extending these provisions in a single bill, saying that “Congress should go through each individual policy in the extenders package and evaluate them on their necessity for neutrality.”

Dubay cited a number of extenders considered “vital,” including tax-free distributions from an individual retirement account for charitable purposes. Among the extenders he recommended eliminating was the enhancement of and parity for mass-transit subsidies.

Full consideration and enactment of these individual measures (or a more comprehensive tax extenders package) is uncertain in the near term, but consideration of such a measure could be possible later in 2014. 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).