On April 26, 2018, the Internal Revenue Service (IRS) released Revenue Procedure 2018-27 and restored the 2018 HSA contribution limit to $6,900 for an individual with family coverage under a higher deductible health plan (HDHP).
In March 2018, the Department of the Treasury (Treasury Department) and the IRS lowered the limit to $6,850 (originally set at $6,900 for 2018 on May 4, 2017) to reflect the statutory amendment to the inflation adjustments under the Tax Cuts and Jobs Act of 2017. As a result of the $50 reduction, stakeholders expressed concerns that the implementation would impose numerous unanticipated administrative and financial burdens, which would significantly outweigh any tax benefit associated with the original unreduced HSA contribution. In response to these concerns, the Treasury Department and the IRS decided to restore the original $6,900 HSA contribution limit for 2018.
If an individual has already received distribution of the excess contribution because of the previous midyear reduction in the limit, the IRS has provided the following relief:
- The individual may repay the distribution to the HSA by April 15, 2019. The repayment is not included in the individual’s gross income, not subject to the 20 percent additional tax, and not subject to the excise tax on excess contributions. In addition, the repayment is not required to be reported on Form 1099-SA or Form 8889 and is not required to be reported as an additional HSA contribution.
- If the individual does not repay the distribution to the HSA, he or she may treat the distribution as a returned excess contribution. Therefore, if the individual receives the distribution on or before the due date (including extensions) to file his or her 2018 tax return, the distribution generally would not be included in gross income or subject to the 20 percent additional tax.
- However, when the distribution from the HSA is attributable to an employer contribution which is not included in the employee’s wages because the employer treats $6,900 as the 2018 limit, the distribution will be included in the employee’s gross income and subject to the 20 percent additional tax unless the distribution from the HSA is used to pay qualified medical expenses.
In summary, if actions have already been taken regarding the midyear reduction announcement, employers should consider the next steps, including reprogramming their payroll and administration systems, communicating the restoration of the higher limit and the relief to employees, and updating relevant materials and websites.
This blog post was authored by Armstrong Teasdale Law Clerk, Han Liu.
St. Luke’s-Roosevelt Hospital Center Inc. (the “Hospital”) (a HIPAA covered entity) committed costly mistakes when the Hospital disclosed sensitive protected health information (“PHI”) of two patients to incorrect recipients. Information regarding individuals’ HIV status, AIDS, sexually transmitted diseases, mental health, and physical abuse was involved. For one individual, the Hospital faxed the PHI to the individual’s employer instead of mailing the information to a post office box, as the individual requested.
Although the Hospital had a compliance program in place, it failed to modify the program after a separate incident occurred several months earlier, where the hospital faxed an individual’s PHI to an office where the individual volunteered. These incidents of disclosure of sensitive PHI were considered “egregious” by the HHS’s Office for Civil Rights (“OCR”).
As a result of the egregious HIPPA violations, the Hospital agreed to pay $387,200 to HHS and agreed to a three-year corrective action plan requiring the Hospital to routinely review and revise its policies and procedures regarding its handling of PHI. The OCR may have come down hard on the Hospital due to the hypersensitivity of the information disclosed. The settlement provides as a reminder that it is important to have HIPAA policies, procedures, and training in place to ensure compliance for protection of PHI and mitigation of damages caused by improper disclosure.
In the Presidential Memorandum on Fiduciary Duty Rule ("Presidential Memorandum") issued on February 3, 2017, President Trump ordered the Department of Labor “(“DOL”) to “examine the Fiduciary Duty Rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice,” with a focus on whether the Fiduciary Rule will reduce investors’ access to retirement savings products, disrupt the retirement services industry, and increase litigation or prices paid by investors and retirees. If the DOL determines that the Fiduciary Rule will cause any of these negative effects or otherwise determines the Fiduciary Rule is inconsistent with the Presidential Memorandum’s stated priorities, the DOL is directed to propose a rule to rescind the Fiduciary Rule.
The Presidential Memorandum does not order a delay in the Fiduciary Rule’s April 10, 2017, applicability date. It is widely expected, however, that the DOL will issue a delay in the applicability date, and the acting Secretary of Labor issued a statement that the DOL will “consider its legal options to delay the applicability date.” Until an actual delay in the Fiduciary Rule’s implementation is issued by the DOL, affected parties should continue to assess whether additional compliance efforts are advisable.
In Notice 2015-87, the Internal Revenue Service (“IRS”) advised that it believes that the amount of an opt-out payment effectively increases the cost of coverage to the employee by the amount of the opt-out payment. When determining whether coverage is affordable for purposes of the employer "play or pay" penalty under Section 4980H(b) of the Internal Revenue Code ("B penalty"), the amount the employee is required to contribute, plus the amount of any offered opt-out payment, is the true cost to the employee. The IRS defines an opt-out payment as "an arrangement providing for a payment conditioned solely on an employee declining coverage under an employer’s health plan and not on an employee satisfying any other meaningful requirement related to the provision of health care to employees, such as a requirement to provide proof of coverage provided by a spouse’s employer." In Notice 2015-87, the IRS indicated that it intends to propose regulations reflecting this rule.
Your plan charges $100 a month for employee-only coverage under the medical plan. In addition, the plan also offers each eligible employee an opt-out payment of $75 per month if the employee declines coverage under the plan, regardless of whether the employee has coverage under a spouse’s plan or elsewhere. Under the IRS’ position, when determining whether this coverage is affordable for purposes of the B penalty, the cost to the employee is $175 a month, not the lower amount of $100 a month, which is what the employee would pay if enrolled in the coverage.
For any opt-out arrangement adopted by December 16, 2015, the proposed rules will contain limited grandfathering. Until the applicability date of regulations, employers maintaining these pre-existing opt-out arrangements are not required to include the amount of the opt-out payment in the employee’s required contribution total, and the opt-out amount will not be included when determining if the coverage is affordable for purposes of the B penalty. However, an employee may treat the opt-out payment as increasing his or her required contribution for purposes of Sections 36B (premium assistance credits) and 5000A (individual shared responsibility) of the Internal Revenue Code.
However, for any arrangements adopted after December 16, 2015, the amount of the opt-out payment will be added to the required employee contribution to determine whether the coverage is affordable. Before continuing or adopting an opt-out arrangement for the 2017 plan year, a review the IRS’ proposed rules may be necessary. Since many employers are already beginning to map out 2017 plan design choices, hopefully the IRS will issue this guidance soon.
On October 23, 2015, the Departments of Labor, Health and Human Services, and the Treasury (the “Departments”) released a new set of Affordable Care Act and Mental Health Parity frequently asked questions. Your group health plan should be reviewed for compliance with these coverage requirements.
Preventive Services (Non-Grandfathered Group Health Plans)
- Lactation Counseling and Breastfeeding Equipment
- Lactation counseling provided by an out-of-network provider must be covered without cost-sharing if there are no in-network providers for such services.
- Coverage for lactation counseling services without cost-sharing may not be limited to services received on an inpatient basis.
- A plan is not permitted to require an individual to obtain breastfeeding equipment within a specified time period following the birth of a child.
- Coverage for lactation counseling services and breastfeeding equipment must be provided without cost-sharing for the duration of breastfeeding.
- Weight Management and Obesity Treatment - For the first time, the Departments clarified preventive care services for weight management and obesity. In addition to obesity screening in adults, intensive, multicomponent behavioral interventions for weight management must also be covered without cost-sharing for adults with a BMI of 30 kg/m2 or higher. The services must be provided without cost-sharing regardless of whether a state’s benchmark plan covers such services.
- Wellness Programs - Non-financial or in-kind rewards for participation in a wellness program, such as gift cards, thermoses, and sports gear, are considered “rewards” subject to the wellness program regulations issued by the Departments.
Mental Health Parity
The criteria used in making a medical necessity determination, as well as any processes, strategies, evidentiary standards, or other factors used in developing a nonquantitative treatment limitation on mental health, substance use disorder, and medical and surgical benefits must be disclosed upon participant request, regardless of any assertion that the information is proprietary or has commercial value.