Early 2017 Health Insurance Reporting Obligations

The Affordable Care Act established two reporting requirements for employers and insurers. Each year, an individual must receive information about his/her own health coverage on IRS Form 1095-B or 1095-C. In addition, certain employers must file information returns with the Internal Revenue Service.

Applicable large employers (“ALEs”), as well as all employers providing self-insured health coverage, must file information returns. Generally, an ALE is an employer that, during the year in question, had 50 or more full-time equivalent employees.

The forms to be used depend on the employer’s status:

  • An ALE, including a self-insured ALE, should file a Form 1095-C for each employee who was a full-time employee for any month of 2016. Form 1094-C (a transmittal form giving employer information) must accompany the Forms 1095-C.
  • A self-insured employer that is not an ALE should file Forms 1095-B with a simple transmittal form, Form 1094-B.

Each employee must receive a copy of the Form 1095-B or 1095-C giving his/her individual information. Forms must be mailed to employees by March 2, 2017. The March 2nd deadline, which is 30 days later than the deadline set forth in regulations, applies for this year only.

The deadline for filing information returns with the IRS has not been extended. The IRS will accept paper forms from self-insured non-ALEs and from ALEs filing less than 250 forms. Paper filings are due by February 28, 2017. An ALE filing 250 or more Forms 1095-C must file electronically; the deadline for electronic filings is March 31, 2017.

DOL Fiduciary Rule — April 10, 2017 Effective Date

Last April, the U.S. Department of Labor released a final regulation expanding the definition of “investment advice” under ERISA. The new rule, which is scheduled to take effect on April 10, 2017, broadens the group of plan service providers who may have “fiduciary” status under ERISA. The final rule also introduces a new prohibited transaction exemption — the “best interest contract” exemption — that may provide relief for certain investment advisers. The effective date for the best interest contract exemption is generally April 10, 2017, but many of the substantive requirements are not effective until January 1, 2018.

Given the upcoming change in administration, many have wondered if the new fiduciary rule will be delayed, repealed, or modified. While any of those actions is possible, we believe that service providers and plan sponsors should be prepared for the new rule to take effect “as is” on April 10, 2017. If you have questions about the new rule or its impact on your ERISA plans and service provider relationships, please contact a member of our Employee Benefits and Executive Compensation Practice Group.

Determination Letter Applications

During 2017, the IRS will be scaling back its determination letter program for tax-qualified retirement plans. As a result, “Cycle A” plan sponsors have a choice to make. (A plan sponsor is in Cycle A if its employer identification number ends in -1 or -6.) The IRS will continue to accept determination letter applications for ongoing Cycle A plans until January 31, 2017. However, Cycle A sponsors are not required to apply for new determination letters.

After January 31, 2017, the IRS will accept determination letter applications only for new plans and terminating plans.

The IRS has announced that the expiration date on any determination letter issued before January 4, 2016 is “no longer operative.” Thus, prior determination letters issued to Cycle A plans (and many other plans as well) will remain in effect until further notice.

Benefit Limits for 2017

A number of the benefit limits affecting tax-qualified retirement plans will change in 2017. In addition, the Social Security taxable wage base and PBGC premiums are increasing. The figures for 2017 are shown below.

Annual Benefit Plan Limits

IRS: Contributions and Benefits 2016 Limit 2017 Limit
Maximum compensation for benefit purposes (401(a)(17) limit)

$265,000

$270,000

415 annual maximums

> accrued defined benefit

> defined contribution allocation

$210,000

$ 53,000

$215,000

$ 54,000

401(k) plan, 403(b) plan, and 457(b) maximum salary reduction

$ 18,000

$ 18,000

Catch-up contribution limit $ 6,000 $ 6,000
Health FSA salary reduction contribution limit $ 2,550 $ 2,600
Highly compensated employee $120,000 $120,000
For top-heavy purposes, a key employee is an officer earning more than . . .

$170,000

$175,000

Social Security
OASDI taxable wage base $118,500 $127,200
Pension Benefit Guaranty Corporation
Maximum monthly benefit guaranteed by the PBGC

(for participant age 65)

$ 5,011

$ 5,369

Premiums

> fixed premium (single-employer plan)

> variable premium per $1,000 underfunded

$ 64

$ 30

$ 69

$ 34

Reminder: Summary Plan Descriptions

An updated summary plan description (SPD) must be furnished every five years if changes have been made to information in the SPD, or if the related plan has been updated during that time period. (Otherwise, a new SPD must be furnished every 10 years.) In the interval between updated SPDs, plan participants must receive a summary of any “material modifications” to their plan no later than 210 days after the end of the plan year in which the modifications were adopted.

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