A Compliance Newsletter by: The Baldwin Regulatory Compliance Collaborative (BRCC)
Welcome to the latest issue of the Baldwin Bulletin – A compliance newsletter by: The Baldwin Regulatory Compliance Collaborative (BRCC). This serves as a monthly guide to important regulatory developments, legal news, and employee benefits-related industry happenings, designed to keep you abreast of the latest developments. Below, we are summarizing a digest of current news and other developments from the industry over the past few weeks, along with important interrelated and upcoming deadlines.
Significant Upcoming Compliance Deadlines
To view the CMS website, click here. To view the Price Comparison Tool Required for 2023 Plan Years, click here.
PCORI Fee for 2023 Announced
On November 14, 2022, the Internal Revenue Service (IRS) published Notice 2022-59, which provides the adjusted PCORI fee amount for plan years ending on or after October 1, 2022, and before October 1, 2023. Employers with self-insured health plans must pay the PCORI fee for plan years ending in 2022 by July 31, 2023. For more information, see here.
2023 Health Care FSA and Other Health and Welfare Limits Released
On October 18, 2022, the Internal Revenue Service (IRS) released Revenue Procedure 2022-38, which provides increased limits for health care flexible spending account (FSA) contributions and related carryover amounts of $3,050 and $610, respectively, for the 2023 plan year (up from the 2022 limits of $2,850 and $570, respectively). In addition, the limit for 2023 qualified transit and parking expenses (which represents the non-taxable limits for employer-provided commuter benefit programs), increases to $300 (up from $280 in 2022).
The following is a reference tool for employers that summarizes 2023 limits applicable to health and welfare plans that are reflected either in Revenue Procedure 2022-38 or earlier guidance. Also included are the 2023 contribution limits required by employers subject to the San Francisco Health Care Security Ordinance (SFHCSO).
2023 Retirement Income Benefits Released
The Internal Revenue Service (IRS) has released Notice 2022-55, containing cost-of-living adjustments for 2023 that affect contribution limits to retirement plan accounts. The following table reflects changes to the limits applicable to most employer plans:
2022 ACA Employer Reporting Forms Finalized
The Internal Revenue Service (IRS) released the final 2022 forms for reporting under Internal Revenue Code Sections 6055 and 6056 (Forms 1094-B and 1095-B and Forms 1094-C and 1095-C). The IRS revised Form 1095-B to remove references to the individual mandate penalty in the “Instructions for Recipients” section. No other substantive changes were made to the final forms for 2022 reporting.
The final instructions for these forms have not been released yet. However, draft instructions are available here, which include updated penalty maximums for 2022.
As a reminder, paper IRS returns for 2022 must be filed by February 28, 2023; individual statements for 2022 must be furnished by March 2, 2023; and electronic IRS returns for 2022 must be filed by March 31, 2023. Several states, including California, Massachusetts, New Jersey, Rhode Island, as well as the District of Columbia, have their own reporting requirements to evidence an employee’s compliance with the individual mandate.
New EEOC “Know Your Rights” Poster Available
On October 19, 2022, the Equal Employment Opportunity Commission (EEOC) issued a new poster titled “Know Your Rights: Workplace Discrimination is Illegal,” which updates and replaces the previous “EEO is the Law” poster. The poster summarizes employment practices that are illegal or can be challenged as discriminatory under Federal law and explains how employees or applicants can file a complaint if they believe that they have experienced discrimination. The new “Know Your Rights” poster includes the following differences from the previous version:
- Uses more straightforward language and formatting;
- Notes that harassment is a prohibited form of discrimination;
- Clarifies that sex discrimination includes discrimination based on pregnancy and related conditions, sexual orientation or gender identity;
- Adds a QR code for applicants or employees to link directly to instructions on how to file a charge of workplace discrimination with the EEOC; and
- Provides information about equal pay laws for federal contractors.
Printed notices should also be made available in an accessible format, as needed, to persons with disabilities that limit the ability to see or read. Notices can be recorded on an audio file, provided in an electronic format that can be utilized by screen-reading technology or read to applicants or employees with disabilities that limit seeing or reading ability. A screen-readable electronic formatted version is available here.
Updated Women’s Preventive Health Services Guidelines
The recommended preventive service guidelines for women have been updated and apply for plan years on or after December 30, 2022. As a bit of background, the Affordable Care Act (ACA) requires non-grandfathered group health plans to provide certain preventive health services to all adults and children without cost-sharing. In December 2021, the Health Resources & Services Administration, or HRSA, approved a new guideline on obesity prevention for midlife women as well as updates to five existing preventive services guidelines: Well-Women Preventive Visits, Breastfeeding Services and Supplies, Counseling for Sexually Transmitted Infections (STIs), Screening for Human Immunodeficiency Virus (HIV) Infection, and Contraception. For further information, visit the HRSA website here.
IRS Fixes “Family Glitch”
On October 11, 2022, the Internal Revenue Service (IRS) released a final rule that changes the eligibility rules for the premium tax credit (PTC) when purchasing health insurance coverage through the Health Insurance Exchange. On the same day, the IRS also issued guidance permitting additional cafeteria plan mid-year election changes for non-calendar year plans in IRS Notice 2022-41. Subsequently, in November, IRS Notice 2022-41 was updated to also apply to calendar year plans.
Employers who sponsor cafeteria plans and wish to allow their employees to make these election changes so that their family members may take advantage of their new eligibility for premium subsidies should comply with the new requirements and amend their cafeteria plans accordingly. For more information, see here.
DOL Proposes New Independent Contractor Rule
The Department of Labor (DOL) announced a proposed rule to rescind and replace its 2021 independent contractor classification rule under the Fair Labor Standards Act (FLSA). The proposal was published in the Federal Register on October 13, 2022. The deadline for submitting comments on the proposal was extended to December 13, 2022.
For an in-depth analysis of the proposed new independent contractor classification rule, see here.
Human Resources Checklist
Over the years there has been an increase in employment and benefit regulations and legislation. HR professionals must be familiar with many employment laws such as the Family and Medical Leave Act (FMLA), the Worker Adjustment and Retraining Notification (WARN) Act, the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the Immigration Reform and Control Act, as well as regulations and requirements for hiring and terminating employees that may vary from state to state. Smooth and effective processes can help ensure HR professionals comply with relevant laws and regulations and that tasks are completed in an orderly manner. The following checklists can assist HR professionals in developing and maintaining effective processes and help organizations remain compliant.
The below link will take you to a group of checklists broken out by applicable law or subject. These do not include an all-encompassing list of compliance topics but rather are intended to be used as guidelines for major compliance topics currently facing HR professionals. The guidance and steps in these checklists should be modified to meet the unique needs of your organization and are designed to work as an additional tool to assist with HR and benefits practices. Due to the complexities of the subjects, organizations are encouraged to seek legal counsel to discuss and address specific issues and concerns. These checklists are available here.
2022 Annual Employer Health Benefits Survey Released
In its 24th annual Employer Health Benefits Survey, the Kaiser Family Foundation reported that the average annual premiums for employer-sponsored health coverage was $7,911 for single coverage and $22,463 for family coverage in 2022. These averages resulted from a survey of private and non-federal public employers conducted between January and July of 2022, covering topics such as plan enrollment (including types of health plans), self-funding, wellness programs, access to telemedicine, and employer satisfaction with benefit offerings. For more information, including a summary of findings and the complete report, see here.
HHS Issues HIPAA Security Incident Procedures
The October 2022 Office of Civil Rights (OCR) Cybersecurity Newsletter contains HIPAA Security Rule Security Incident Procedures to assist HIPAA covered entities in addressing suspected or known security instances and protect the privacy and security of confidential information. According to the OCR, “[s]ecurity incidents will almost inevitably occur during the lifetime of a regulated entity. Having a plan established and documented is essential to being able to detect security incidents quickly in order to respond to and recover from security incidents effectively….” In this respect, HIPAA covered entities should consider the following:
- Forming a security incident response team,
- Identifying security incidents,
- Responding to security incidents,
- Mitigating harmful effects of a security incident,
- Documenting the security incident, and
- Understanding breach reporting obligations.
The complete October 2022 OCR Cybersecurity Newsletter is available here.
Public Health Emergency Period Extended
On October 13, 2022, the Secretary of the Department of Health and Human Services (HHS) extended the public health emergency (PHE) period for another 90 days (through January 11, 2023). See here. During this time, employer-sponsored group health plans (both fully insured and self-insured) must continue to cover COVID-19 testing without imposing a deductible, copayment, or other cost sharing. In addition, at-home COVID-19 tests must be covered even if they are obtained without the involvement of a health care provider. HHS has promised to give at least a 60-day notice of the final expiration or termination of the PHE. Although it appears that the PHE may be further extended in January based on recent comments by HHS, now would be a good time for plan sponsors to start discussions with their carrier or third-party administrator about how the likely end of the PHE at some point in 2023 will affect their plans.
Keep in mind that the mandates tied to the PHE referenced above are different than those tied to the COVID-19 national emergency last extended by the President on February 18, 2022. The extension of the national emergency impacts deadline relief related to employee benefit plan deadlines for HIPAA, COBRA, claims procedures and external review process requests.
Plan Sponsor Council of America Releases 2022 HSA Survey
The Plan Sponsor Council of America (PSCA) has released its 4th annual 2022 Health Savings Account (HSA) benchmarking survey. The survey was sponsored by HSA Bank and examined how employers structure their HSA programs, their use by employees, and their potential as a retirement savings vehicle. Key highlights include the following:
- Nearly 90 percent of participants opened an HSA when given the opportunity,
- 75 percent of employers make HSA contributions,
- 60 percent of employers offer investment options for the HSA and more than 20 percent of participants choose to invest their assets,
- 40 percent of organizations automatically enroll employees in the HSA if they enroll in the HSA-qualifying health option, and
- More than 70 percent of respondents consider employee education as a top concern.
The complete 2022 HSA Survey is available here.
Fidelity to Pay Employees’ College Tuition Costs
Fidelity Investments announced recently that it will offer fully funded undergraduate degrees to many of its employees. The program will fully pay for tuition, books, fees, and taxes, providing a debt-free education for select four- and two-year programs. Fidelity views this new program as an investment in the next generation of financial services talent and part of a larger expansion of its education benefits with the goal of making education and the most in-demand skills accessible to all. Read the full news release here.
Analysis of Potential Impact of Challenges to ACA’s Preventive Services Requirements
The Kaiser Family Foundation (KFF) has released a white paper describing the recent litigation challenging the Affordable Care Act (ACA)’s requirement that most private insurance plans cover recommended preventive care services without cost sharing. On September 7, 2022, in the case of Braidwood Management v. Becerra, a Federal judge for the U.S. District Court for the Northern District of Texas ruled that parts of the ACA’s process for determining which types of preventive care must be covered by private health insurance on a no-cost basis is unconstitutional. In addition, another portion of the ruling indicated that a requirement that H.I.V. prevention drug therapy be covered on a no-cost basis violates the religious freedom of an employer. The KFF white paper is available here.
McDonald’s COBRA Settlement Approved
A class action lawsuit brought against McDonald’s by plaintiffs alleging they received statutorily deficient COBRA notices has resulted in a settlement in the amount of $156,782.50. In Johnson v. McDonald’s Corp., No. 1:21-cv-24339-FAM, S.D. Fla., plaintiffs filed suit alleging that required information was omitted in the COBRA notices, including that McDonald’s failed to provide a mailing address for submitting premium payments or for how to enroll for coverage, and that the information was broken down into multiple documents mailed separately under different cover, causing confusion among the COBRA beneficiaries such that they failed to elect COBRA as a result.
The net settlement amount, after payment of legal fees, reasonable litigation costs and cost of administration will be distributed pro rata among a settlement class of 8,959 members (or approximately $7.00-$10.00 per member). This case, as well as many similar cases that have been filed recently alleging COBRA notice deficiencies, illustrates the need for employers and their COBRA administrators to use the specific language in the model COBRA notice provided by the Department of Labor when drafting their COBRA notices. The proposed settlement agreement that was filed on September 22, 2022, and approved on October 27, 2022, is available here.
Still More COBRA Notice Related Litigation
In the case of Howard v. Ivy Creek of Tallapoosa, LLC, 2022 WL 4390431 (M.D. Ala. 2022), a court ruled that delegating responsibility to a third-party administrator (TPA) to mail COBRA election notices to plan COBRA beneficiaries did not absolve the employer of liability. This is yet another reminder for employers to make sure that procedures are implemented and followed regarding the necessity of providing COBRA notices using a method that is calculated to ensure receipt by the beneficiary as well as keeping TPAs apprised of notice address changes.
The Howard case involved a former employee who failed to receive her COBRA election notice for her medical coverage. She had changed residences after her termination and alleged she had properly notified the employer of her change in address. The former employee had received the election notice for her dental coverage at her new address which was provided by the employer (the TPA was contractually responsible for mailing out the election notice for the medical coverage). The TPA had sent the election notice to the address it had on file, which was the employee’s prior residence. She sued both her employer and the TPA. This court rejected the employer’s argument that it could rely on the fact that it had delegated this responsibility contractually to the TPA and allowed the case to proceed against the employer.
Question of the Month
Must COBRA be offered to employees who terminate employment and are eligible for retiree coverage for at least the length of their COBRA continuation period? The coverage is identical to the coverage they had as active employees, but the retiree coverage has a greater premium contribution requirement.
Answer: Internal Revenue Service (IRS) regulations clearly require an offer of COBRA in these circumstances. Even though it may seem that retirees are able to continue their same coverage under the plan without interruption, the increased premium charged to retirees is considered a loss of coverage for COBRA purposes.
COBRA requires plan administrators to furnish a COBRA election notice to qualified beneficiaries whenever there is a triggering event listed in the statute that causes a loss of coverage within the maximum coverage period. While a retiring employee’s termination of employment is clearly a triggering event, the critical issue is whether the retiree has had a loss of coverage. If retirees’ coverage under the combined active/retiree plan will not continue under the same terms and conditions under which active employees are covered, then retirees and related qualified beneficiaries must be given the opportunity to elect COBRA. The IRS COBRA regulations make clear that “to lose coverage means to cease to be covered under the same terms and conditions as in effect immediately before the qualifying event”. Source: Thompson Reuters.