Industry & Regulatory News

The IRS has issued final regulations granting a permanent, automatic extension of time to comply with the Affordable Care Act (ACA) reporting requirements. Employers, health insurance issuers, and governmental plans have additional time—not to exceed 30 days after January 31— in which to provide Forms 1095-B or 1095-C to individuals. If the extended due date falls on a weekend or legal holiday, statements are due on the next business day. The extended deadline is effective for calendar years beginning after December 31, 2021. 

In addition, the regulations provide guidance on the following.

Medicaid Coverage Limited to COVID Services.  Medicaid coverage that is limited to COVID testing and diagnostic services is not minimum essential coverage under a government-sponsored program. Individuals covered under this type of plan may still qualify for premium tax credits. This provision is effective September 28, 2020.

Additional Extensions Not Available. Reporting entities are not permitted to request an additional extension to provide Forms 1095-B or 1095-C beyond the automatic 30-day extension. A reporting entity may seek to qualify for penalty relief by showing a failure to file was due to reasonable cause and not willful neglect.

Elimination of Transitional Good Faith Relief. For calendar years 2015 through 2020, the IRS did not impose penalties on reporting entities if they could show that they made good faith efforts to comply with the ACA reporting requirements. The final regulations reiterate that transitional good faith relief is not applicable to the 2021 calendar year and will not be available in the future. 

Filings Submitted to the IRS.  Reporting entities are also required to submit an information return and transmittal form to the IRS on or before February 28 for paper submissions (March 31 if filed electronically) of the year following the calendar year. This deadline has not been extended.

These final regulations provide welcome news to reporting entities who are in the beginning stages of preparing to comply with the 2022 reporting requirements.

Representative Carol Miller (R-WV) has introduced HR 9514, the Working Families Childcare Access Act. According to a press release, the bill allows certain additional expenses in a dependent care flexible spending arrangement—specifically qualified sports, tutoring, and music or art expenses. Additionally, the bill would support families by:

• Increasing annual contribution limits to $15,000 from the current $5,000 limit
• Eliminating the “use-or-lose” rule by allowing the rollover of saved unused dependent care FSA funds into the following year
• Expanding qualified expenses by providing parents with the flexibility to use their dependent care FSA funds for adoption expenses, tutoring, sports, art, and music programs
• Raising the allowable age limit for dependent care expenses for children and dependents to age 15

Currently, these tax-advantaged accounts are limited to $5,000, and any funds not used by the end of the year are forfeited.

The National Emergency and whether it will or won’t come to an end in 2023 is on the mind of many health plan Sponsors and Administrators. The COVID-19 Public Health Emergency (PHE) is extended through January 11, 2023, and the National Health Emergency (NE) is set to expire March 1, 2023. 

The Council of the District of Columbia has approved a new transportation benefit law (D.C. ACT 23-305) that requires employers who provide parking benefits to also offer ‘clean-air’ transportation benefits to their employees. The law also requires the employers to submit annual/bi-annual reporting and plans to the city. The new law applies to every employer that employs at least 20 persons located in Washington D.C. and offers its employees free or discounted parking. Note, the ordinance does not apply if the employer owns the parking lot.

In recent years, the Federal Government has passed several pieces of legislation to offer relief and much-needed flexibility to employers that offer dependent care assistance programs (DCAPs). But many employers are struggling to make these benefits attractive to all levels of their workforce who may not see the value in putting away pre-tax dollars for care of children. However, DCAP assistance and the expanded Dependent care tax credit is a benefit many should reconsider.

The short answer is yes. If you are not currently conducting ongoing verification audits or requiring employees to provide documentation when they enroll in benefits, then you should audit your plan.

Background

The Health Opportunity Patient Empowerment Act, passed in 2006, included a provision which allows the owner of an Individual Retirement Account (IRA) to make a one-time, tax-free transfer into a Health Savings Account (HSA). This type of transfer is officially referred to as a qualified HSA funding distribution (QHFD) and gives HSA owners an additional way to fund their accounts and save on taxes while planning to cover future qualified medical expenses. Through this transfer, IRA assets are moved directly from the IRA trustee to the HSA trustee as a regular contribution. The election to make a qualified HSA funding distribution is irrevocable.

On November 14, 2022, the IRS has Notice 2022-59, announcing the adjusted applicable dollar amount for determining the Patient-Centered Outcomes Research Trust Fund (PCORTF) fee for policy years and plan years ending on or after October 1, 2022, and before October 1, 2023.

On October 18, 2022, the IRS issued Revenue Procedure 2022-38, which address annual inflation adjustments for more than 60 tax provisions. Included are new limits for Flexible Spending Accounts, Commuter Benefits and various other code provisions, as follows:

Effective December 14, 2022, the federal prime interest rate increased from 7 percent to 7.50 percent. The prime interest rate is largely determined by the federal funds rate, as set by the Federal Reserve’s Federal Open Market Committee (FOMC). As Department of Labor regulations require a retirement plan loan interest rate to be comparable to interest rates charged by entities that are in the business of lending money in similar circumstances, plan sponsors typically use a benchmark such as the prime rate to set the interest rate on plan loans. As a reminder, for a participant who is on active duty in the uniformed services, the Servicemembers Civil Relief Act of 2003 prescribes an interest rate limitation of 6% for loans that were secured before the military service period started.

The next FOMC meeting is scheduled for February 1, 2023.