Complying with qualified domestic relations orders (QDROs) can be complicated. This article covers the basics of QDRO administration and points out the common mistakes plans make.
Are Your QDRO Practices Costing Your Plan Money?
Jim McKeogh and Mandy Notaristefano published this article in the October 2016 issue of Benefits Magazine.
The U.S. House of Representatives passed HR 1628, the American Health Care Act (AHCA), by a vote of 217-213 on May 4, 2017. This bill is the first step in the Trump Administration’s process to repeal and replace the Affordable Care Act, also known as the ACA or Obamacare.
The AHCA, as written, eliminates the individual mandate to buy health insurance, changes subsidies from income-based to age-based, ends Medicaid expansion, lessens coverage requirements for insurance companies and eliminates taxes on high-earners. The AHCA retains coverage for those with pre-existing conditions, but allows insurers to charge higher premiums to such individuals.
The bill will now head to the Senate. The GOP has a much narrower majority in the Senate (52-48) than in the House (238-193) and many Senate Republicans have already stated that they will likely rewrite the legislation or start over completely.
The ACA established the Patient Centered Outcomes Research Institute (PCORI) to fund research that can help patients and those who care for them make better-informed decisions about the healthcare choices they face every day, guided by those who will use that information. The research is funded in part by health insurers and sponsors of self-insured plans through PCORI fees.
Generally, the PCORI fees apply to group health plans (including self-insured plans). The IRS chart found HERE describes which health plans are subject to the fee. Those health plans are required to report and pay fees annually using IRS form 720. Form 720 is due July 31, 2017 for plan years ending in 2016 along with payment in the following amount:
- $2.17 per covered life for plan years ending between January 1, 2016 and September 30, 2016
- $2.26 per covered life for plan years ending between October 1, 2016 and December 31, 2016
There are three methods for calculating the number of covered lives:
- Actual Count Method – Calculate the lives covered for each day of the plan year and divide by the number of days in the plan year.
- Snapshot Method – Add the lives covered on a date during the first, second, or third month in each quarter, or an equal number of dates for each quarter, and divide the total by the number of dates on which a count was used. There are two methods for counting family members: Count the actual lives covered on the designated date; or Count the participants on the designated date and multiply by 2.35.
- Form 5500 Method – Add the participants at beginning of year and end of year as reported on the Form 5500 for the plan year (this method may be used only if the Form 5500 is filed no later than the due date for the fee imposed for that plan year).
For more information, click HERE for a question and answer page provided by the IRS.
The applicable dollar amount to determine PCORI fees will increase from $2.08 to $2.17 for plan years ending after September 30, 2015 and before October 1, 2016 according to Notice 2015-60 issued by the Internal Revenue Service (IRS) on October 9th.
Health insurance issuers and self-funded health plans are required to pay PCORI fees for Plan Years ending on or after October 1, 2012 and on or before September 30, 2019. These fees help fund the Patient-Centered Outcomes Research Institute (PCORI). The fee amount is calculated by multiplying the average number of covered lives during the Plan Year by the applicable dollar amount for that Plan Year.
The applicable dollar amount for each Plan Year is:
Plan Year ending between October 1, 2012 and September 30, 2013 $1.00
Plan Year ending between October 1, 2013 and September 30, 2014 $2.00
Plan Year ending between October 1, 2014 and September 30, 2015 $2.08
Plan Year ending between October 1, 2015 and September 30, 2016 $2.17
Beginning in 2016, group health plans and large employers will be required to file annual health coverage information returns under Internal Revenue Code Sections 6055 and 6056, which were added by the Affordable Care Act (ACA). Although all filers are encouraged to file information returns electronically, those who file 250 or more information returns are required to file electronically through the Affordable Care Act (ACA) Information Returns (AIR) system. To assist in developing software for use with the AIR system, the Internal Revenue Service (IRS) released Draft Publication 5165. This guide has information regarding the communication procedures, transmission formats and other rules for the following annual information returns filed electronically:
- Form 1094-B, Transmittal of Health Coverage Information Returns
- Form 1095-B, Health Coverage
- Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
- Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
The IRS will publish a final Publication 5165 at a later date.
The Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury released FAQ XXV addressing the compliance of wellness programs with the Affordable Care Act.
Highlights of FAQ XXV:
- Compliance with the wellness program regulations under ACA does not determine compliance with other laws nor does it determine the tax treatment of rewards provided by the wellness program.
- A wellness program will comply with the requirement to be “reasonably designed” if it:
has a reasonable chance of improving the health of, or preventing disease in, participating individuals;
- is not overly burdensome;
- is not a subterfuge for discrimination based on a health factor;
- is not highly suspect in the method chosen to promote health or prevent disease; and
- provides a reasonable alternative standard to qualify for the reward for anyone who does not meet the initial standard that is related to a health factor.
The Department of Health and Human Services has provided an extension of the deadline for contributing entities to submit their 2014 enrollment counts for the transitional reinsurance program contributions. The deadline has now been extended until December 5, 2014. The January 15, 2015 and November 15, 2015 payment deadlines have not been changed.
The Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury released FAQ Part XXII addressing the compliance of premium reimbursement arrangements with the Affordable Care Act. Sponsors of health reimbursement arrangements (HRAs), health flexible spending arrangements (health FSAs) or other arrangements that reimburse health premiums should confirm that reimbursements are not being made for individual coverage premiums.
Specifically, the guidance provided in this set of three questions states that:
- Employers cannot offer employees cash to reimburse the purchase of an individual policy.
- Employers cannot offer employees at risk of high claims a choice between the group health plan or cash to obtain individual insurance.
- Employers cannot cancel group policies, setup a Code section 105 reimbursement plan using brokers to help employees select individual policies and allow employees to access premium tax credits.
Final rules were released by the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury addressing limited scope vision and dental benefits and employee assistance programs (EAPs) as excepted benefits. These regulations should be reviewed so that plans may make any necessary changes effective for plan years beginning on or after January 1, 2015.
Excepted benefits are generally excluded from the Affordable Care Act’s (ACA’s) requirements. There are four categories of excepted benefits:
- Benefits that are generally not health coverage (workers compensation, accidental death and dismemberment)
- Limited excepted benefits (some limited scope* vision or dental benefits, long-term care, home health care, health FSAs)
- Non-coordinated excepted benefits (coverage for a specific disease or illness, hospital indemnity insurance)
- Supplemental excepted benefits (Medicare Supplement plans)
*Limited scope means that benefits are limited to treatment of the eye (vision) or mouth (dental).
In December 2013, proposed rules were issued regarding excepted benefits. The rules proposed changes in the requirements affecting limited scope vision and dental coverage and recognition of both employee assistance programs and coverage that wraps around individual coverage as new forms of limited excepted benefits. The final rule is silent on wraparound coverage and makes minor modifications to the other proposals. Additional guidance on wraparound coverage is expected in the future.
Vision and Dental Benefits
The final rules clarify that limited scope vision and dental benefits are excepted benefits if they (1) are offered under a separate policy or insurance contract or (2) are not considered to be an integral part of the group health plan. These benefits are not an integral part of the group health plan if either (1) participants may decline coverage or (2) claims for the benefits are administered under a separate contract. The regulations eliminate the requirement that an additional premium be charged in order to qualify as an excepted benefit.
Employee Assistance Programs (EAPs)
The final rule also allows employee assistance programs to be recognized as excepted benefits if they:
- Do not provide significant medical care benefits.
- Do not coordinate their benefits with group health plan benefits.
- Do not require employee premiums or contributions for participation.
- Do not impose cost-sharing requirements.
These regulations apply to group health plans and group health insurance issuers for plan years beginning on or after January 1, 2015. Plans should review the regulations and determine that benefits have been designed and are being administered appropriately to meet the definition of excepted benefits. If these requirements are not met, plans may face additional compliance under HIPAA, Mental Health Parity and the ACA as well as potential penalties for noncompliance.
The Internal Revenue Service (IRS) issued Notice 2014-56 announcing the PCORI fees applicable to health plans for plan and policy years ending on or after October 1, 2014 and before October 1, 2015 is $2.08. These fees are calculated using an average number of covered lives and an annually announced applicable dollar amount. The applicable dollar amount for plan and policy years ending on or after October 1, 2012 and before October 1, 2013 was $1.00. This dollar amount was increased to $2.00 for plan and policy years ending on or after October 1, 2013 and before October 1, 2014.
For policy years and plan years ending October 1, 2015, through September 30, 2019, the adjusted applicable dollar amount will be published in future guidance in the Internal Revenue Bulletin.