Wednesday Benefits Developments – Cadillac Tax, Fiduciary Rule, ACA Reporting & More

• Here’s the text of the bill as posted on the House Document Repository site. (docs.house.gov) We think it’s the final version, but double check before you rely on it. We’ll link to the GPO version when it’s available.
• The Cadillac tax gets pushed down the road, with a new effective date of 2020 rather than 2018. It gets some new accessories as well, such as a tax deduction for employers and indexed limits. There’s also a study commissioned by the U.S. Comptroller General to look at various adjustments to reflect workforce characteristics.
• Hoped for, but missing, is any change to the DOL’s proposed fiduciary rule—either by way of delayed funding or legislative changes.

• AmeriCorps members are not employees (of AmeriCorps or the grantee) for ACA purposes. This means theres no need to distribute Form 1095 to AmeriCorp members or count them as employees for purposes of the employer mandate.  See Q&A – 16.

• Many employers continue to classify certain inactive, disabled individuals as employees for a period of time after they leave active employment. This has raised lots of questions under ACA — both for the employer mandate and reporting purposes. The analysis for this one starts with the “hour of service” definition in the Code Section 4980H regulations. The 4980H regulations defer to regulations under ERISA for situations where an employee is entitled “hours of service” when the employee isn’t actively at work.  In very broad terms, those ERISA regulations say that the employee is treated as having “hours of service” even when not actively working IF the employee is receiving certain kinds of pay. That’s where it gets confusing. Q&A – 14 gives us some guidelines around what pay results in imputed “hours of service.”
  • There are imputed hours of service for the inactive employee who is receiving payments from an employer-paid disability plan.
  • Those imputed hours are NOT limited to 501 hours as some had hoped.
  • Disability payments attributable to disability coverage purchased with after-tax contributions DO NOT result in imputed hours.

There are more details in the guidance.  See Q&A – 14.

• For now, and at least through the 2016 plan year, employer fringe benefit payments to employees pursuant to the McNamara-O’Hara Service Contract Act (“SCA”) and the Davis-Bacon Act (“DBA”) are treated as  employer contributions for determining whether an employer has made an offer of affordable minimum value coverage, to the extent the payment does not exceed the amount required to satisfy the requirement to provide fringe benefit payments under the SCA or DBRA.
• Similarly, an employer may treat the fringe benefit payments as reducing the employee’s required contribution for purposes of reporting on Form 1095-C, although employers are encouraged to treat these fringe benefit payments as not reducing the employee’s required contribution for these purposes. If an employee’s required contribution is reported without reduction and the employer is contacted by the IRS concerning a potential pay or play penalty, it may show that it is entitled to relief under the new guidance.
• For purposes of receiving a premium tax credit and for the individual mandate, individual taxpayers are not required to take the fringe benefit payments into account as reducing the employee’s required contribution.
• Because employers can report a lower amount as the employee’s required contribution, employees who enrolled in coverage through the Marketplace may need additional information regarding their required employee contribution to determine whether they may claim the premium tax credit. As such, employers using the relief described above are encouraged to notify employees that they may obtain accurate information about their required contribution using the employer contact telephone number provided to the employee on Form 1095-C.