Health Care Reform Update
April 27, 2011
The Departments of Health and Human Services (“HHS”), Labor (“DOL”), and Treasury (“IRS”) recently issued additional guidance regarding the implementation of certain Patient Protection and Affordable Care Act of 2010 (“PPACA”) requirements, including: the rapidly approaching deadline for employers planning to apply for early-retiree funding from HHS; additional details on implementing the grandfathered plan rules; and the procedures for reporting the cost of employer-provided health coverage to employees. The DOL has also provided updated information on the status of the automatic enrollment requirement for large employers.
Deadline For Early-Retiree Health Insurance Funding
Pursuant to the PPACA, $5 billion was appropriated to establish a temporary program for partial reimbursement of the cost of providing health coverage to early retirees (including the spouses, dependents, and surviving spouses of early retirees). The program, which was implemented on June 1, 2010, began accepting applications on June 29, 2010. On March 31, 2011, HHS announced that it will stop accepting applications as of May 5, 2011, based on the amount of remaining program funds and the rate at which the funding is being disbursed. A copy of the application and instructions can be found at http://www.errp.gov. All applications must be physically received by HHS (i.e., not postmarked) on or before May 5, 2011.
Additional Guidance For Grandfathered Health Plans
On April 1, 2011, the Departments issued a sixth set of FAQs regarding the implementation of the PPACA .
Form W-2 Cost Of Coverage Reporting
On March 29, 2011, the IRS issued interim guidance (Notice 2011-28) regarding the PPACA requirement that employers report the “aggregate cost of applicable employer-sponsored coverage” to employees on IRS Form W-2. Included in the interim guidance is a set of Q&As that addresses, among other things: (1) which employers are subject to the reporting requirement; (2) methods of cost-reporting in specific circumstances (e.g., termination from employment, successor employers, retirees, etc.); (3) how to determine the aggregate cost of applicable employer-sponsored coverage; (4) the coverage required to be reported; and (5) calculating the dollar amount of reportable coverage costs. The IRS emphasizes that cost of coverage reporting to employees is for informational purposes only, and will not cause otherwise excludable employer-provided health benefits to become taxable income.
Although voluntary for the 2010 and 2011 tax years (Notice 2010-69), most employers that provide health coverage to their employees are required to report cost information beginning with the 2012 tax year. (Note, employers that choose to report the cost of coverage for 2010 and/or 2011 may rely on Notice 2011-28.) Transitional relief may be available, however, for: (1) small employers (i.e., employers that file less than 250 Forms W-2 for the 2011 tax year); (2) terminated employees to whom Forms W-2 are provided before the end of the year; (3) multiemployer plans; (4) health reimbursement arrangements; (5) stand-alone dental and vision plans; and (6) self-insured plans not subject to COBRA continuation coverage or other federal law requirements (e.g., church plans).
Automatic Enrollment Requirement For Large Employers
The PPACA requires large employers (those with more than 200 full-time employees) that are subject to the Fair Labor Standards Act to automatically enroll new full-time employees (or continue enrollment for current employees) in one of the employer’s health benefit plans. Employers are not required to comply with the automatic enrollment provisions until regulations are issued and effective, which the DOL intends to complete by 2014. To assist in the development of proposed regulatory guidance, the DOL hosted a public forum (held April 8, 2011) for individual and organizational stakeholders to exchange information and ideas regarding the automatic enrollment requirements. Forum topics included the definition of “full-time employee,” selecting the appropriate plan/benefit package (for employers that maintain multiple health plans or benefit packages) and type of coverage (e.g., single or family) in which employees would be automatically enrolled, and notice requirements for employees who wish to opt out of coverage. A transcript of the forum will be available on the DOL’s website at www.dol.gov/ebsa/healthreform.
