Client Alert: IRS Releases Final 2019 ACA Employer Reporting Forms and Instructions

The Internal Revenue Service (“IRS”) has just released the Final Forms and Instructions for 2019 information reporting by employers and other entities under Internal Revenue Code sections 6055 and 6056. The links to the Final Forms and Instructions are below:

2019 Forms for Applicable Large Employers (Code section 6056):

2019 Forms for Employers who Self-Fund (Code section 6055):

These instructions and forms reflect only minor changes, such as a few formatting modifications and the reflection of indexed penalty amounts for reporting failures. The instructions also reflect the extension of due dates for furnishing statements from January 31, 2020 to March 2, 2020, as well as the extension of good faith relief for reporting and furnishing as reflected in our most recent Client Alert. Additionally, the IRS will not impose a penalty for failure to furnish Form 1095-C to any employee enrolled in an Applicable Large Employer member’s self-insured health plan who is not a full-time employee for any month of 2019 if certain conditions are met. The IRS will also not impose a penalty for failure to furnish Form 1095-B to individuals if certain conditions are met. See Notice 2019-63 at https://www.irs.gov/pub/irs-drop/n-19-63.pdf.

The increased penalties are now as follows for 2019 tax year returns (and may be waived in certain circumstances):

  • The penalty for failure to file a correct information return is $270 for each return for which the failure occurs, with the total penalty for a calendar year not to exceed $3,339,000.
  • The penalty for failure to provide a correct payee statement is $270 for each statement for which the failure occurs, with the total penalty for a calendar year not to exceed $3,339,000.
  • Special rules apply that increase the per-return and per-statement and total penalties with no maximum limitations if there is intentional disregard of the requirement to file the returns and furnish recipient statements.

Additionally, the instructions for Forms 1094-B and 1095-B state that health insurance issuers and carriers are encouraged (but not required) to report coverage in catastrophic health plans enrolled in through the Marketplace for months in 2019.

The remainder of the provisions remain intact, including the mandatory electronic filing for Forms reaching the 250-return threshold.

If you should have questions regarding employer reporting requirements or other ACA mandates, the Employee Benefits Department at Fraser Trebilcock can assist.


Elizabeth H. Latchana, Attorney Fraser TrebilcockElizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

Client Alert: Delay of Deadline to Furnish Forms 1095-B and 1095-C to Individuals

Statements to Individuals

The Internal Revenue Service (“IRS”) has extended the deadline for 2019 Information Reporting by employers (and other entities) to individuals under Internal Revenue Code sections 6055 and 6056 by just over a month. However, the deadline for these entities to file with the Internal Revenue Service (IRS) remains the same.

IRS Notice 2019-63 extends the due dates for the following 2019 information reporting Forms from January 31, 2020 to March 2, 2020:

  • 2019 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
  • 2019 Form 1095-B, Health Coverage

Please note that no further extension beyond the March 2, 2020 deadline is allowed. Therefore, this deadline for furnishing the Forms to individuals must be met. 

Reporting to IRS

However, the due dates for filing these Forms and their Transmittals with the IRS remains unchanged. Specifically, the due date for filing the following documents with the IRS is February 28, 2020 for paper filings; however, if filing electronically, the due date is March 31, 2020 (employers who are required to file 250 or more Forms must file electronically):

  • 2019 Form 1094-B, Transmittal of Health Coverage Information Returns, and the 2019 Form 1095-B, Health Coverage
  • 2019 Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and the
  • 2019 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

Additional extensions may still be available for filing these Forms with the IRS.

Good-Faith Transition Relief

IRS Notice 2019-63 also extends the good-faith transition relief from Code section 6721 and 6722, which are the Code sections imposing penalties for filing incorrect or incomplete information on the return or statement. Specifically, entities showing that they have made good faith efforts to comply may avoid penalties for incorrect or incomplete information reporting.  However, relief is not available to entities who fail to file returns or furnish the statements, miss a deadline, or otherwise had not made good faith efforts to comply.  The Notice states that in determining good faith, the IRS “will take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting the required information to the Service and furnishing it to employees and covered individuals, such as gathering and transmitting the necessary data to an agent to prepare the data for submission to the Service or testing its ability to transmit information to the Service.”

Penalty Relief for Form 1095-B Statement to Responsible Individuals

Last, the Notice addresses that as the individual shared responsibility payment was reduced to zero for months beginning after December 31, 2018, the IRS and Department of Treasury are continuing to analyze if and how the section 6055 reporting requirements should change in the future.  Comments are requested.  However, because an individual will not need the information on Form 1095-B to compute his or her federal tax liability or to file an income tax return with the IRS, the Treasury Department and the IRS have determined that relief from penalties associated with furnishing a statement under section 6055 is appropriate.  Therefore, the IRS will not assess a penalty under section 6722 against reporting entities who fail to furnish a Form 1095-B to responsible individuals if two conditions are met: 

  • First, the reporting entity posts a notice prominently on its website stating that responsible individuals may receive a copy of their 2019 Form 1095-B upon request, accompanied by an email address and a physical address to which a request may be sent, as well as a telephone number that responsible individuals can use to contact the reporting entity with any questions.
  • Second, the reporting entity furnishes a 2019 Form 1095-B to any responsible individual upon request within 30 days of the date the request is received.

This relief does not extend to the requirement that applicable large employers (ALEs) must furnish Forms 1095-C to full-time employees, whether or not self-insured health plans.  Those statements must continue to be provided.  However, the penalty relief will apply to employees enrolled in an ALE’s self-insured health plan who are not full-time employees for any month of 2019.

You can find the full Notice here: https://www.irs.gov/pub/irs-drop/n-19-63.pdf.

If you should have questions regarding employer reporting requirements or other ACA mandates, the Employee Benefits Department at Fraser Trebilcock can assist.


Elizabeth H. Latchana, Attorney Fraser TrebilcockElizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

Client Alert: IRS Announces 2020 Increase for Health FSAs

The IRS has just released its 2020 annual inflation adjustments, in which it announced that the dollar limitation under Code section 125 on voluntary employee salary reductions for contribution to health flexible spending arrangements (health FSAs) is increasing to $2,750. Previously the limitation was $2,700. The authority for this increase can be found in Rev. Proc. 2019-44: https://www.irs.gov/pub/irs-drop/rp-19-44.pdf. This link takes you to the IRS annual inflation adjustments for more than 60 tax provisions.

Although open enrollment season is about to be in full swing for most, employers should ensure that their salary reduction agreements and related enrollment materials are updated to reflect this increase. Additionally, employers will want to review their Code section 125 cafeteria plan documents to ensure these also allow for such an increase.


Elizabeth H. Latchana, Attorney Fraser TrebilcockElizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

Up in Smoke – Section 280E’s Buzz not Harsh by Excessive Fines Clause: Northern California Small Business Assistants, Inc. v Commissioner

A tax provision that blocks marijuana companies from claiming federal business tax deductions is constitutional ruled the U.S. Tax Court on October 23rd. Northerner California Small Business Assistants, Inc. v Commissioner, 153 TC No. 4 (No. 26889-16, October 23, 2019).

Northern California Small Business Assistants, Inc., a California medical marijuana business, claimed $1.5 million in ordinary and necessary business expenses for its 2012 tax year. The IRS disallowed the company’s tax deductions under Section 280E of the Internal Revenue Code. That provision blocks companies that are involved in drug trafficking from claiming business deductions and credit that are available to businesses not engaged in trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act).

Cannabis companies that are organized and operated legally under state law, face what amounts to a federal income tax on their gross receipts – with effective tax rates as high as 70% because for federal purposes, those companies are considered to be trafficking in the illegal drug trade. Some types of marijuana businesses are able to reduce the amount of their income subject to tax based on their inventory costs.

The Company claimed that Section 280E violated the prohibition on excessive fines contained in the Eighth Amendment. The Excessive Fines Clause guards against abuses of the government’s ability to punish civil or criminal infractions. Specifically the company argued that:

  • The Eighth Amendment applied to corporations,
  • That Section 280E operates as a penalty through the tax laws on the company’s gross receipts, and
  • That this “penalty” is excessive.

The Tax Court held, however, that Section 280E does not violate the Constitution because it is not a penalty provision. “Despite efforts by several States to legalize marijuana use to varying degrees, it remains a Schedule 1 controlled substance within the meaning of the Controlled Substance Act,” wrote Judge Joseph Goeke. “Unlike in other context where the Supreme Court has found a financial burden to be a penalty, disallowing a deduction from gross income is not a punishment,” said the Court. The court noted its holding was consistent with the only Circuit Court of Appeals decision on this point.

The company also argued that, assuming Section 280E is constitutional, that it should be applied more narrowly than as interpreted by the IRS.  According to the taxpayer, while Section 280E may be appropriately applied to limit ordinary and necessary business expenses, other provisions, such as depreciation deductions, and the deductions for state and local taxes should be excluded from Section 280E’s reach. The Tax Court declined this invitation, stating, “Congress could not have been clearer in drafting this section [280E] of the Code.”

Perhaps most interesting, is that there were two dissenting opinions. Judge Gustason, dissenting in part, wrote that he believed Section 280E unconstitutionally exceeded Congress’ power to impose an income tax under the Sixteenth Amendment. “I would hold that this wholesale disallowance of all deductions transforms the ostensible income tax into something that is not an income tax at all, but rather a tax on an amount greater than the taxpayer’s ‘income’.”

Judge Copeland, agreeing with Judge Gustafson’s dissent, also wrote a partial dissent of her own, insisting that Section 280E is a penalty and urging further analysis of whether it violates the Eighth Amendment.

Read full opinion here.


Fraser Trebilcock attorney Paul V. McCord has more than 20 years of tax litigation experience, including serving as a clerk on the U.S. Tax Court and as a judge of the Michigan Tax Tribunal. Paul has represented clients before the IRS, Michigan Department of Treasury, other state revenue departments and local units of government. He can be contacted at 517.377.0861 or pmccord@fraserlawfirm.com.

Department of Labor Releases Proposed Regulations Expanding Employer’s Ability to Provide ERISA Disclosures Electronically

Pursuant to a 2018 Executive Order, the Department of Labor released proposed regulations this week which would expand an employer’s ability to provide ERISA disclosures electronically. These rules do not replace existing guidance, but instead add an additional safe harbor option for employers to comply.

The proposed regulations essentially adopt a “notice and access” regime under which employers may post required disclosures on a website and provide participants with notification of their availability and instructions for access. Critically—after providing a one-time initial notice on paper—this notification may be delivered electronically as a default, as long as the participant either:

  1. Provides a personal email address to the employer, plan sponsor, or plan administrator, as a condition of his or her employment, OR
  2. Is assigned an email address by the employer.

For former employees, the employer must take reasonable steps to ensure that it continues to have an accurate email address for the terminated participant. Participants who desire to receive the disclosures on paper are permitted to opt out of electronic delivery.

The content of the notice of internet availability is fairly standard, as far as ERISA disclosures go, and the proposed regulations place a strong emphasis on the use of ordinary language, indicating that the notice should use “short sentences without double negatives, everyday words rather than technical and legal terminology, active voice, and language that results in a Flesch Reading Ease test score of at least 60.” Generally, a separate notice is required for each document, but there are opportunities for combining these notices and providing them on an annual basis.

While these proposed rules are generally a positive development, we expect that employers will be disappointed to learn that—at least at this point—these rules are limited to retirement plans (although the proposed regulations do reserve consideration for the possibility of expansion to health and welfare plans). It is also important to note that these rules are merely proposed and that plan sponsors should continue following the existing ERISA disclosure rules unless and until the regulations are adopted as final.

If you have any questions about the rules that apply to participant disclosures for your retirement plans, please contact Brian Gallagher at (517) 377-0886 or bgallagher@fraserlawfirm.com.


Brian T. Gallagher is an attorney at Fraser Trebilcock specializing in ERISA, Employee Benefits, and Deferred and Executive Compensation. He can be reached at (517) 377-0886 or bgallagher@fraserlawfirm.com.

Client Alert: 2020 Adjustments for ACA’s OOP Limits, Penalty Amounts, and Affordability

Government has Issued the 2020 Adjustments for ACA’s OOP Limits, Penalty Amounts, and Affordability

HHS Announces OOP Limitations for 2020

With the passage of the Affordable Care Act (ACA), group health plans became required to apply an out-of-pocket limitation to certain in-network benefits… meaning that once an individual or family out-of-pocket (OOP) limit was met, the plan could not charge additional OOP costs for essential health benefits. These OOP limits include both the plan’s deductible as well as cost-sharing amounts for essential health benefits (EHB) in-network as set forth under the ACA.

Although self-insured plans and large-group insured plans are not required to cover all EHBs (while small-group insured plans are), to the extent they do, in-network OOP expenses for EHBs cannot exceed the maximum OOP limit. Additionally, group health plans may not impose annual or lifetime dollar limitations on EHBs whether offered in-network or out-of-network.

The Department of Health and Human Services (HHS) has released the 2020 plan year inflation-adjusted OOP limits applicable to non-grandfathered plans.

  • Self-only coverage:      $8,150 (was $7,900 for 2019)
  • Family coverage:         $16,300 (was $15,800 for 2019)

See https://www.govinfo.gov/content/pkg/FR-2019-04-25/pdf/2019-08017.pdf.

Employers with non-grandfathered group health plans must update their maximum annual OOP limits.

These rules do not apply to ACA grandfathered plans. [Please note that these cost-sharing limits are different than the maximum out-of-pocket limits for purposes of being HSA-qualifying high deductible health plans.]

HHS Announces ACA Employer Mandate (Pay or Play) Penalty Amounts for 2020

Under the ACA, applicable large employers must offer certain group health plan coverage to their full-time employees; otherwise they will risk significant penalties.

Applicable large employers are those who employ 50 or more full-time or full-time equivalent employees in the preceding calendar year. Employees of related employers (within a controlled group or affiliated service group) are counted in this determination.

  • Part A requires employers to offer minimum essential coverage to 95% of their full-time employees.  See Section 4980H(a).
  • Part B requires the offered coverage be affordable and meet the minimum value standards.  See Section 4980H(b).

Specifically, the Part A Penalty is imposed on an employer who fails to offer minimum essential coverage (MEC) to at least 95% of the employer’s full-time employees (FTEs) and dependents as defined under the ACA, and if one of its FTEs receives subsidized coverage through the Marketplace or public health insurance exchange. The penalty amount is multiplied by the number of FTEs, minus 30. Special rules exist for applicable large employer members which are part of a controlled group.

The Part B Penalty amount is imposed on an employer who fails to offer coverage that meets the minimum value (MV) requirements or fails to be affordable, again as defined under the ACA, with respect to each one of its FTEs who receives subsidized coverage through the Marketplace or public health insurance exchange.

The Department of Health and Human Services (HHS) has released the 2020 inflation-adjusted penalty amounts under the Affordable Care Act’s Employer Shared Responsibility Mandate (Pay or Play):

  • Part A Penalty:                  $2,570 (was $2,500 for 2019)
  • Part B Penalty:                  $3,860 (was $3,750 for 2019)

Specifically, HHS finalized the premium adjustment percentage as 1.2895211380 for the 2020 benefit year, which is then multiplied by the original 2015 penalty amounts (Part A was $2,000 and Part B was $3,000) and rounded down to the nearest multiple of ten.

By way of example, an employer with 200 FTEs who fails to offer MEC to 95% of those employees (and if at least one of those FTEs receives subsidized coverage through the Marketplace or an exchange), the penalty assessed for the year will be $436,900 (200-30 = 170 x $2,570).  The larger the employer, the larger the penalty.  If the same employer offers coverage to 95% of its FTEs but that coverage is not affordable or doesn’t provide minimum value, the penalty assessed will be based on the number of employees who receive subsidized coverage through the Marketplace or an exchange.  If 20 FTEs receive subsidized coverage for each month of the year, the 2020 penalty would be $77,200 ($3,860 x 20).

Affordability Rates for 2020

As discussed above with respect to ACA penalties, an applicable large employer who does not offer affordable employer-sponsored group health plan coverage could face steep penalties.

For 2020, the ACA affordability requirement applies to the lowest-cost self-only coverage option that offers minimum value and must not exceed 9.78 percent of an employee’s household income. Please see Rev. Proc. 2019-29. https://www.irs.gov/pub/irs-drop/rp-19-29.pdf. This is a decrease from 2019 (which was 9.86%).

As it is difficult to determine an employee’s household income, three safe-harbors are available for employers to use to determine affordability:

  1. Form W-2, based on an employee’s W-2 wages as reported in Box 1;
  2. Rate of Pay, based on the employee’s hourly wage rate, multiplied by 130 hours per month; and
  3. Federal Poverty Line, based on the individual federal poverty level as of six months prior to the beginning of the plan year, divided by 12…

The reduction in the affordability percentage may likely mean that employers will have to reduce what employees pay for self-only coverage in order to maintain compliance, depending on what safe-harbor the employer uses.

Employers must be sure to carefully consider the safe harbors available and calculation of the lowest-cost employee coverage that should be charged.


Elizabeth H. Latchana, Attorney Fraser TrebilcockElizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

[Client Reminder] October 14 Deadline: Medicare Part D Notice of Creditable (or Non-Creditable) Coverage

Medicare Part D notices (of either creditable or non-creditable coverage) are due for distribution prior to October 15th.

Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires entities who offer prescription drug coverage to notify Medicare Part D eligible individuals whether their prescription coverage is creditable coverage.  With respect to group health plans including prescription coverage offered by an employer to any Medicare Part D eligible employees (whether or not retired) or to Medicare Part D Medicare-eligible spouses or dependents, the employer must provide those individuals with a Notice of Creditable or Non-Creditable Coverage to advise them whether the drug plan’s total gross value is at least as valuable as the standard Part D coverage (i.e., creditable). Medicare Part D notices must be provided to Medicare-eligible individuals prior to October 15th of each year (i.e., by October 14th).

The initial notices were due by November 15, 2005 and have been modified numerous times. The newest model notices and guidance were issued for use after April 1, 2011. Therefore, any notices you send from this point forward must conform to the new guidelines. Use of the former model notices will not suffice.

Downloads to the updated guidance and various notices can be found on the CMS website HERE and HERE.

As a reminder, there are five instances in which such notice must be provided:

  1. Prior to an individual’s initial enrollment period for Part D;
  2. Prior to the effective date of enrollment in your company’s prescription drug coverage;
  3. Upon any change in your plan’s creditable status;
  4. Prior to the annual election period for Part D (which begins each October 15); and
  5. Upon the individual’s request.

Providing the notice above is important as a late enrollment penalty will be assessed to those persons who go 63 days or longer without creditable coverage (for example, if they enroll in an employer’s prescription plan which is not as valuable as the Part D coverage instead of enrolling directly in the Medicare Part D coverage).

If your plan does not offer creditable prescription drug coverage and if the Part D eligible person enrolls in your plan instead of the Part D plan for at least 63 days, a permanent late enrollment penalty of 1% of the premium is added to the Medicare premium for each month the person does not enroll in Part D.

Please contact us if you need assistance with your Notice of Creditable (or Non-Creditable) Coverage.

Reminder: Submit Medicare Part D Notice to CMS

As discussed above, employers offering group health plans with prescription drug coverage are required to disclose to all Part D-eligible individuals who are enrolled in or were seeking to enroll in the group health plan coverage whether such coverage was “actuarially equivalent,” i.e., creditable. (Coverage is creditable if its actuarial value equals or exceeds the actuarial value of standard prescription drug coverage under Part D.) This notice is required to be provided to all Part D eligible persons, including active employees over age 65.

The regulations also require group health plan sponsors with Part D eligible individuals to submit a similar notice to the Centers for Medicare and Medicaid Services (“CMS”). Specifically, employers must electronically file these notices each year through the form supplied on the CMS website.

The filing deadline is 60 days following the first day of the plan year.

At a minimum, the Disclosure to CMS Form must be provided to CMS annually and upon the occurrence of certain other events including:

  1. Within 60 days after the beginning date of the plan year for which disclosure is provided;
  2. Within 30 days after termination of the prescription drug plan; and
  3. Within 30 days after any change in creditable status of the prescription drug plan.

The Disclosure to CMS Form must be completed online at the CMS Creditable Coverage Disclosure to CMS Form web page HERE.

The online process is composed of the following three step process:

  1. Enter the Disclosure Information;
  2. Verify and Submit Disclosure Information; and
  3. Receive Submission Confirmation.

The Disclosure to CMS Form requires employers to provide detailed information to CMS including but not limited to, the name of the entity offering coverage, whether the entity has any subsidiaries, the number of benefit options offered, the creditable coverage status of the options offered, the period covered by the Disclosure to CMS Form, the number of Part D eligible individuals, the date of the notice of creditable coverage, and any change in creditable coverage status.

For more information about this disclosure requirement (instructions for submitting the notice), please see the CMS website for updated guidance HERE.

As with the Part D Notices to Part D Medicare-eligible individuals, while nothing in the regulations prevents a third-party from submitting the notices (such as a TPA or insurer), the ultimate responsibility falls on the plan sponsor.


Elizabeth H. Latchana, Attorney Fraser TrebilcockElizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

Michigan Appellate Practice Journal Feature

Fraser Trebilcock appellate specialist Graham K. Crabtree recently wrote an article featured in the Summer 2019 edition of the Michigan Appellate Practice Journal, discussing the history and use of Michigan’s constitutional process for voter initiatives proposing constitutional amendments and initiated laws, and seeking approval or disapproval of legislation by referendum.  Continue reading Michigan Appellate Practice Journal Feature

Client Alert: IRS Announces 2020 Increases for HSAs

The IRS has released its 2020 annual inflation adjustments for Health Savings Accounts (HSAs) as determined under Section 223 of the Internal Revenue Code. Specifically, IRS Revenue Procedure 2019-25 provides the adjusted limits for contributions to a Health Savings Account (“HSA”), as well as the high deductible health plan (“HDHP”) minimums and maximums for calendar year 2020.

The 2020 limits are as follows:

  • Annual Contribution Limit
    • Single Coverage: $3,550
    • Family Coverage: $7,100
  • HDHP-Minimum Deductible
    • Single Coverage: $1,400
    • Family Coverage: $2,800
  • HDHP-Maximum Annual Out-of-Pocket Expenses (including deductibles, co-payments and other amounts, but not including premiums)
    • Single Coverage: $6,900
    • Family Coverage: $13,800
  • The catch-up contribution for eligible individuals age 55 or older by year end remains at $1,000.

Plans and related documentation, including employee communications, should be updated to reflect these new limits for 2020.

As always, please keep in mind that participation in a health FSA (or any other non-HDHP) will result in HSA ineligibility, unless the health FSA is limited to: (1) limited-scope dental or vision excepted benefits; and/or (2) post-deductible expenses.

This alert serves as a general summary of lengthy and comprehensive new provisions of the Internal Revenue Code. It does not constitute legal guidance. Please contact us with any specific questions.


Elizabeth H. Latchana, Attorney Fraser TrebilcockElizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

Client Alert: PCORI Payment Due July 31st

Patient-Centered Outcomes Research Institute (PCORI) Fee/Comparative Effectiveness Fee


Reminder: Plan Sponsors of Applicable Self-Funded Health Plans Must Make PCORI Fee Payment By July 31, 2019.

Please let this serve as a reminder that the PCORI fee is due by July 31st and must be reported on Form 720. The fee is used to partially fund the Patient-Centered Outcomes Research Institute which was implemented as part of the Patient Protection and Affordable Care Act.

Instructions are found here (see Part II): http://www.irs.gov/pub/irs-pdf/i720.pdf

The Form 720 itself is found here (see Part II): http://www.irs.gov/pub/irs-pdf/f720.pdf

Form 720, as well as the attached Form 720-V to submit payment, must be used to report and pay the requisite PCORI fee to the IRS. While Form 720 is used for other purposes to report excise taxes on a quarterly basis, for purposes of this PCORI fee, it is only used annually and is due by July 31st of each relevant year.

As previously advised, plan sponsors of applicable self-funded health plans are liable for this fee imposed by Code section 4376. Insurers of specified health insurance policies are also responsible for this fee.

  • For plan years ending on or after October 1, 2016 and before October 1, 2017, the fee is $2.26 per covered life.
  • For plan years ending on or after October 1, 2017 and before October 1, 2018, the fee is $2.39 per covered life.
  • For plan years ending on or after October 1, 2018 and before October 1, 2019, the fee is $2.45 per covered life.

See IRS Notice 2018-85. The fee is due no later than July 31 of the year following the last day of the plan year and concludes with plan years ending on or after October 1, 2018 and before October 1, 2019. For calendar year plans, the fee runs from 2012 through 2018 plan years. This means that 2018 will be the last year that the PCORI fee is assessed for a calendar year plan (and again, will be due July 31, 2019).

There are specific calculation methods used to configure the number of covered lives and special rules may apply depending on the type of plan being reported. While generally all covered lives are counted, that is not the case for all plans. For example, HRAs and health FSAs that are not excepted from reporting only must count the covered participants and not the spouses and dependents. The Form 720 instructions do not outline all of these rules.


Elizabeth H. Latchana, Attorney Fraser TrebilcockElizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.