Employee Benefits | Fraser Blog

Five Stories That Matter in Michigan This Week – October 6, 2023

House Bills Would Allow Students Access to Medical Marijuana on School Grounds

“Jayden’s Law,” Michigan House Bills 5063 and 5064, would apply only to non-smokable medical marijuana. It would allow both public and private schools to administer medical cannabis on school grounds, subject to certain requirements, including a written treatment plan provided by the child’s caregiver, supervised administration by a designated staff member, and annual proof of the students’ medical marijuana cards.

Why it Matters: Michigan has allowed minors to access medical marijuana as registered patients for more than a decade. Such use, however, is prohibited while at school or school events. Backers of the legislation argue that students who use medical marijuana but must check out and back into school to do so, miss classroom instructions or extracurricular activities.

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U.S. Supreme Court Clarifies Legal Standard for Threatening Speech in Counterman V. Colorado

The U.S. Supreme Court’s recent ruling in Counterman v. Colorado addressed the longstanding ambiguity surrounding the standards for criminal prosecution based on perceived threats of violence.

Why it Matters: The Court held that such a prosecution requires proof that the defendant subjectively understood the threatening nature of the statement such that making the statement was at least reckless. This case not only delves deep into First Amendment protections but also has broad implications for online communications and interactions. Read more from your Fraser Trebilcock attorney.

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Fraser Trebilcock Attorney Thaddeus Morgan Selected to Serve on State Bar of Michigan’s U.S. Courts Committee

Fraser Trebilcock attorney Thaddues Morgan was selected to serve on the State Bar of Michigan’s U.S. Courts Committee for the 2023-24 Bar Year. Attorney volunteers are vital for the State Bar to continue providing exceptional service to the legal profession, the public, and the state.

Why it Matters: The State Bar of Michigan’s U.S. Courts Committee provides advice and recommendations concerning the State Bar’s interaction with federal courts in Michigan and on practice of law in those courts. Learn more.

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Employee Benefits Attorney

Fraser Trebilcock is seeking applications for a position in our Firm from well-qualified attorneys with strong experience in employee benefits, including employer sponsored retirement plans, employee health plans and general ERISA compliance.

Why it Matters: The successful candidate should have a solid and portable client base. Fraser will consider candidates who may lack a portable client base provided they have a solid background in these practice areas and demonstrate an aptitude for client service and growth. Learn more and to apply.

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Business Education Series – Maximizing Productivity: Strategies for More Effective Workdays

Productivity is a habit and it’s something you can become better at every day by choosing the methods and tricks that work for you.

Why it Matters: In the October Business Education Series program, Emmie Musser, Future of Work Strategist with TechSmith, is going to discuss some tried-and-true strategies for more productive and effective workdays. Learn more.

Related Practice Groups and Professionals

Cannabis Law | Sean Gallagher
Criminal Law | Paula Spicer
Litigation | Thaddeus Morgan

Five Stories That Matter in Michigan This Week – September 29, 2023

Detroit Mayor’s Land Value Tax Plan Moves to House Floor

Earlier it was covered that Detroit Mayor Mike Duggan spoke to lawmakers at the House Tax Policy Committee hearing on his land value tax plan. The Committee passed the proposed plan, and it now moves onto the House Floor.

Why it Matters: According to the plan laid out online, if enacted, would replace certain tax rates for homes and property structures with a higher rate of tax on land, with the purpose of targeting unused, unproductive, or vacant land while providing benefits to homeowners and businesses.

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Momentum Builds for Michigan Clean Energy Bill

Clean energy bill sponsors in the Michigan Senate took public testimony during a committee hearing last week, as the Michigan legislature continues to push for comprehensive clean energy legislation. Among policies being debated include setting a carbon-free energy standard, reducing energy waste, increasing access to solar power, and expanding electric vehicle charging stations.

Why it Matters: Beyond environmental goals, access to significant federal funding hangs in the balance. In order to access certain funds allocated under the federal Inflation Reduction Act, states must adopt certain clean energy standards into law.

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Employee Benefits Attorney

Why it Matters: The successful candidate should have a solid and portable client base. Fraser will consider candidates who may lack a portable client base provided they have a solid background in these practice areas and demonstrate an aptitude for client service and growth. Learn more and to apply.

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Michigan 2023 Cannabis Sales Through 6 Months Exceeds 2022 Sales by Almost $400 Million

Per data released by the Cannabis Regulatory Agency, through six months of sales in 2023, totaling $1,426,137,854.75, Michiganders have exceeded sales compared to 2022 data through six months, which totaled $1,029,451,152.66. This is an almost $400 million increase through the first six months of this year.

Why it Matters: Marijuana sales remain strong in Michigan, particularly for recreational use. However, there still are significant concerns about profitability and market oversaturation that the industry is contending with.

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Business Education Series – Maximizing Productivity: Strategies for More Effective Workdays

Productivity is a habit and it’s something you can become better at every day by choosing the methods and tricks that work for you.

Related Practice Groups and Professionals

Real Estate | Jared Roberts
Energy Law | Mike Ashton
Cannabis Law | Sean Gallagher

[Client Alert] Outbreak Period Nightmare: Employee Benefit Deadline Extensions Now Based on Individual Case-by-Case Basis

Employee benefit plan administration is no small feat. However, it is becoming more and more difficult, especially with pandemic related modifications. As you may recall from our previous Client Alert regarding the Outbreak Period, various benefit deadlines were extended due to COVID-19. Plans could not deny certain benefits or impose certain deadlines during the designated Outbreak Period (i.e., March 1, 2020 through 60 days after the National Emergency ends (or another specified date)). However, when the Outbreak Period ends has been a lingering question recently, and the Department of Labor has just answered it in a way that may make plan administrators’ heads spin.

In summary, the period of time which must be disregarded for certain benefits deadline purposes (such as HIPAA special enrollment, as well as certain COBRA and claims procedure due dates) will now end on the earlier of: (a) 1 year from the date that the individual or plan was first eligible for the particular relief, or (b) 60 days after the announced end of the National Emergency (the end of the Outbreak Period). What does this mean? It means that plan administrators must keep track on a case-by-case basis of each individual who would have had a deadline imposed on/or after March 1, 2020 but for the 2020 relief, the date of the original deadline, and track one year from that date (unless the Outbreak Period ends earlier).

Background

Last year when the pandemic hit, and to assist plan participants and beneficiaries, employers and other plan sponsors, plan fiduciaries, and other service providers of employee benefit plans impacted by the COVID-19 pandemic, the U.S. government took the following action as authorized by ERISA Section 518:

2020 Disaster Relief Notice

On April 28, 2020, the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) issued EBSA Disaster Relief Notice 2020-01 (Disaster Relief Notice). The Disaster Relief Notice provided deadline relief and other guidance and extended the time for plan officials to furnish benefit statements, annual funding notices, and other notices and disclosures required by Title I of the Employee Retirement Income Security Act of 1974 (ERISA).

2020 Joint Notice

Additionally, on April 28, 2020, the Department of Treasury, the Internal Revenue Service (IRS), and EBSA issued a joint notice which extended certain time frames affecting participants and beneficiaries under ERISA and the Internal Revenue Code (Joint Notice). The Joint Notice extended time frames affecting a participant’s right to group health plan coverage during the COVID-19 outbreak, special enrollment periods, and COBRA continuation of such coverage. Time periods for filing claims for benefits, appealing denied claims, and external review periods were also extended.

The Joint Notice is applicable to all group health plans, disability plans, other employee welfare benefit plans, and employee pension benefit plans subject to ERISA or the Code. Specifically, the Joint Notice provided that these plans must disregard the period from March 1, 2020 until sixty (60) days after the National Emergency ends (or other specified date) when determining certain deadlines for plan participants, beneficiaries, qualified beneficiaries, and claimants. This period is called the Outbreak Period. In particular, plans must disregard the Outbreak Period for the following due dates:

HIPAA Special Enrollment
COBRA Election Period
COBRA Premium Payment Due Date
Date for Individuals to Notify the Plan of Qualifying Events or Disability Determinations
Claim Procedure Date for Individuals to File A Benefit Claim
- Keep in mind health FSA runout periods and forfeitures are also delayed during this period
Claim Procedure Date for Claimants to File An Appeal
Date for Claimants to File A Request for External Review
Date for Claimants to Perfect A Request for External Review

Note: The Joint Notice only extended the claims procedure deadlines for claimants; it did not explicitly extend the date by which a plan administrator had to respond to claims and appeals. However, the plan administrator’s deadlines for issuing such adverse benefit determination on claims and appeals would appear to fall within the general notice and disclosure relief provided by the Disaster Relief Notice.

Additionally, for purposes of group health plan obligations, the Outbreak Period is disregarded for the following:

Date to Provide a COBRA Election Notice

Employers and Plan Sponsors have had to pay close attention to these deadlines as they can have significant administrative and economic impacts.

Lingering Questions

However, many have questioned whether the deadline extension would end on February 28, 2021 due to statutory provisions within ERISA and the Internal Revenue Code stating that with such declared disasters, the Secretaries of Labor and Treasury may provide that periods of time up to one year may be disregarded when determining certain deadlines. That one year period from March 1, 2020 would have expired February 28, 2021.

However, the Department of Labor answered at the last hour, and unfortunately, the difficulty of these previous administrative functions has just been magnified.

Answer: EBSA Disaster Relief Notice 2021-01 (Released Friday, February 26, 2021)

On Friday, February 26, 2021, the Department of Labor released EBSA Disaster Relief Notice 2021-01. The Departments of Treasury, IRS and HHS have reviewed and concur with this guidance.

Instead of ending the disregarded periods on February 28, 2021, or instead of extending the period of disregarded periods to a future date certain, the Department of Labor instituted a case by case analysis, applicable to individuals and plans for whom timeframes were extended. Specifically, individuals and plans who are subject to the relief afforded under the 2020 Disaster Relief Notice and the 2020 Joint Notice as described above will have the applicable periods under the Notices disregarded until the earlier of:

(a) 1 year from the date they were first eligible for relief, or
(b) 60 days after the announced end of the National Emergency (the end of the Outbreak Period).

On the applicable date, the timeframes for individuals and plans with periods that were previously disregarded under the Notices will resume. In no case will a disregarded period exceed 1 year.

Notice 2021-01 provides examples to illustrate application of the above:

If a qualified beneficiary, for example, would have been required to make a COBRA election by March 1, 2020, the Joint Notice delays that requirement until February 28, 2021, which is the earlier of 1 year from March 1, 2020 or the end of the Outbreak Period (which remains ongoing). Similarly, if a qualified beneficiary would have been required to make a COBRA election by March 1, 2021, the Joint Notice delays that election requirement until the earlier of 1 year from that date (i.e., March 1, 2022) or the end of the Outbreak Period. Likewise, if a plan would have been required to furnish a notice or disclosure by March 1, 2020, the relief under the Notices would end with respect to that notice or disclosure on February 28, 2021. The responsible plan fiduciary would be required to ensure that the notice or disclosure was furnished on or before March 1, 2021. In all of these examples, the delay for actions required or permitted that is provided by the Notices does not exceed 1 year.

The Department of Labor further reiterates concerns over COVID-19 related problems that plan participants and beneficiaries may encounter. In such vain, the Department states as follows:

plan fiduciaries should make reasonable accommodations to prevent the loss of or undue delay in payment of benefits in cases where pandemic delayed deadlines are reinstated; and
plans should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time frames, such as:
- affirmatively sending a notice regarding the end of the relief period;
- reissuing or amending disclosures regarding the end of the relief period and the time period in which participants and beneficiaries are required to take action, e.g., COBRA election notices and claims procedure notices;
- reminding participants and beneficiaries who are losing coverage under ERISA group health plans that other coverage options may be available to them, including the opportunity to obtain coverage through the Health Insurance Marketplace in their state.

The Department of Labor understands that full and timely compliance with ERISA’s disclosure and claims processing requirements by plans and service providers may not always be possible due to the end of the relief period. Good faith compliance will be taken into consideration.

Conclusion

The case-by-case determinations were not anticipated last year and will require continual monitoring and possibly enhanced recordkeeping, especially if initially imposed deadlines were not accurately recorded at the time due to the deadline delay. Plan sponsors should promptly speak with their benefit and COBRA administrators to ensure the new guidance can be followed. And, as mentioned by the Department of Labor, group health plan communications regarding these deadline changes should be made as quickly as possible.

As you are well aware, the law and guidance are rapidly evolving in this area. Please check with your Fraser Trebilcock attorney for the most recent updates.

We have created a response team to the rapidly changing COVID-19 situation and the law and guidance that follows, so we will continue to post any new developments. You can view our COVID-19 Response Page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.

Elizabeth 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.

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.

Michigan’s New Paid Medical Leave Act Is About To Become Effective. Are You Ready?

Paid Medical Leave Act in General

The recently enacted Paid Medical Leave Act (PMLA) requires entities which employ 50 or more individuals to provide paid medical leave for their eligible employees and family members.

Effective Date

March 29, 2019

Affected Employers

Any employer (aside from certain governments) that employs 50 or more individuals is subject to the law, regardless of where those employees work or live. However, even though the employer would be subject to the law, employees whose primary work location is outside of Michigan would not be protected by it. So if you had 55 employees with 45 working out of state, the law only applies to the 10 working in Michigan.

Eligible Employees

Significantly, eligible employees do not include individuals who are exempt from overtime requirements under the FLSA section 13(a)(1), non-public agency employees covered by CBAs currently in effect, federal or state (or political subdivision) government employees, employees in a job scheduled for 25 weeks or less (and work 25 weeks or less), employees who worked on average less than 25 hours per week during the immediately preceding calendar year, variable hour employees (as defined under Pay or Play), as well as a few other exceptions (including certain employees under the railroad unemployment insurance act, railway labor act, MI employment security act, and improvement opportunity wage act).

Family Members

The definition of family member is broad and includes:

A biological, adopted or foster child, stepchild or legal ward, or a child to whom the eligible employee stands in loco parentis.
A biological parent, foster parent, stepparent, or adoptive parent or a legal guardian of an eligible employee or an eligible employee’s spouse or an individual who stood in loco parentis when the eligible employee was a minor child.
An individual to whom the eligible employee is legally married under the laws of any state.
A grandparent.
A grandchild.
A biological, foster, or adopted sibling.

Therefore, if an employee’s brother is ill, the employee is allowed to take leave to care for his/her brother.

Basis of Accrual

The employer can provide paid medical leave on either: (1) an accrual basis (of at least one hour for every 35 hours worked – cannot be less than 40 hours in a benefit year) or (2) can front at least 40 hours of paid leave at the beginning of the benefit year (and can prorate for mid-year hires).

If the accrual basis is used, an employer is not required to allow the employee to accrue more than 1 hour per calendar week and may limit the accrual and use of paid medical leave to 40 hours per benefit year. However, the employer must allow the employee to carryover at least 40 hours of unused accrued paid medical leave from one benefit year to the next.

If the front load option (of at least 40 hours) is used, the employer is not required to allow the eligible employee to carry over any of the paid leave to another benefit year.

For new hires, an employer can require a 90 day waiting period after hire to use any accrued paid leave.

The paid medical leave must be provided at a pay rate equal to the greater of the normal hourly wage / base wage for that eligible employee or the minimum wage rate under the improved workforce opportunity wage act. An employer is not required to include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, or gratuities in the calculation of an eligible employee’s normal hourly wage or base wage.

Use of Medical Leave

Leave can be used for personal or family health needs, domestic violence and sexual assault (documentation can be required but cannot ask details), missing work due to closed schools (to take care of children) or closed work for public health emergencies, and for issues with regard to communicable diseases. Specifically, paid medical leave is for:

The eligible employee’s mental or physical illness, injury, or health condition; medical diagnosis, care, or treatment of the eligible employee’s mental or physical illness, injury, or health condition; or preventative medical care for the eligible employee.
The eligible employee’s family member’s mental or physical illness, injury, or health condition; medical diagnosis, care, or treatment of the eligible employee’s family member’s mental or physical illness, injury, or health condition; or preventative medical care for a family member of the eligible employee.
If the eligible employee or the eligible employee’s family member is a victim of domestic violence or sexual assault, the medical care or psychological or other counseling for physical or psychological injury or disability; to obtain services from a victim services organization; to relocate due to domestic violence or sexual assault; to obtain legal services; or to participate in any civil or criminal proceedings related to or resulting from the domestic violence or sexual assault.
For closure of the eligible employee’s primary workplace by order of a public official due to a public health emergency; for an eligible employee’s need to care for a child whose school or place of care has been closed by order of a public official due to a public health emergency; or if it has been determined by the health authorities having jurisdiction or by a health care provider that the eligible employee’s or eligible employee’s family member’s presence in the community would jeopardize the health of others because of the eligible employee’s or family member’s exposure to a communicable disease, whether or not the eligible employee or family member has actually contracted the communicable disease.

Procedural Requirements

Eligible employees must comply with the employer’s usual and customary notice, procedural and documentation requirements for requesting leave; however, the employer must give the employee at least 3 days to provide the documentation. Furthermore, the law has parameters on documentation required for domestic violence or sexual assault. If you require such documentation, you should discuss these parameters with legal counsel.

Additionally, unless the employer has a different written increment policy in an employee handbook or other benefits document, paid leave must be used in 1 hour increments.

Employers who transfer to other divisions, entities or locations but remain employed by the same employer are allowed to retain all accrued paid medical leave. However, if the employee separates from service and is rehired, the accrued paid leave may be lost. There are no requirements to reimburse employees for unused time.

Notice and Document Retention

You are required to display a poster at your place of business, in a conspicuous and accessible place, containing the amount of paid leave required, the terms under which the paid medical leave may be used, and the employee’s right to file a complaint with the department for any violation. The department will create and make said posters available at no cost.

Finally, PTO records shall be retained for not less than 1 year and are subject to inspection.

Penalties

For violations of the law, the department may impose penalties and grant an eligible employee or former eligible employee payment of all paid medical leave improperly withheld. Employers failing to provide paid medical leave are also subject to an administrative fine of not more than $1,000.00. Additionally, an administrative fine of not more than $100.00 may be imposed for each separate violation of the posting requirement.

This communication serves solely as a general summary and does not constitute legal advice, and cannot be used or substituted for legal advice.

Client Alert/Reminder: Form W-2 Reporting Due for Employer-Provided Health Care / Disclosure Due to CMS for Medicare Part D

Upcoming Deadlines: (1) Form W-2 Reporting of Employer-Provided Health Coverage; And (2) Medicare Part D Notices to CMS

Reminder: Form W-2 Reporting on Aggregate Cost of Employer Sponsored Coverage

Unless subject to an exemption, employers must report the aggregate cost of employer-sponsored health coverage provided in 2018 on their employees’ Form W-2 (Code DD in Box 12) issued in January 2019. Please see IRS Notice 2012-09 and our previous email alerts for more information.

The following IRS link is helpful and includes a chart setting forth various types of coverage and whether reporting is required: http://www.irs.gov/Affordable-Care-Act/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage. Please note this is a summary only and Notice 2012-09 should also be consulted. The IRS has issued questions and answers regarding reporting the cost of coverage under an employer-sponsored group health plan, which can be found here: https://www.irs.gov/newsroom/employer-provided-health-coverage-informational-reporting-requirements-questions-and-answers.

If you have questions regarding whether you or your particular benefits are subject to reporting, please feel free to contact us.

Deadline Coming Up for Calendar Year Plans to Submit Medicare Part D Notice to CMS

As you know, group health plans offering 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, retirees, spouses, dependents and COBRA qualified beneficiaries.

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. If you operate a calendar year plan, the deadline is the end of February. If you operate a non-calendar year plan, please be sure to keep track of your deadline.

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

Within 60 days after the beginning date of the plan year for which disclosure is provided;
Within 30 days after termination of the prescription drug plan; and
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 at:
https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/CCDisclosureForm.html.

The online process is composed of the following three step process: Enter the Disclosure Information;
Verify and Submit Disclosure Information; and
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 at: https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/CCDisclosure.html.

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), ultimate responsibility falls on the plan sponsor.

This email serves solely as a general summary of the Form W-2 reporting requirements and CMS disclosure for Medicare Part D.

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

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

The Internal Revenue Service (“IRS”) has extended the deadline for 2018 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 2018-94 extends the due dates for the following 2018 information reporting Forms from January 31, 2019 to March 4, 2019:

2018 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
2018 Form 1095-B, Health Coverage

Please note that no further extension beyond the March 4, 2019 deadline is allowed. Therefore, this deadline for furnishing the Forms to individuals must be met.

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, 2019 for paper filings; however, if filing electronically, the due date is April 1, 2019 (employers who are required to file 250 or more Forms must file electronically):

2018 Form 1094-B, Transmittal of Health Coverage Information Returns, and the 2018 Form 1095-B, Health Coverage
2018 Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and the 2018 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

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

As a result of these extensions, individuals might not receive a Form 1095-B or Form 1095-C by the time they file their 2018 tax returns. In such case, IRS Notice 2018-94 explains that individual taxpayers may instead rely on other information received from their employers or other coverage providers for purposes of filing their tax returns and do not need to wait to receive Forms 1095-B and 1095-C before filing. Once they do receive their forms, the individuals should keep it with their tax records. You can find the full Notice here: https://www.irs.gov/pub/irs-drop/n-18-94.pdf.

IRS Notice 2018-94 also extends the good-faith transition relief from Code section 6721 and 6722 (which are the Code sections imposing penalties for failing to timely file an information return, filing incorrect or incomplete information, failing to timely furnish an information return, or furnishing an incorrect or incomplete information 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.”

Last, the Notice addresses that as the individual shared responsibility payment is being reduced to zero for months beginning after December 31, 2018, the IRS and Department of Treasury are analyzing if and how the section 6055 reporting requirements should change in the future.

The links to the Final Forms and Instructions are below:

2018 Forms for Applicable Large Employers (Code Section 6056):

2018 Instructions for Forms 1094-C and 1095-C: www.irs.gov/pub/irs-prior/i109495c–2018.pdf
2018 Form 1094-C: www.irs.gov/pub/irs-pdf/f1094c.pdf
2018 Form 1095-C: www.irs.gov/pub/irs-pdf/f1095c.pdf

2018 Forms for Employers who Self-Fund (Code Section 6055):

2018 Instructions for 1094-B and 1095-B: www.irs.gov/pub/irs-prior/i109495b–2018.pdf
2018 Form 1094-B: www.irs.gov/pub/irs-pdf/f1094b.pdf
2018 Form 1095-B: www.irs.gov/pub/irs-pdf/f1095b.pdf

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 increased penalties are now as follows for 2018 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 $3,275,500.
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 $3,275,500.
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 also now 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 2018.

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 specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2018 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 Releases Final ACA Employer Reporting Forms & Instructions (1094-B, 1094-C, 1095-B, and 1095-C)

IRS Releases Final ACA Employer Reporting Forms & Instructions (1094-B, 1094-C, 1095-B, and 1095-C)

The Internal Revenue Service (“IRS”) has finalized Forms 1094/1095-B and 1094/1095-C for the 2018 tax year, as well as their related instructions, which are required to be filed under the Affordable Care Act.

As provided in previous Client Alerts, information reporting requirements are applicable under two Internal Revenue Code (“Code”) sections as follows:

Section 6055 for insurers, self-insuring employers, and certain other providers of minimum essential coverage; and
Section 6056 for applicable large employers.

By way of background, the IRS requires applicable large employers and sponsors of self-insured health plans to report on the health coverage offered and/or provided to individuals beginning calendar year 2015. Although the reporting requirements extend to other entities that provide “minimum essential coverage” (such as health insurance issuers), this Client Alert focuses on the requirements imposed on employers.

Employers who are deemed applicable large employers, as well as employers of any size who offer self-funded health coverage, must carefully review and study these instructions, which set forth numerous details, definitions and indicator codes that must be used to complete the requisite forms. The instructions address the “when, where and how” to file, extensions and waivers that may be available, how to file corrected returns, and potential relief from penalties imposed for incorrect or incomplete filing.

The IRS utilizes information from these returns to determine which individuals were offered minimum essential coverage, whether individuals were eligible for premium tax credits in the Marketplace, as well as to determine any penalties to be imposed on employers under Pay or Play (Code section 4890H; Shared Responsibility for Employers Regarding Health Coverage, 26 CFR Parts 1, 54, and 301, 79 Fed. Reg. 8543 (Feb. 12, 2014)). Due to the impact of proper reporting, a clear understanding of these forms and instructions is essential.

Code section 6056 applies to applicable large employers (generally employers with at least 50 full-time employees, including full-time equivalent employees). Information with respect to each full-time employee (whether or not offered coverage) must be reported on Form 1095-C. Transmittal Form 1094-C must accompany the Forms 1095-C; all the Forms 1095-C together with the Transmittal Form 1094-C constitute the Code section 6056 information return that is required to be filed with the IRS. For applicable large employers who self-insure, there is a separate box to complete which incorporates the information required under Code section 6055.

Code section 6055 applies to employers of any size who self-insure. Non-applicable large employers with self-funded plans must report their information on Form 1095-B, as well as on Transmittal Form 1094-B. All of the Forms 1095-B together with the Transmittal Form 1094-B constitute the Code section 6055 information return that is required to be filed with the IRS. Again, if the employer who self-insures is also an applicable large employer, the employer will instead use Forms 1095-C and 1094-C, which include a section for self-insured plans.

Employers subject to these requirements must report in early 2019 for the entire 2018 calendar year.

Additionally, employers must provide informational statements to the individuals for whom they are reporting. Form 1095-C or Form 1095-B (as applicable) may be used as this informational statement.

The links to the Final Forms and Instructions are below:

2018 Forms for Applicable Large Employers (Code Section 6056):

2018 Instructions for Forms 1094-C and 1095-C: www.irs.gov/pub/irs-prior/i109495c–2018.pdf
2018 Form 1094-C: www.irs.gov/pub/irs-pdf/f1094c.pdf
2018 Form 1095-C: www.irs.gov/pub/irs-pdf/f1095c.pdf

2018 Forms for Employers who Self-Fund (Code Section 6055):

2018 Instructions for 1094-B and 1095-B: www.irs.gov/pub/irs-prior/i109495b–2018.pdf
2018 Form 1094-B: www.irs.gov/pub/irs-pdf/f1094b.pdf
2018 Form 1095-B: www.irs.gov/pub/irs-pdf/f1095b.pdf

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 $3,275,500.
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 $3,275,500.
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.

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

Deadlines for distribution and filing are:

January 31, 2019 to furnish returns to individuals
February 28, 2019 for paper filing with the IRS
April 1, 2019 for electronic filing with the IRS

There is no current indication of filing deadline relief, so it is essential to ensure your reporting and collection of data procedures are intact.

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

Client Alert: IRS Releases Early Drafts of ACA Employer Reporting Forms & Instructions

IRS Releases Early Drafts of ACA Employer Reporting Forms & Instructions (1094-B, 1094-C, 1095-B, and 1095-C)

The Internal Revenue Service (“IRS”) has released early drafts of the instructions and health insurance coverage reporting forms required to be filed under the Affordable Care Act.

As provided in previous Client Alerts, information reporting requirements are applicable under two Internal Revenue Code (“Code”) sections as follows:

Section 6055 for insurers, self-insuring employers, and certain other providers of minimum essential coverage; and
Section 6056 for applicable large employers.

Employers subject to these requirements must report in early 2019 for the entire 2018 calendar year.

Additionally, employers must provide informational statements to the individuals for whom they are reporting. Form 1095-C or Form 1095-B (as applicable) may be used as this informational statement.

The links to the Draft Instructions are below:

2018 Drafts for Applicable Large Employers (Code Section 6056):

2018 Draft Instructions for Forms 1094-C and 1095-C: https://www.irs.gov/pub/irs-dft/i109495c–dft.pdf
2018 Draft Form 1094-C: https://www.irs.gov/pub/irs-dft/f1094c–dft.pdf
2018 Draft Form 1095-C: https://www.irs.gov/pub/irs-dft/f1095c–dft.pdf

2018 Drafts for Employers who Self-Fund (Code Section 6055):

2018 Draft Instructions for 1094-B and 1095-B: https://www.irs.gov/pub/irs-dft/i109495b–dft.pdf
2018 Draft Form 1094-B: https://www.irs.gov/pub/irs-dft/f1094b–dft.pdf
2018 Draft Form 1095-B: https://www.irs.gov/pub/irs-dft/f1095b–dft.pdf

These draft instructions and forms reflect only minor changes, such as a few formatting modifications and the reflection of indexed penalty amounts for reporting failures. Additionally, the draft instructions for Forms 1094-B and 1095-B also now 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 2018.

The remainder of the provisions remain intact.

There is no current indication of filing deadline relief, so it is essential to ensure your reporting and collection of data procedures are intact.

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

Client Alert: Administering Benefit Coverage During a Leave of Absence – The Necessity of a Leave of Absence Policy

Administering Benefit Coverage During a Leave of Absence – The Necessity of a Leave of Absence Policy

Employee leaves of absence take on various forms, but whether such leaves are provided as a matter of law or pursuant to employer policy, they create unique challenges from a health and welfare benefits compliance standpoint. Indeed, common issues for employers to analyze when employees are absent from work for an extended period of time are whether health and welfare benefit coverage should be continued and, if so, for how long. The answers are contingent upon various factors such as the circumstances surrounding the leaves of absence, the size of the employer, the terms of the applicable plan documents, and the applicability of various federal and state laws. Establishing and implementing a carefully drafted leave of absence policy addressing the provision of benefits is an essential component of benefit administration during a leave of absence.

Implementing a carefully designed leave of absence policy addressing the provision of health and welfare benefits is an easy way for an employer to reduce its risk of employee disputes, discrimination complaints, and financial exposure related to the provision of benefits. However, care needs to be given to such policy’s terms. At the onset, an employer’s policy needs to address what types of leaves of absence are permitted. Federal law mandates that certain employers provide job protected leaves of absence under the Family and Medical Leave Act of 1993 (“FMLA”) and the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”). However, many employers also offer extended leave options for non-qualified and/or extended medical, personal, and/or other various reasons. For each type of permitted leave under an employer’s policy, specific issues related to the provision of benefits need to be addressed. For example, issues related to the provision of benefits that should be addressed within and/or considered in conjunction with an employer’s leave of absence policy include, but are not limited to, the following:

What Benefits are Continued and For How Long? An employer must decide when to cut off eligibility for various benefits for employees on a leave of absence and then draft its policy carefully to carry out its intent. Generally speaking, an employer covered by the FMLA must maintain coverage under any group health plan (as defined under the FMLA) for the duration of a FMLA leave at the level and under the conditions that coverage would have been provided if the employee had continuously employed for the duration of the leave. Similarly, under USERRA, an employer is required to provide certain benefit rights to employees who take a leave of absence for service in the uniformed services. USERRA generally requires an employer to continue to maintain the employee’s health plan (as defined in 20 C.F.R. section 1002.163) benefits for up to 24 months on the same terms and conditions as if the employee was still an active employee during an USERRA qualifying leave. An employer generally has more leeway with respect to determining how long to continue benefits during leaves not subject to the FMLA and USERRA (either because the protected leave has ended or the leave was not protected to begin with) and benefits not required to be continued under the FMLA and USERRA (e.g., life insurance, accidental death and dismemberment, disability, business travel, etc.). However, with respect to major medical coverage, an employer also needs to consider coverage implications under the Patient Protection and Affordable Care Act’s Employer Shared Responsibility Mandate (i.e., Pay or Play).
Has the Insurance/Stop Loss Carrier Agreed to the Continuation of Coverage? Determining how long the insurance company/stop loss carrier has agreed to continue benefits during a leave of absence or other period of time where the employee is not actively working the hours required for eligibility is imperative. Providing coverage that has not been agreed to by the insurance company and/or stop loss carrier can result in substantial exposure through the required self-funding of claims incurred after the carrier refuses to pay due to the participant’s ineligibility. Such financial exposure may be catastrophic to an employer if the claim involves life insurance coverage or massive medical expenses.
What Do the Applicable Plan Documents Say? It is necessary for an employer to review the plan documents (including active at work requirements and hour thresholds) to ensure that an employee remains eligible prior to continuing coverage during a leave of absence. All plan eligibility and participation provisions must be drafted with care to address extended eligibility during a leave of absence. Ambiguity and/or inconsistency between the plan documents and employer policy can lead to participant disputes, litigation, and potential self-funding of claims.
How Will Benefits Be Paid For During the Leave? An employer must address how long any employer contribution towards the cost of coverage will be continued. Additionally, the policy should articulate how the employee needs to pay for his or her portion of the cost of coverage during the leave of absence. The requirements associated with the payment of an employee’s share of the cost of coverage can be particularly tricky if the leave of absence is unpaid. Issues to be addressed include, but are not limited to, the timing of the required payment and whether such payment is made on a pre-tax or after-tax basis. Careful attention needs to be paid to federal laws and regulations, such as those related to Code Section 125 cafeteria plans, FMLA, and USERRA.
When are COBRA Requirements Implicated? A leave of absence is a reduction of hours and is therefore a triggering event that may cause a loss of coverage. COBRA rights may be implicated during a leave of absence if an employee loses eligibility for group health plan coverage. The loss of an employer contribution towards the cost of coverage may also implicate COBRA rights. COBRA requirements need to be carefully analyzed in conjunction with an employer’s benefit structure during a leave of absence to determine whether a qualifying event occurs and, if so, when such event occurs. Failure to timely and accurately provide COBRA continuation rights can result in significant financial ramifications to an employer.

Thus, an employer’s leave of absence policy must be drafted with care taking into account of a plethora of factors. An employer must ensure that it understands when benefits are supposed to end, not only as a matter of its internal company practice, but also as articulated within the applicable plan documents. Ensuring that the employer policy does not create obligations that do not exist within the plan documents is essential. It is equally important for an employer to ensure that it follows the terms of its established leave of absence policy. Deviations from policy terms for one employee can set unintended precedent for future employees. However, case by case analysis may also be required under disability discrimination laws as a leave of absence can also be deemed a reasonable accommodation. Thus, an employer is encouraged to consult with its legal counsel in conjunction with drafting, establishing, implementing, and administering a leave of absence policy.

Client Alert: Tax Reform Causes Some Employers to Put Transportation Plans in Park

Tax Reform Causes Some Employers to Put Transportation Plans in Park

Prior to 2018, it was commonplace for employers to provide qualified transportation fringe benefit plans, in part, to pay for or reimburse employees for costs associated with transit passes, commuter highway vehicles, carpools, or qualified parking. The benefit was not taxable to the employee and was deductible by the employer.

However, pursuant to the Tax Cuts and Jobs Act (TCJA), the employer deduction is no longer allowed effective 2018. The TCJA (formally called the “Act to provide for reconciliation pursuant to Titles II and V of the concurrent resolution on the budget for fiscal year 2018”), amended Internal Revenue Code Section 274 to deny any deduction for “the expense of any qualified transportation fringe (as defined in Code Section 132(f)) provided to an employee of the taxpayer”. See Code Section 274(a)(4). It also added Code Section 274(f) which specifically states:

No deduction shall be allowed under this chapter for any expense incurred for providing any transportation, or any payment or reimbursement, to an employee of the taxpayer in connection with travel between the employee’s residence and place of employment, except as necessary for ensuring the safety of the employee.

Moreover, Publication 15-B for 2018: Employer’s Tax Guide to Fringe Benefits confirms that no deduction is allowed for qualified transportation benefits incurred or paid after December 31, 2017, whether provided directly by the employer, through a bona fide reimbursement arrangement, or through a compensation reduction agreement. This prohibition on deductions includes any expense incurred for providing any transportation, or paying or reimbursing employees, for travel between the employees’ home and work (except for safety reasons). However, any such employer payments may be excluded from the employees’ wages.

Clearly, employers who had been subsidizing parking and transportation related expenses will no longer be able to deduct those expenses. Some commentary contemplates that by making such benefits taxable to the employee, possibly the employer would be allowed to deduct the expenses. Code Section 274(e)(2) does create an exception to Code 274(a)’s no deduction rule for expenses treated as compensation; however, this provision within Code Section 274(e) only applies to entertainment, amusement, or recreation… it was not amended to include transportation. Further guidance on this would be appreciated.

While some employers will continue to provide transportation fringe benefits to remain competitive, others are scaling back to eliminate subsidized parking and/or requiring employees to pay such expenses on a pre-tax basis through a qualifying transportation expense reimbursement arrangement.

Other Fringe Benefits

TCJA affects other fringe benefits as well. Subject to certain requirements and exceptions, effective 2018, deductions are generally eliminated for on-site premises athletic facilities; club dues and membership; entertainment, amusement and recreation; meals, food and beverages; and moving expenses.

Exempt Organizations

Finally, tax-exempt entities are also affected as they will now be taxed on the value of the transportation fringe benefits (either payment towards the benefit or the cost of an employer owned parking facility) by treating funds used to pay for these benefits as unrelated taxable income.

As mentioned above, the TCJA amended the employer deduction rules under Code Section 274 pertaining to the deduction of certain expenses for entertainment, amusement, or recreation and certain membership dues. While the elimination of the employer deduction for these expenses does not directly impact an exempt organization, the TCJA also amended Code Section 512(a) to provide that an exempt organization’s unrelated business taxable income is increased by any amount for which a deduction is not allowable under Code Section 274 and which is paid or incurred by the organization for any qualified transportation fringe (as defined in Code Section 132(f)), any parking facility used in connection with qualifying parking (as defined in Code Section 132(f)(5)(C), or any on-premises athletic facility (as defined in Code Section(j)(4)(B)). Accordingly, beginning in 2018, the amount an exempt organization pays for qualified transportation fringes, qualified parking, or on-premise athletic facilities will give rise to unrelated business taxable income.

Feel free to contact us for questions or further information on how the TCJA affects you and your business.