Author Archives: Mark Flanagan

PCORI Fees Due for Many Health Insurance Arrangements by July 31, 2017

PCORI fee

Under the Patient Protection and Affordable Care Act (PPACA), certain types of health insurance arrangements are required to pay a special fee. This fee is called the Comparative Effectiveness Research Fee, also referred to as the PCORI fee, and it will be used to help fund the Patient-Centered Outcomes Research Institute. The types of arrangements subject to this fee include:

  • Fully insured medical plans
  • Self-insured medical plans
  • Employer plans sponsored by private, government, churches, and not-for-profit organizations
  • Individuals on a temporary U.S. visa who reside in the U.S.
  • Retiree only plans
  • Health Reimbursement Accounts (HRAs)
  • Certain Flexible Spending Accounts (FSAs), if the employer contribution is greater than $500 and is more than the employee contribution

The PCORI fee is reported and remitted to the IRS through Form 720. The 2016 fees are detailed below:

The PCORI fee is based on the average number of covered lives during the plan year. Covered lives include covered employees of the plan sponsor and all other covered dependents. The IRS has prescribed four methods for counting average number of employees.

In fully insured arrangements, insurance companies are required to pay the fee and file Form 720. Self-insured plan sponsors are also required to both pay the fee and submit Form 720. Unlike other aspects of the Act, the PCORI fee requirement is applicable to all affected plans regardless of the employer’s size. Furthermore, the Department of Labor has indicated that the fee must be paid by the employer and not from plan assets.

Contact Mark Flanagan, Director of Aronson’s Compensation and Benefits Practice, at 301-231-6257 or mflanagan@aronsonllc.com to further discuss the impact this requirement.

Fiduciary Rule Goes into Effect June 9th

Fiduciary Rule

The initial effective date for the new Fiduciary Rule was April 10, 2017; however, the Department of Labor (DOL) delayed it for 60 days after the new Administration took office. The DOL was instructed to review the Rule during the delay period to further determine its impact on plan participants. While the retirement plan industry cautiously waited out the delay, the overriding presumption was that the Rule was dead. Surprisingly, the DOL announced on May 22, that the Rule would in fact be moving forward without further delay.

Under the Rule, an advisor making a recommendation or sale as opposed to giving ongoing advice is considered a fiduciary. Previously, only advisors charging a fee for services were deemed plan fiduciaries. Such fees could be hourly or a percentage of assets, but not commissions. As a fiduciary, the DOL requires advisors to act in the best interest of their clients. All fees must be shown in hard dollars and any conflicts of interest disclosed. At the heart of the Rule, is the fact that a fiduciary must recommend investments that are in their client’s “best interest” not investments that are merely suitable based on various needs and objectives. The net effect being a sub-set of advisors who were previously giving investment advice that were not considered fiduciaries, will be considered as such on June 9. Additionally, advisors that give investment advice related to IRAs will now be considered fiduciaries. These “new” fiduciaries are subject to the best interest standard where as previously they were not.

The investment industry and retirement plan sponsors alike have prepared for these new requirements for the last several years; many plan sponsors have already established a relationship with an advisor that meets the fiduciary standard. Additionally, many investment companies have modified their client service model or forgone servicing retirement plan assets to avoid the fiduciary standard.

To the non-advisor community, it seems shocking that advisors were not required to provide investment advice in the best interest of the recipient for a reasonable fee. Does this mean some advisors have been providing advice that is not in a person’s best interest at an unreasonable fee? Yes, it does!

Plan sponsors should be mindful of how the Rule evolves and its impact on the relationship with their advisor. It remains to be seen if any changes will be attempted or provisions are further delayed. Luckily, the DOL will likely focus their initial efforts on compliance with the new Rule as opposed to accessing penalties.

If you have any questions, please contact Aronson Compensation and Benefits Practice Director Mark Flanagan at 301.231.6257.

House Votes to Repeal and Replace the ACA – What Does it Really Mean?

healthcare

On May 5, the House of Representatives narrowly approved the American Health Care Act (AHCA). The bill was hastily modified after the initial version from March was doomed to fail. The current Administration has been under enormous pressure to make progress on one of its biggest campaign promises. What began as repeal Obamacare during the campaign, morphed into repeal and replace post-inauguration and is now a huge unknown.

Some of the relevant healthcare provisions of the new bill include:

  • Repeal of the employer shared-responsibility penalties
  • Greater state control over health plan requirements
  • Further implementation delays of the Cadillac Tax until January 1, 2026
  • Increased limits on HSA contributions: $3,400 to $6,500 for individuals; $6,550 to $13,100 for families
  • Elimination of the health flexible savings account contribution limit
  • Authority given to states to allow insurers to charge higher premiums for individuals with pre-existing conditions
  • Medicaid revisions back to the pre-Affordable Care Act (ACA) framework

Many of the provisions are nothing more than reverting to pre-ACA standards. The bill’s next stop is the Senate where it will likely face significant opposition amidst a slow and methodical review process.

Virtually all involved with healthcare agree that various parts of the ACA need revisions, but it is difficult at this point to envision a complete dismantling of the ACA. Employees and employers should continue to monitor legislative developments, while trying to avoid feeling every bump along the way. It has become increasingly difficult, if not impossible, to evaluate what is really going to happen and the eventual impact. Healthcare is a profoundly complicated issue that has been muddied by special interest groups, excessive political rhetoric, and sensationalized media coverage.

Individuals that anticipate consistent employer coverage should avoid some of the impact from future healthcare changes. However, individuals with spotty employer-based coverage could be greatly impacted by the eventual outcome, especially those with pre-existing conditions. Large employers should expect to fare better than smaller ones, with everyone receiving various forms of reporting and penalty relief.

The current healthcare structure in the United States is broken on many fronts, not just health insurance. It’s a complicated and dynamic issue that has certain tentacles, which are politically unappealing. Individuals and employers alike must accept that the next several years are fraught with uncertainty while continued focus on wellness and flexibility are key.

If you should have any questions, please contact Aronson Compensation and Benefits Practice Director Mark Flanagan at 301.231.6257.

New HSA Deduction Limits Released for 2018

HSA Deduction Limits

The IRS recently released the 2018 annual deduction limits for a Health Savings Account (HSA). Typically, these limits are adjusted each year for inflation. This is subject to any additional changes that become effective because of the proposed legislation modifying the Affordable Care Act.

The 2018 limits are $3,450 for an individual with self-only coverage and $6,900 for an individual with family coverage. Such deductible contributions can only be made to an HSA that is maintained in conjunction with a high-deductible health plan.

A high-deductible health plan is defined as a plan with an annual deductible of $1,350 or more for self-only coverage or $2,700 or more for family coverage. The corresponding maximum out-of-pocket expenses are $6,550 and $13,100, respectively.

HSAs continue to be a powerful tool in combating the rise in health costs especially for young healthy people. Employers should continue to evaluate their effectiveness as part of an overall health benefits strategy.

If you have any questions, please contact Mark Flanagan of Aronson’s Compensation and Benefits Practice at 301.231.6257.

New Retirement Plans Must Be Established by December 31, 2016!

One of the last great tax deductions for small businesses, including sole-proprietors and LLCs, is the ability to make tax deductible contributions to a retirement plan. If an entity does not currently have a plan in place and they expect to make deductible contributions for 2016, then a plan must be established no later than December 31, 2016.

At this time of year, as part of year-end tax planning, business owners strategize about possible retirement plan contributions and the establishment of a new plan if one does not currently exist. The most common types of plans established at year-end are solo 401k plans, profit sharing plans, which include 401k plans, and defined benefit plans (traditional or cash balance). While other plan types exist, these are typically the most popular at tax planning time. Frequently, the Simplified Employee Pension (SEP) is considered; however, SEPs can be established post year-end prior to the extended due date of the Employer’s tax return.

Each plan should be considered carefully so that the associated costs and benefits meet the business’ goals, objectives, and cash flow limitations. These plans require different levels of evaluation and time to set-up. The solo 401k plan for example, can be evaluated and set-up in a couple of hours, if not less. While a defined benefit arrangement could take several days at a minimum, given the need to consult with an actuary and the consideration needed to commit to potentially very large contributions; not to mention the other potential time drags that may occur as a result of needing to find an investment advisor or evaluate potential plan vendors. The spectrum of what is involved in getting a plan put in place is wide and varied.

As year-end quickly approaches, businesses should be well into tax planning, with new plan considerations in full force. Some plan vendors are nimble and have flexible deadlines for establishing plans by year-end, while others are extremely rigid and may require new plans to be set-up several weeks prior to year-end. Business owners should be mindful that plan establishment challenges increase exponentially the closer to year-end we get, especially with all of the holiday season demands.

Don’t wait if you are seriously contemplating establishing a new plan for 2016, you need to get the process going as soon as possible. For questions regarding retirement plans, please contract Aronson’s Compensation and Benefits Practice Director Mark Flanagan at 301.231.6257.

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