May Review and Regulatory Recap

A Note from Danielle Capilla, Alera Group's Director of Compliance - Employee Benefits

The IRS modified its annual limitations on deductions for contributions to health savings accounts (HSAs) for taxpayers with family coverage under a high deductible health plan (HDHP) for the 2018 calendar year. This reverts the limit back to its original level prior to a $50 reduction to $6,850 due to Revenue Procedure 2018-18. Click here for more information on the HSA Contribution Limit Change

The IRS also released the inflation adjusted amounts for 2019 for HSAs and HDHPs. The IRS increases are in line with those we have seen over the past few years, but unfortunately continue to diversion of HDHP maximum out of pockets from the separate ACA maximum out of pocket thresholds. Click here for more information about the 2019 Limits, and maximums

2019 Affordability Rates Released

Under the ACA, applicable large employers (ALEs) are required to offer affordable, minimum value, minimal essential coverage to all full time employees. Coverage is affordable if it costs less than a certain percentage of the employee’s household income. The percentages change annually:

Year	Affordability Percentage	FPL EE Safe Harbor Premium Max
2015	9.56 %	$92.97
2016	9.66 %	$94.75
2017	9.69 %	$95.93
2018	9.56 %	$96.08
2019	9.86 %	$97.38

Employers will rarely know an employee’s household income, and are given three affordability safe harbors that they can meet in order to ensure their offer of coverage meets the requirement. The safe harbors are the W-2 safe harbor, the rate of pay safe harbor, and the federal poverty level (FPL) safe harbor. The W-2 and rate of pay safe harbors are reliant on how much money the employee earns in their position, whereas the FPL safe harbor is based solely on the annual FPL, and is calculated regardless of an employee’s actual pay.

The annual FPL amount is typically released in early first quarter of each year, because of that the regulations allow the employer to select their FPL by looking back 6 months before the first day of their plan year.

IRS Proposes Regulations Expanding Mandatory Electronic Filing

On May 31, 2018, the IRS issued a proposed regulation that would greatly expand mandatory electronic filing for certain information returns.

Currently, employers with fewer than 250 information returns are permitted to file manually, and each type of return is considered separately. For example under the current rules, an employer with 145 W-2s, and 125 1095-C Forms, would be permitted to file manually because no single return had more than 250 forms. The proposed rule would require this sample employer to file electronically, as the two returns combined exceed the 250 threshold.

Forms included in the aggregated count would be Form W-2, Form 1095-C, Form 1095-B, and all forms in the 1099 series.

The waiver process would still be available for employers who do not have access to electronic filing at a reasonable cost.

If finalized, these regulations would be effective for all returns filed after December 31, 2018.

227 Letters

The IRS has created an online resource to assist employers with understanding Letter 227, which is the letter the IRS sends to acknowledge an employer’s response to their initial Letter 226J, which is the agency’s mechanism for proposing penalty assessments to applicable large employers (ALEs) under the ACA’s play or pay regulations.

There are five versions of Letter 227.

Letter 227-J is sent with an employer agrees with the initial proposed penalty. The case is considered closed.

Letter 227-K is sent when the IRS reduces the penalty to $0. The case is considered closed.

Letter 227-L is sent when the proposed penalty is revised, and includes an additional form (14765) and calculation table. Employers receiving this letter can agree, appeal, or request a meeting with the IRS. This letter requires a response.

Letter 227-M shows the original penalty amount, and will also include an updated Form 14765, and if applicable, a revised calculation table. Employers receiving this letter can agree, appeal, or request a meeting with the IRS. This letter requires a response.

Letter 227-N is sent when the IRS appeals office makes a final decision, and will include the final penalty amount. The case is considered close.

 

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