Employee Benefits Blog

Individual Health Insurance Policies Can Now Be Provided to Employees Only On After-Tax Basis

On Friday, September 13, the IRS issued Notice 2013-54 to discuss the application of the “market reform” provisions of the Affordable Care Act (ACA)  to certain employer healthcare arrangements, including, among others, arrangements under which employers pay for employees’ individual health insurance policies, either by paying the insurance company directly or by reimbursing the employee. The Notice, which mirrors substantially identical guidance issued by the DOL, also covers health reimbursement accounts under Section 105 and health flexible spending arrangement under Code Section 125.  The “market reform” provisions include the requirements to provide certain preventive services with no cost-sharing and to refrain from imposing a lifetime cap on benefits.  There are many aspects to this Notice, but this post will focus only on its impact on employers’ subsidies of employees’ individual health insurance policies.

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Waiting In The Wings: Obamacare’s Nondiscrimination Rules for Insured Group Health Plans

During the past several months, numerous provisions of the Affordable Care Act have taken their turn on center stage.  For example, starting in early July we have had constant reminders of first the one-year delay in the employer mandate, then the Patient Center Outcomes Research Institute (PCORI) fee, then the exchange notices, and most recently the possibility of a government shutdown over funding the ACA.  There is another ACA provision that has received very little attention to date that may turn out to be among the Act’s most significant changes: the new nondiscrimination rules applicable to insured group health plans.

One of the traditional quirks in the taxation of employee benefits is that, whereas self-insured health plans are subject to significant and potentially punitive nondiscrimination rules under Code Section 105(h), health plans funded through commercial insurance are subject to no discrimination rules.  (In general, Section 105(h) prohibits discrimination as to either eligibility or benefits in favor of highly compensated employees.  For this purpose, the definition of “highly compensated employee” is very broad, in that it includes the highest paid 25% of all employees.)  Thus, employers have been free to provide very rich insurance coverage to certain employees and far inferior coverage to others.  Congress attempted to address this discrepancy in the late 1980’s by enacting Code Section 89.  However, this section was so convoluted and controversial that it was repealed before it came into effect.

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Health Insurance Marketplace Notices Must Be Issued by October 1, 2013

Certain provisions of the Affordable Care Act, most notably the employer “play or pay” penalties, have been delayed.  However, the Health Insurance Marketplace, also known as the public exchanges, is still scheduled to begin operation on January 1, 2014, with open enrollment beginning on October 1, 2013.  The purposes of this post are to remind you of the required notice that employers must provide to their employees by October 1 and to discuss a few practical considerations relative to this notice.

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PCORI Fee: A Few Practical Considerations

We recently wrote an article regarding the Patient-Centered Outcome Research Institute (PCORI) fee, a new requirement under the Affordable Care Act which will require many plan sponsors to file a Form 720 and pay an excise tax by July 31, 2013.  This post is a reminder of this filing requirement.  In addition, we would like to briefly mention a few of the more significant practical issues and considerations that we have encountered as we have started to deal with these filings.

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UBI in IRAs and Qualified Plans from Partnership Investments Can Ba a Nasty Surprise

During this past tax filing season, we came across several instances where clients experienced unexpected tax return filing requirements and, in some cases, tax liabilities resulting from partnership investments within their individual retirement accounts (IRAs) and qualified retirement plans.  This post will explore some of the issues involved in these unpleasant situations.

In general, tax-exempt organizations are required to pay income tax on net unrelated business income (UBI), which generally means income derived from regular business activities that are unrelated to the organizations’ missions.  In addition, investment income derived from debt-financed investments is generally taxable as UBI.  When people think of “tax-exempt organizations,” they generally think of charities such as hospitals or schools.  However, the term also includes IRAs and qualified retirement plans, which therefore are also potentially subject to tax on UBI.

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Recent Tax Court Case Highlights Risk of Prohibited Transactions in IRAs

Last year, we posted about alternative investments, including active closely-held businesses, within individual retirement accounts (IRAs).  A recent United States Tax Court case, Peek and Fleck v. Commissioner, involved an investment in a closely-held business and illustrates the risk of running afoul of the strict rules governing prohibited transactions with IRAs.

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