2018 was another busy year for lawmakers and IRS officials, as employer penalty notices came out in bundles and regulations flowed.
Health Care Reform
Section 4980H Employer Mandate
There are no ‘new’ mandates to prepare for in the approaching 2019 calendar year, but the employer mandate is still in effect and being actively enforced by the IRS.
Calendar year 2016 penalty notices under both ‘A’ and ‘B’ of the mandate are circulating, so HR departments still need to watch the mailbox for any communications from the IRS.
To avoid a penalty in 2019, large employers should offer coverage that is affordable (no more than 9.86% of income or wages using a safe harbor method) and is of minimum value.
The failure to do so, along with any employee qualifying for a subsidy to purchase insurance on the Health Exchange, will result in a penalty equal to $3,750 x the number of full time employees that receive a subsidy to purchase insurance on the Health Exchange.
Section 5000 Individual Mandate
The Individual Mandate will be equal to $0 as of January 1, 2019. Taxpayers will still need to report coverage when they file their 2018 returns, and will still be assessed a penalty for the present year for any MEC failure that last more than 3 months.
The so-called ‘Cadillac tax’ on plans exceeding certain cost thresholds was delayed earlier this year for another time, making it effective for plan years beginning in 2022. The 40% excise tax on high cost plans will be assessed on carriers, who will then pass it down to employer plan sponsors beginning with calendar year 2022.
The PCORI fee for all calendar year plans will be $2.45 in July, 2019.
This will be the final PCORI payment for all November, December, and calendar year plans. Non- calendar year plans beginning in Feb, March, April, May, June, July, August, September or October will pay $2.39 in July 2019, and will pay $2.45 per employee in July, 2020).
The Health Insurer Industry Tax (‘HIT’) was due in 2018, but will not be due for plans in 2019. This applies to fully insured plans only.
Entities objecting to covering certain contraceptives under the preventive care mandate of the ACA have more options under finalized rules. Any accommodation made whereby a TPA provides the contraceptive coverage to employees will now be optional, and can be revoked with notice in the following plan year.
An important decision for labor unions was rendered in late June, when the Court ruled that unions could not force government workers who didn't join a union to finance union activities. This decision is hypothesized to further reduce the effectiveness of existing labor unions.
The retirement announcement from Justice Kennedy created a vacancy on the bench. Brett Kavanaugh was confirmed amidst one of the most contentious debates in US history. Kavanagh clerked for Justice Kennedy, and also served 12 years on the U.S. Court of Appeals for the D.C. Circuit. The impact the new bench will have on upcoming cases will play out in the next few months.
Pursuant to the state budget signed into law in April 2018, New York employers are now required to conduct annual anti-sexual harassment training, and have a written policy. The requirement took effect in October, 2018. New hires must be given this training within 30 days of their hire date.
As of 12/31/18, the Overtime thresholds and minimum wage across New York will increase:
The minimum wage increases to $15 per hour (NYC employers with 11+ employees), $12 per hour (Nassau/Suffolk/Westchester Counties), and $11.10 per hour (all other locations in New York State).
The minimum salary for exemption as an “administrative” or “executive” employee increases from $975 per week/$50,700 annually, to $1,125 per week/$58,500 annually for NYC employers with 11+employees.
NY Paid Family Leave (PFL) became effective in 2018. In 2019, the employee paid premium increases from a maximum of $85 to $107 annually, and the benefit payment and time off increases as well. The list below outlines the growth of PFL over the next few year:
2018 - 8 weeks of leave - 50% of wages, up to 50% of State Average Weekly Wage *in 2018, max weekly benefit of $652.96
2019 - 10 weeks or 50 days of leave - 55% of wages, up to 55% of State Average Weekly Wage *in 2019, max benefit of $746.41
2020 - 10 weeks of leave - 60% of wages, up to 60% of State Average Weekly Wage
2021 - 12 weeks - 67% of wages, up to 67% of State Average Weekly Wage
As of October, 2018, NJ employers must offer paid sick leave to all employees (including temporary and part time employees). Employers can front load 40 hours to all employees at the beginning of the plan year, or track 1 hour of paid sick leave for every 30 hours worked.
Beginning in 2019, New Jersey will impose a mandate for all NJ resident to carry health insurance or pay a penalty (similar to the Federal ACA individual mandate that will now be repealed).
Beginning July 1, 2019, Massachusetts employers will begin taking payroll taxes from employees to fund a paid family and medical leave program. Benefits under the new program will be effective as of January, 2021.
The DOL published final rules on Association Health Plans (AHPs) expanding ERISA’s definition of ‘employer’ and allowing small employers, sole proprietors and others to come together with the purpose of offering health insurance to members. AHPs will still be largely regulated by state law, so the exact logistics of the new framework’s effect on the market remain to be seen.
The Departments released the final rule on short term health plans, increasing their availability for those who may lose employer coverage. Short term health policies are now available. Individuals will now have the ability to purchase short-term, limited-duration insurance policies that:
Are less than 12 months
Have designated language to help them understand the short duration and limited scope of the coverage
May be renewed for up to 36 months.
HHS fined the University of Texas MD Anderson Cancer Center $4.3 million for a HIPAA breach in June, that resulted from the theft of a laptop, as well as the loss of unencrypted thumb drives with PHI for thousands of patients. This is among the largest HIPAA breach penalties in history.
CMS can impose a penalty of $1,000 per day for employers who receive a Medicare Data Match survey and fail to respond by the state deadline. There has been indication that this will be enforced more stringently in the future, so employers should be on the lookout for this notice and should ensure they respond promptly with all requested information.
The IRS released indexed account contribution and out of pocket limits for the upcoming year. The FSA limit is still yet to be announced.
HDHP minimum deductible amount - $1,350/ $2,700
HDHP Maximum OOP Limit (determined by IRS) - $6,750/ $13,500
NON-HDHP Maximum OOP Limits (determined by HHS in accord with ACA) - $7,900/ $15,800
HSA Maximum Contribution Amount - $3,500/$7,000
FSA Maximum Contribution Amount - $2700
Transit - $265