Chaz

"Murky" is an understatement.

Subject to the answers to Peter's questions, I think it would be safe to remove the spouse from coverage if presented with an divorce decree executed by a court. Any divorce decree can theoretically be appealed a number of times, which would put the plan administrator in a predicament if an original decree is not considered "final" for purposes of dropping the spouse from coverage. The employer would then offer the spouse COBRA continuation coverage (assuming the employer is otherwise subject to COBRA). If the order is modified, it might be to require the employee to contribute all or part of the cost of continuation coverage but that would generally not be the concern of the employer except possibly to the extent that the employee's wages are garnished.

Do any of you that maintain PHI on behalf of a covered entity use Microsoft as your cloud provider? Have any of you who do successfully convinced Microsoft to enter into a business associate agreement? Thanks.

Brian, I typically see in level-funded arrangements that the TPA holds the amounts in its account, and therefore they don't remain in the employer's general assets so, in most cases at least, 92-01 won't apply. Is that your experience?

You may need to discuss with benefits counsel. It is quite possible that the amounts needed to be held in trust. If they weren't that is a problem itself but in general, they cannot revert back to the employer. I need to know more facts, though.

Note also that, regardless of to whom the reimbursements are made, most if not all of the reimbursements will likely constitute taxable income to the participant, if as appears likely, the LSA is provided in connection with an employer-employee relationship.

Imagine you are teaching your child to drive. You reach an intersection with a red light with absolutely no sign that anyone else is around. You child asks "Why can't we go through the light? How will the police know we did that?" How would you respond?

I advise employers to (i) require employees to provide documentation that a individual that the employee wishes to enroll in the plan meets the eligibility requirements and (ii) state in the SPD and in enrollment materials that the plan will consider enrolling an ineligible dependent as constituting fraud and misrepresentation. The second part may be a slightly risky way to avoid the ACA's prohibition on rescissions but, at the very least, will give employees second thoughts about engaging in hijinks or shenanigans.

My comments do not relate to the HSA/HDHP part of it. Here is a good resource on enrolling in Medicare and the potential penalties that you will incur if you enroll late: https://www.medicare.gov/publications/10050-medicare-and-you0.pdf See pages 17-18 (and elsewhere in the document) for a discussion of the timing of enrollment.

I'm not sure I fully understand your situation but if you are not going to covered by a group health plan through current employment (i.e., COBRA doesn't count) for longer than eight months, you're probably looking at paying higher premiums for Medicare Part B and D when you ultimately enroll in Medicare.

I am not necessarily looking for specific advice but I was wondering if anyone has had this or something similar occur. Employer was assessed a penalty of $40K under the ACA's shared responsibility provisions (the details don't matter). At no time did the employer send the IRS any amounts with respect to this assessment. Employer worked with counsel (me) to abate the penalty, which the IRS agreed to do. A few months later, the IRS sent Employer a check for $40K plus interest. Employer wrote back and said that the check was sent in error and requested IRS guidance on how to handle it. No response from the IRS. A few months later, the IRS sent another check in the same amount to the Employer. The employer responded similarly to what it did before. A few months later, the IRS sent yet another check in the same amount. Employer called the IRS and the representative told the Employer to send the checks back. Employer did so, along with a brief explanation. All was good until this past November, when the IRS sent a note saying that it was still working on the matter and would respond in 60 days. Last week the IRS sent another check, this time in the amount of $50K or so, reflecting additional interest. That is all.

Thanks for this. You set forth what has been my understanding all along. Maybe I am missing something, though, because the regs you cite are either with respect to calculating FTEs or for determining whether an ALE needs to offer coverage to an individual and don't discuss the threshold for full-time employees who are not considered in calculating FTEs. Here's a fuller excerpt from Publication 5208: Steps to determine your status as an ALE 1. Determine how many full-time employees you had each month of the prior calendar year. Under the ACA, a full-time employee for any calendar month is one who has, on average, at least 30 hours of service per week, or at least 130 hours per calendar month. There are exceptions for seasonal workers and employees with medical coverage under TRICARE or the Department of Veterans Affairs. 2. Determine how many full-time equivalent employees you had each month of the prior calendar year. To do this, combine the number of hours of service of all non-full-time employees for the month and divide that total by 120. Make sure you do not include more than 120 hours of service per employee. The same exceptions above for seasonal workers and workers with coverage under TRICARE or the Department of Veterans Affairs apply when determining the number of full-time equivalent employees. Peter and you accurately describe #2 above but not #1(?) Is Publication 5208 incorrect or am I missing something?

Hi Peter, Thanks. You have accurately cited the rule for calculating FTEs for non-full time employees (aggregate the hours and divide by 130) but that isn't the same for determining the number of employees who work full-time (and who are not included in the FTE calculation. Your point about relying on an IRS publication is well-taken but it does say what it says.

I understand that the monthly threshold hours that an employee must work is fewer that 130 for purposes of an ALE avoiding the shared responsibility penalty for not offering that employee coverage. But what is the monthly threshold for full-time status to determine whether an employer is an ALE? 120 or 130? IRS Publication 5208 states that the threshold is 130 hours: "Under the ACA, a full-time employee for any calendar month is one who has, on average, at least 30 hours of service per week, or at least 130 hours per calendar month." https://www.irs.gov/pub/irs-pdf/p5208.pdf. But, when asked this specific question in the 2014 JCEB Q/As, an IRS representative stated that the threshold was 120: "The Service representative disagrees with the notion of using either the 130-hour monthly equivalency or 30 hours per week for the applicable large employer determination. For the applicable large employer status, an employer does not use 130 hours. The statute requires employers to use 120 hours. So, for purposes of counting employees for purposes of the large employer determination, an employer counts how many employees worked at least 120 hours in a month. Each employee who works at least 120 hours counts as one full-time employee. It does not matter if the employee worked 121 hours or 250 hours that month, the employee counts as one employee." https://www.americanbar.org/content/dam/aba/events/employee_benefits/technicalsessions/2014_irs_qa.pdf (Note that my reading of the statute indicates that it does not say 120 hours per month; it says 30 hours per week.) I recognize that Publication 5208 is more authoritative than an IRS representative speaking for himself, but can anyone point to anything that specifically states the rule? Perhaps the IRS's thinking changed? Thanks!

Off the top of my head, I think the rules state that, while an employee can open an HSA at any bank/HSA provider, the employer can restrict the ones to which it will forward employer or employee salary reduction contributions. I don't think that the employer has an obligation to make its contribution to this employee if the employee is unable to open an account at the employer's selected bank. If the employee can manage to find another bank where he or she can open an HSA account and the employer still wants to make the contribution, it may pay the employee extra taxable compensation and the employee can deposit the amount into the HSA at the other bank. If the employee is unable to open an HSA account at any bank then he or she would be SOL and not be able to contribute to an HSA. There may be extraneous facts that might cause me to change my view but, based on your fact scenario, I can't see how the employer would have any obligation to make a contribution in either case.

Thanks!

Any thoughts on how and whether this analysis would change in an asset sale, where the assets of a non-ALE are acquired by another non-ALE, and, upon closing, the purchaser exceeds the 50 FTE threshold. I think in a stock sale, the obligation to offer coverage commences in the month of closing but I am not sure if that is true in an asset deal. I've read conflicting things on it, none of which are particularly convincing. Thanks.

This back and forth is very interesting and I don't disagree with your analysis. The only thing I would add is that I would be hesitant to not comply with a court order under these circumstances, specifically because of the possible ramifications that Peter laid out a couple of posts ago.

The buyer would need to do the testing as soon as possible after closing (doing it before closing is ideal). Doing it at the end of the year is highly risky. Having two separate plans for even a portion of the year risks failing the eligibility portion of the tests. In my experience, this is not a priority for the IRS, but of course that could change.

Unlike retirement plans, there is no transition period for health and welfare plan nondiscrimination testing purposes. It poses some difficulties in M&A deals. There are work-arounds, which are generally only partially satisfactory. Speak with your benefits counsel.

Thanks!

If an auditor concludes that a plan has a "significant deficiency" in the plan's internal controls (but that deficiency does not rise to a "material deficiency"), must that be reported in the plan's financial statements attached to the plan's Form 5500?

Here's a follow-up: https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/warning-letters/electrx-and-health-solutions-llc-614251-03022023

You would need to look at the FDA rules regarding prohibitions on importing drugs, among other things. We looked at it and, despite the vendors' marketing efforts regarding its legality ("We have an opinion from a law firm!"), we were unable to recommend that our client proceed with this program.

If (and only if) the move to another country results in the loss of eligibility for coverage, then I would permit an election change each time the move occurs. I don't think there is any rule regarding a time frame for such moves or whether such move has to be "permanent."