Brian Gilmore

I agree the loss of coverage caused by ineligible status is not one of the COBRA triggering events, and therefore not a qualifying event. In other words, no COBRA rights apply. The second piece is basically if you want to offer "COBRA-like" coverage in this situation to mirror the continuation rights available through COBRA for those removed in the eligibility audit. I think that's fine with two important caveats: It's approved by stop-loss (self-insured) or the carrier (fully insured). It's handled consistently for ERISA plan precedent purposes. As noted by multiple folks above, that first condition could be a significant barrier here. You never want to be in a position where a carrier or stop-loss can deny payment for an unapproved individual.

This is a great resource! Thanks for putting it together @Gary Lesser. Adding this latest from the DOL that the newsletter just put out today: Technical Release 2026-02 -- Code section 530A Trump accounts and section 128 Trump account contribution programs generally will not constitute “employee pension benefit plans” for purposes of the provisions of Title I of ERISA.

My understanding is that safe harbor applies to the benefits test component of the §105(h) nondiscrimination rules. If the retiree HRA is made available only to HCIs, that strikes me as an issue under eligibility test component. If it just happens that only HCIs have participated--even though other non-HCIs who retire are also eligible--that would be a better situation. Here's some IRS guidance that seems to indicate the same approach: https://www.irs.gov/pub/lanoa/pmta01373_7367.pdf. Generally, all benefits under the Plan are available to all participants and to their dependents on the same basis. A different benefit schedule applies with respect to retirees. Under §1.105-11(c)(3)(iii) of the regulations, benefits provided to a retiree are generally not considered to be discriminatory benefits if the benefits provided to retired employees who were highly compensated individuals are the same for all other retired participants. Because the benefits under the Plan are the same for all retirees and their dependents, the Plan passes the benefits test. They appear to analyze the retiree safe harbor for benefits test purposes only.

§105 is a Code section rather than a type of plan. I'm assuming you're referring to an HRA. As long as it covers fewer than two employees, it should be fine. But given there are other employees who may potentially participate (either now or in the future), seems like an ICHRA is the way to go to easily avoid this issue.

I think this is an area where you'll find a variety of opinions. I definitely would provide the SAR if the client receives a written request from the former participant to avoid potential $110/day penalties. Otherwise, I am comfortable excluding those who are not currently in active or COBRA coverage. This is some mixed guidance here that could be interpreted to support the other side, though. Here's my take-- https://www.newfront.com/blog/the-summary-annual-report-sar-for-health-plans What About COBRA Qualified Beneficiaries? COBRA qualified beneficiaries have a right to receive the SAR in the same manner as active participants. There is an open question as to whether terminated employees who participated in the prior plan year to which the SAR relates, but are not COBRA qualified beneficiaries (e.g., they declined COBRA), are also entitled to receive the SAR. Our position is that because these former employees are not currently participants (neither active nor COBRA), the plan does not have to provide them with a copy of the SAR. Note: DOL guidance in Advisory Opinion Letter 79-64A provides that in the context of a plan termination, the SAR is required for all participants in the prior plan year regardless of COBRA status. Some have interpreted this guidance broadly to apply even for a continuing plan. We feel this is an overly conservative approach and therefore do not have any concern with employers who distribute the SAR only to those terminated employees who have elected COBRA.

I would make sure there are not any plan terms providing that employees always remain eligible during the stability period. A clear leave policy addressing the loss of coverage in non-protected leave scenarios (even while in a stability period as full-time) would also be ideal.

My guess is no, but we're still awaiting the employer-side Trump Account guidance. Here's what they said in the recently proposed regs-- https://www.federalregister.gov/documents/2026/03/09/2026-04533/trump-accounts Section 128 employer contributions paid to a Trump account of an employee or a dependent of an employee are not includible in the employee's income. Such contributions are limited to $2,500, subject to cost-of-living adjustments after 2027. Section 128 employer contributions must be made pursuant to a section 128(c) Trump account contribution program. (The Treasury Department and the IRS intend to issue guidance under section 128 at a future date.)

This is just a plan design question. Check the plan materials (SPD, carrier/TPA/stop-loss, etc.) to see if it's directly addressed. If not, any consistent approach should be fine. Your reference as to whether it might "violate ERISA"--that would generally only be an issue where an approach conflicted with plan terms or was not administered consistently in similar circumstances. Employers generally have the discretionary authority under ERISA and the terms of the plan to interpret plan terms in a consistent manner. More discussion: https://www.newfront.com/blog/j-and-j-case-practical-considerations-the-core-four-erisa-fiduciary-duties-part-2 Slide summary: 2026 Newfront ERISA for Employers Guide

I've seen some combination of a letter explaining where the error(s) occurred on the forms and how it was caused by a third-party reporting service, corrections to the 1095-C coding on the Form 14765 that's included with the 14764/Letter 226J, and a corrected version of the 1094-C that was originally filed (e.g., correcting column (a) in Part III to say "Yes" to the MEC offer for all 12 months). In situations where the §4980H assessment was actually based on a simple reporting error, I've almost always seen a) the IRS agree to remove the penalty assessment without too much back and forth, and b) no penalties assessed for the coding errors.

I've seen significant penalties for failure to file via IRS Letter 5699. I have not seen incorrect/late ACA reporting penalties via Notice 972CG. They might be happening, I just haven't seen them yet in the wild. 2026 Newfront ACA Employer Mandate & ACA Reporting Guide

Hi there, good news--you can contribute up to the family HSA limit as long as you are HSA-eligible and have at least one other individual covered under the plan. The other individual(s) covered do not have to be HSA-eligible for these purposes. So the fact that your husband cannot establish and contribute to an HSA (because he is enrolled in Medicare) has no effect on your ability to contribute to the family max. On the child matter, whether your child is a qualifying relative matters only as to whether you can take tax-free medical HSA distributions for that child (see here for more details: https://www.newfront.com/blog/the-hsa-distribution-rules-part-1). It has no effect on contribution limits. Here's the overview of your main issue-- IRS Notice 2004-50: https://www.irs.gov/pub/irs-drop/n-04-50.pdf Q-12. What is family HDHP coverage under section 223? A-12. Under section 223(c)(4), the term “family coverage” means any coverage other than self-only coverage. Self-only coverage is a health plan covering only one individual; self-only HDHP coverage is an HDHP covering only one individual if that individual is an eligible individual. Family HDHP coverage is a health plan covering one eligible individual and at least one other individual (whether or not the other individual is an eligible individual). Example. An individual, who is an eligible individual, and his dependent child are covered under an “employee plus one” HDHP offered by the individual’s employer. The coverage is family HDHP coverage under section 223(c)(4). https://www.newfront.com/blog/the-hsa-contribution-rules-part-1 The HSA Contribution Limit: HDHP Family Coverage HSA-eligible employees can contribute to the family limit ($8,550 in 2025) if they enroll in family HDHP coverage for the entire calendar year (or take advantage of the last-month rule, as outlined in Part II). The HSA rules define family HDHP coverage as any coverage other than self-only coverage. This means that employees who are HSA-eligible and cover at least one other individual under the HDHP (e.g., employee + spouse, employee + domestic partner, employee + child(ren), employee + family) can contribute up to the family HSA limit. The family HSA contribution limit is available regardless of: Whether the other covered family members are HSA-eligible (e.g., the family members may also be enrolled in non-HDHP coverage or Medicare); or Whether the other covered family members are eligible for tax-free coverage under the plan (e.g., non-tax dependent domestic partners). Example 1: Ben enrolls in HDHP coverage for himself and his domestic partner Julianna for all of 2025 (and has no disqualifying coverage). Ben’s (non-tax dependent) domestic partner Julianna also has employee-only coverage under a non-HDHP HMO plan with her employer. Result 1: Ben is eligible to make the full $8,550 family HSA contribution limit for 2025. The fact that Julianna is a non-tax dependent domestic partner and has other disqualifying coverage is irrelevant for purposes of Ben’s ability to contribute to the family HSA limit. Note that Julianna cannot make or receive HSA contributions to an HSA in her name because she is not HSA-eligible. Slide summary: 2026 Newfront Go All the Way with HSA Guide

First of all, unless this is a birth/adoption event the election change request received in '26 generally would not have a retroactive effect to 2025. More details: https://www.newfront.com/blog/when-mid-year-election-changes-are-effective Assuming the change is retro to '25, this would be a matter of plan design. Employers have broad discretion on how to structure their ER HSA contribution approach. Any consistent approach would generally be fine. I leave to you to address the potential vendor issues. If you are going to make the contribution, employers can make a year one HSA contribution by 4/15 of year two if they notify the HSA custodian and employee that the amount is to be allocated to year one. That does not require any changes to the year one W-2. More details: https://www.newfront.com/blog/correcting-missed-hsa-contributions Missed Employer HSA Contribution: Prior Year (Correction by 4/15) Employers frequently discover missed HSA contributions after the calendar year has closed. These discoveries often occur as part of a regular year-end payroll auditing process. They may also be discovered as part of the reporting process for HSA contributions on the Form W-2. The good news is that whatever the reason for the error or the cause of its discovery, missed HSA contributions from a prior year are still an easily correctible mistake. The HSA rules provide that employers can make a prior year missed HSA contribution by the tax filing deadline without extension (generally April 15). There are two communication steps required to ensure that the contribution is allocated to the prior year contribution limit: The employer must notify the HSA bank that the contribution is to be allocated to the prior year; and The employer must inform the employee that the contribution is to be allocated to the prior year. No Form W-2 Correction Required Employers must report all employer and employee HSA contributions made through payroll as a single aggregated amount on the employee’s Form W-2 in Box 12 using Code W. Employers are often concerned that making an HSA contribution for the prior year will require a corrected Form W-2c to report the additional contribution allocated to that prior year. However, IRS guidance is clear that an HSA contribution correction by the tax filing deadline (generally April 15) does not require any correction to the prior year Form W-2. Rather, the IRS guidance confirms that employers simply report the prior year HSA contribution on the current year Form W-2 (issued the following January). Note that this may result in the employee’s Box 12, Code W showing an amount larger than the annual statutory HSA contribution limit. However, as long as the amount in excess of the limit is attributable to the prior year contributions made prior to the tax filing deadline, this will not present any issues. Employee Addresses Additional Prior Year Contributions on Form 8889 On the employee side, the additional contributions made for the prior year are addressed via the Form 8889 that all individuals with HSA contributions or distributions must include with the individual tax return (Form 1040). This will ensure that the contributions are allocated to correct year and are consistent with the Form 5498-SA provided by the HSA custodian. The Form 8889 Instructions include an “Employer Contribution Worksheet” that accomplishes two purposes to ensure proper reporting of HSA contribution amounts attributable to the tax filing year: Prior Year Contributions Subtracted: The employee subtracts any amounts attributable to the prior year that were included on the current-year Form W-2 (because it was contributed by the prior year tax filing deadline); and Current Year Contributions Added: The employee adds any employer contributions made for the current year after the Form W-2 was issued (because it was contributed by the current-year tax filing deadline). Potential Complications: Employees who have already filed their individual tax return (Form 1040) prior to receiving notice of the additional HSA contribution attributable to that prior year (the tax-filing year) may have to amend their individual tax return (Form 1040-X) to reflect the additional contribution on the Form 8889. Employees may argue that they should receive some form of lost earnings compensation for the duration of the failure. Although there are no specific rules addressing this (unlike, for example, the EPCRS lost earnings rules that apply in the 401(k) context), employers might consider accommodating such a request. Any such adjustment should generally be made outside the HSA (i.e., as standard taxable compensation) to avoid the potential for excess HSA contributions. If the employee has terminated from employment, the HSA account with the employer’s designated custodian may no longer be open. In this case, employers should consider making the missed payment to the former employee as standard taxable cash compensation. Example: Jason works for his employer Treadstone Security, which offers an HDHP plan option to employees. Treadstone Security makes a $3,000 employer contribution ($125 per payroll period) for employees who enroll in the HDHP. Upon review of his 2023 Form W-2 in February 2024, Jason discovers that Treadstone Security contributed only $2,875 because it missed one payroll’s HSA contribution. Result: Treadstone Security should correct the mistake by making the missed 2023 employer HSA contribution no later than April 15, 2024. Treadstone Security must notify both Jason and the HSA bank that the $125 deposit made in 2024 is to be allocated to the 2023 HSA contribution limit. Treadstone Security does not prepare a corrected 2023 Form W-2c for Jason to address the error. Instead, Treadstone Security reports the 2023 contribution made in 2024 on Jason’s 2024 Form W-2 provided in January 2025 (aggregated as one amount with the 2024 employer and employee HSA contributions, if any, in Box 12 using Code W). Jason will prepare his 2023 Form 8889 to reflect that the additional $125 HSA employer contribution made in 2024 is allocated to the 2023 contribution limit. Jason will prepare his 2024 Form 8889 to exclude the $125 additional amount reported on his 2024 Form W-2 that was attributable to the 2023 HSA contribution limit. Slide summary: 2026 Newfront Go All the Way with HSA Guide

The issue here is whether the return of the excess pre-tax contributions is taxable in year one or year two. There are arguments either way here. For example, in the health FSA context the IRS has specifically approved including year one improper payment amounts in year two taxable income under certain circumstances. Many employers are comfortable with that approach in this type of context, too. The employer likely haven't finalized/issued the year one W-2 in this case, so it probably would not be that difficult to address this as year one taxation if they preferred. IRS Chief Counsel Advice Memorandum 201413006: https://www.irs.gov/pub/irs-wd/1413006.pdf In cases in which all other correction procedures have been exhausted by the employer and the employer treats the improper payment as business indebtedness in accordance with Prop. Treasury Reg. §1.125-6(d)(7)(v), the improper payment should be reported by the employer to the employee as wages on a Form W-2 to the extent the employer forgives the indebtedness after requesting payment consistent with collection procedures for other business indebtedness. The amount included in income is subject to withholding for income tax, FICA and FUTA, since the benefits are made available to the employee by the employer for the performance of services. The improper payment is reportable in the taxable year of the employee in which the indebtedness is forgiven.

Yeah that's how I read it. The A Penalty could only be triggered above five full-time employees. However, they could trigger B Penalty liability at any number of full-time employees. There would be no B Penalty liability at one full-time employee given that it's capped at the A Penalty amount--which is zero based on the one employee proportional reduction. But at two or more full-time employees there would be an A Penalty amount. Then an employee triggering the B Penalty would create a calculation scenario of which penalty amount (A or B) is lower to determine the actual potential liability.

This is an interesting one. I agree the A Penalty does not apply, but it's not because of the proportional 30-employee reduction for each ALEM. That reduction is used for purposes of calculating the applicable A Penalty amount where a full-time employee of ALEM has triggered the A Penalty by receiving a subsidy on the exchange. But in this case, the (one and only) full-time employee of the ALEM can't even trigger the A Penalty. The A Penalty generally applies if the ALEM fails to offer coverage to at least 95% of it's full-time employees (and at least one full-time employee receives an exchange subsidy). However, there is an additional rule that says if greater, the ALEM can fail to offer to up to five full-time employees without A Penalty exposure. Given that the ALEM doesn't even have five full-time employees, there is no way the A Penalty can apply. So in any case, we're reaching the same result here but the different reasoning is still interesting. With that in mind, I agree the ALEM's one full-time employee can still trigger B Penalty liability by receiving subsidized exchange coverage. But that raises yet another interesting point, which is that B Penalty liability cannot exceed A Penalty liability. As you noted, even if it were possible to trigger the A Penalty, the one-employee proportional reduction would result in no A Penalty. The end result I'm seeing is that there is no potential ACA employer mandate liability for this ALEM with only one full-time employee because a) the A Penalty can't be triggered, and b) the B Penalty can't exceed the A Penalty, which is zero. I know this is real life, but you really couldn't design a better law school exam question on the employer mandate than this scenario here. Here's the relevant points: https://www.federalregister.gov/documents/2014/02/12/2014-03082/shared-responsibility-for-employers-regarding-health-coverage The alternative margin of five full-time employees (and their dependents), if greater than five percent of full-time employees (and their dependents), is designed to accommodate relatively small applicable large employer members because a failure to offer coverage to a few full-time employees (and their dependents) might exceed five percent of the applicable large employer member's full-time employees. ... Notwithstanding the foregoing, the aggregate amount of assessable payment determined under this paragraph (a) with respect to all employees of an applicable large employer member for any calendar month may not exceed the product of the section 4980H(a) applicable payment amount and the number of full-time employees of the applicable large employer member during that calendar month (reduced by the applicable large employer member's ratable allocation of the 30 employee reduction under § 54.4980H-4(e)).