Open Enrollment Season is Here

The fall season is a time of change, especially for HR and benefit professionals.

Fall brings more than just daylight savings time change or the colors of the trees, it brings open enrollment. Each year HR and benefit professionals must provide employees with options for the next plan year. The list of activities for this season should include the following:

Summary of Benefits & Coverage (SBC). A new requirement for this year is the SBC, under the Affordable Care Act (ACA). You must provide an SBC to all applicants and enrollees for all group health plans, except for those that are excepted benefits under HIPAA (e.g., stand-alone dental, vision, most Health FSAs). This requirement is effective for open enrollment periods that start on or after September 23, 2012.

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IRS Provides Guidance on $2,500 FSA Limit

In late May, the IRS issued Notice 2012-40, which offers long-awaited guidance on the $2,500 limit on Health FSA salary reduction contributions. This rule is effective in 2013 under the Affordable Care Act (ACA).

Notice 2012-40 brings clarity to several gray areas related to §9005 of the ACA. This provision created §125(i) of the Internal Revenue Code. In addition, the IRS publicly indicated a willingness to change the Use-or-Lose Rule. 

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IRS Updates W-2 Health Care Coverage Reporting FAQ

On January 3, 2012, the IRS issued Notice 2012-09, which restates and amends last year’s Notice 2011-28 guidance on W-2 health coverage reporting. 

The Notice arrives just as many employers are processing their first payroll of 2012, the first payroll that is subject to the new reporting requirement. Recall that §9002 of the Affordable Care Act imposes this mandate, with the cost of all applicable coverage reported in Box 12 as Code DD.

Notice 2011-28 was a 31-question FAQ. Notice 2012-09 builds upon the earlier framework, adding eight more questions and revising some of the answers (under the heading of “Additional Issues”). Here are some highlights: Click Here to read more!

• Small Employer Exception. Employers with fewer than 250 W-2s in 2011 still have an indefinite delay, as do Indian tribal governments. An employer that uses a §3504 agent does not qualify for the exemption if the employer would have exceeded the 250 threshold without the agent.
• Health FSAs. The IRS clarified that only the amount that exceeds an employee’s salary reduction (if any) must be reported. An example would be an employer’s matching contribution.

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IRS Reminds Plans of Benefit Gray Areas

Every year, the IRS clarifies areas of the law in which it will not provide guidance. For 2012, Revenue Procedure 2012-03 provides a good reminder of a few gray areas for health and welfare benefits.

Specifically, the Revenue Procedure identified 79 areas in which the IRS will not issue rulings or determination letters “because of the inherently factual nature of the problems involved, or for other reasons.” Four areas are of particular interest.

First, the IRS will not define gross misconduct as it relates to COBRA. Recall that a termination of employment involving gross misconduct is not a qualifying event. In the past, courts have differed on how to define this term. This will continue. Because gross misconduct is so murky, the usual recommendation is to offer COBRA to avoid daily penalties, excise taxes and self-insuring claims.

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