The Affordable Care Act (ACA) reporting under Section 6055 and Section 6056 for the 2021 calendar year is due in early 2022. Specifically, reporting entities must:
A proposed rule issued on November 22, 2021, would extend the annual furnishing deadlines under both Sections 6055 and 6056 for an additional 30 days (to March 2). This rule is in proposed form and has not been finalized. As a result, the general furnishing deadline of January 31 continues to apply. However, the proposed rule states that taxpayers may rely on the proposed regulations for 2021 reporting. In either case, reporting entities are generally encouraged to furnish statements to individuals as soon as they are able.
The proposed rule would also provide an alternative method for furnishing statements to individuals under Section 6055. Under this alternative manner of furnishing, the reporting entity must post a clear and conspicuous notice on its website stating that responsible individuals may receive a copy of their statement upon request. The notice must include an email address, a physical address to which a request may be sent and a telephone number to contact the reporting entity with any questions. Reporting entities must generally retain the website notice until Oct. 15 of the year following the calendar year to which the statement relates. However, applicable large employers (ALEs) may not use the alternative method of furnishing for full-time employees who are enrolled in a self-insured plan.
Keep in mind that nothing has changed with respect to filings required to be made to the IRS.
The proposed rule also eliminates the good faith transition relief from penalties that has been available for reporting entities that could show that they made good faith efforts to comply with information reporting requirements. This means that relief from penalties under Sections 6721 and 6722 for the reporting of incorrect or incomplete information on information returns or statements is not available for reporting for tax year 2021 and subsequent years. However, the IRS noted in the proposed regulations that the reasonable cause exception under IRC Section 6724 already provides adequate relief from penalties under Sections 6721 and 6722 for filers who have reasonable cause for failing to timely or accurately complete their reporting requirements. Either way, filers should be extra diligent in preparing their information forms for 2021 and beyond.
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In response to legislative mandates under the Affordable Care Act and Executive Orders issued during the Trump Administration, several pieces of federal legislation and rulemaking have recently been enacted that are designed to give plan members and patients more control over their health care decisions. Following the heels of a final price transparency rule for hospitals, which became effective this year (see here for more information), on October 29, 2020, the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury (collectively, the Departments) issued a final rule regarding transparency in coverage that imposes new transparency requirements on group health plans and health insurers in the individual and group markets. In addition, the Consolidated Appropriations Act, 2021 (CAA) was passed on December 27, 2020, Title I provisions of which, include the No Surprises Act, and Title II of Division BB of the CAA contains several transparency in coverage provisions.
The No Surprises Act is set to be effective for plan years beginning on or after January 1, 2022, while the transparency in coverage provisions are set to be effective between January 1, 2022 and January 1, 2024, with enforcement of several of the January 1, 2022 provisions delayed until at least July 1, 2022 or pending the issuance of further guidance. The provisions of the CAA also apply to grandfathered health plans.
On November 10, 2021, the IRS released the remaining 2022 contribution limits for employee benefit plans, among other inflation-adjusted numbers that were released. The IRS typically announces the dollar limits that will apply for the next calendar year with enough time to allow employers to update their plans and confirm their plan administration will be consistent with the new limits; however, some limits were released later this year, causing many employers to scramble during their open enrollment periods and update any documents and/or make any plan adjustments, if necessary.
Notably, the health flexible spending account (FSA) maximum annual contribution increased $100, from $2,750 to $2,850 in 2022. If the employer’s plan allows the carryover of unused health FSA amounts, the maximum carryover limit rose to $570 (up from $550), although the COVID-19 relief provides employers the option of permitting employees to carry over their unspent 2021 FSA balances into 2022.
To read more about the clarifying guidance for health FSA and DCAP COVID-19 relief, click here.
Further, the 2022 DCAP maximum annual contribution returned to $5,000 (or $2,500 for married individuals filing separately). While in 2021, the American Rescue Plan Act (ARPA) increased the limit to $10,500 (or $5,250 for married individuals filing separately) due to the COVID-19 pandemic, these limits no longer apply for 2022.
Additionally, the IRS released the 2022 health savings account (HSA) contribution limits in May 2021. The individual HSA contribution limit increased to $3,650 (up from $3,600), and the family contribution limit increased to $7,300 (up $100 from $7,200).
Transportation fringe benefits also increased by $10 per month (up to $280 from $270).
Due to the COVID-19 pandemic, new laws have been implemented to provide financial relief and allow for certain benefits enhancements to an employer’s benefits plan – allowing mid-year election changes for Section 125 plans (Cafeteria Plans), extending the list of qualified medical expenses, increasing the Medical Flexible Spending Account (FSA) carry-over amount and eliminating employee cost sharing for COVID-19 related medical services. With these new rules, came the requirement to update plan documents with an amendment to reflect the changes. The deadline for the amendment is December 31, 2021.
Cafeteria Plan and FSA Election Changes
The relief allowing for changes to the Cafeteria Plan is voluntary. Employers may allow limited changes or allow all relief outlined in the IRS Guidance.
An employer may allow employees to prospectively make certain changes to their Cafeteria Plan elections. The options include making a new election if coverage was previously declined, revoking an existing election, making a new election in a different employer sponsored plan, or revoking an existing election if the employee attests they have other health coverage.
An employer’s medical and dependent care FSA plans can afford employees with similar changes such as prospectively revoking their election, making a new election, or decreasing or increasing an existing election.
For more detail on the subject, click here.
Medical FSA – NEW Qualifying Medical Expenses
The CARES Act (Coronavirus Aid, Relief and Economic Security Act) expanded the list of what was considered a qualifying expense that employees can purchase using a health savings account, medical FSA, or health reimbursement account. The definition of a qualified medical expense now includes certain over-the-counter medications and products, including menstrual products. Basically, more over-the-counter medications can be purchased without a prescription using one of these tax-advantaged accounts.
For more detail on the subject, click here.
Medical FSA Carry-Over
On November 10, 2021, the IRS released guidance which increased the limit for unused medical FSA carry-over amounts to a maximum of $570. This will be effective for plans beginning on or after January 1, 2022. Similar to the FSA election changes, permitting carry-overs is at the employer’s discretion.
For more detail on the subject, click here.
COVID-19 Services – Testing, Vaccine and Telemedicine
Insurers and group health plans are required to cover COVID-19 testing and any related services without cost-sharing (deductibles, copays or coinsurance). Insurers and health plans must cover the cost for FDA approved diagnostic testing during an office visit, urgent care center or emergency room at 100%.
For more detail on the subject, click here.
Employer Action Items
It’s recommended employers who adopted any or all of the available relief contact their FSA vendor and/or medical carrier about the plan amendments that are required by December 31, 2021.
Telehealth – HDHP
The CARES ACT changed how no cost telemedicine affected HSA eligibility for plans beginning January 1, 2020 through plans beginning on or before December 31, 2021. The rules were suspended during the time frame to allow those employees with High Deductible Health Plans to utilize telemedicine for non-preventative care without having a copay. However, for plans beginning January 1, 2022, the rules have been reinstated and require a “fair market” cost share for those with HDHP and HSAs.
For more information , please click here.
This newsletter is a summary of the new requirements and should be reviewed in whole for additional details that may or may not pertain to your company.