Welfare Benefit Plan ERISA News
November 2010

 
Heads Up!
Employers often charge their executives less for their health insurance than other employees pay. For plan years starting on or after September 23, 2010, the IRS can impose draconian penalties on those employers - an excise tax of $100 per day for each non-highly compensated employee. An employer with 100 employees, 5 of which are executives, that subsidizes its executives' premiums more than other employees, may be subject to a penalty of $9,500 per day. Additionally, employers must self-report violations on Form 8928. Under ERISA, a participant can sue to enforce the law, leaving an employer facing a lawsuit in addition to the excise tax for discriminating, plus penalties and interest for not turning itself in. Sources: IRS Notice 2010-63, US Code Section 4980D, PPACA ยง 2716 (download).
One-Year Reprieve
Employers were required to begin reporting the cost of employer-sponsored group health plans on their employees' Form W-2 for the tax year 2011. However, the Treasury Department and the IRS have decided to postpone this reporting requirement until 2012 because employers needed additional time to make changes to their payroll systems and procedures. The IRS noted that the W-2 reporting requirement is only for informational purposes, and the amounts that are reported will not be taxable. However, starting in 2018, a 40% excise tax will be imposed on health insurance premiums that exceed a certain amount (the so-called Cadillac plans). The government anticipates further guidance on implementation of this new reporting requirement before the end of this year. Source: U.S. DOL FAQs  
Update on Grandfathering
Last month, we featured an article on obtaining and maintaining grandfathered status for employer sponsored group health plans. In an updated set of frequently asked questions, regulators clarified that the grandfathered plan analysis applies on a plan-by-plan basis. In other words, if an employer sponsors an HMO, a PPO, and a POS, a design change that causes the loss of grandfathered status to one of the plans will not affect the status of the other two plans. Additionally, under previous guidance, the government said that changing carriers for an insured health care plan would automatically trigger the loss of grandfathered status. However, regulators are now considering the circumstances under which employers may change insurance carriers without plans losing grandfathered status. Source: Business Insurance
 
 
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"How ERISA Will Affect Your Group Insurance Clients in 2010"
 
 
© 2017 ERISAPros, LLC, All rights reserved. Information on ERISAPros' website, its newsletter, “News & Views,” and its blog, “ERISA Wonk,” is published as a general informational source. Information and articles are general in nature and are not intended to constitute legal or tax advice in any particular matter. Blog posts and comments reflect the personal views of their respective authors - not those of ERISAPros. Transmission of this information does not create an attorney-client relationship. ERISAPros, LLC is not a law firm and is not giving legal or tax advice. It does not warrant and is not responsible for errors or omissions in the content on its website or in its newsletters. ERISA is a complicated and confusing law. Summary Plan Descriptions (SPDs), Wrap Plan Documents, and Form 5500s require review and updating by qualified ERISA compliance professionals.

 

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