Archive for the ‘IRS’ Category

IRS Proposed Regulations Recognize Same Sex Marriage | Clemons Company

November 3rd, 2015 by Clemons

By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors

In June 2015, the Supreme Court ruled in Obergefell v Hodges that the 14th Amendment requires a state to license a marriage between two people of the same sex, and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out of state. The IRS has issued proposed regulations to Wedding ringsreflect that holding, which will impact married couples, employers, sponsors, and administrators of employee benefit plans and executors.

The Proposed rule would require that terms indicating sex, such as “husband,” “wife,” and “husband and wife,” will be interpreted in a neutral way to include same-sex and opposite-sex spouses. The Proposed rule would also recognize marriages for federal tax purposes if the marriage would be recognized by any state, possession, or territory of the United States. Similarly, marriages in foreign jurisdictions will be recognized if the marriage would be recognized in at least one state, possession, or territory of the United States.

The IRS also clarified that, under the Proposed rule, for federal tax purposes the term “marriage” does not include registered domestic partnerships, civil unions, or similar relationships recognized under state law. The Proposed rule stated that couples choose between relationship types deliberately, and for some there are benefits to being in a relationship that provides some but not all protections and responsibilities of marriage.

Comments for the Proposed rule are open through December 7, 2015.


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IRS Announces 2016 Retirement Plan Contribution Limits | Clemons Company

October 27th, 2015 by Clemons

On October 21, 2015, the Internal Revenue Service (IRS) announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2016. In general, the pension plan limitations will not change in 2016 because the increase in the cost-of-living index did not meet the statutory Pension Planthresholds that trigger their adjustment. The following is a summary of the limits for 2016.

For 401(k), 403(b), and most 457 plans and the federal government’s Thrift Savings Plans:

  • The elective deferral (contribution) limit remains unchanged at $18,000 for 2016.
  • The catch-up contribution limit for employees aged 50 and over who participate in these plans remains at $6,000 for 2016.

For individual retirement arrangements (IRAs):

  • The limit on annual contributions remains unchanged at $5,500 for 2016.
  • The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000 for 2016.

For simplified employee pension (SEP) IRAs and individual/solo 401(k)s:

  • Elective deferrals remains unchanged at $53,000 in 2016, based on an annual compensation limit of $265,000.
  • The minimum compensation that may be required for participation in a SEP remains unchanged at $600 for 2016.

For savings incentive match plan for employees (SIMPLE) IRAs:

  • The contribution limit on SIMPLE IRA retirement accounts remains unchanged at $12,500 for 2016.
  • The SIMPLE catch-up limit remains unchanged at $3,000 for 2016.

For defined benefit plans:

  • The basic limitation on the annual benefits under a defined benefit plan is unchanged at $210,000 for 2016.

Other changes:

  • Highly-compensated and key employee thresholds: The threshold for determining “highly compensated employees” remains unchanged at $120,000 for 2016; the threshold for officers who are “key employees” remains at $170,000 for 2016.
  • Social Security cost of living adjustment: In a separate announcement, the Social Security Administration stated that the taxable wage base will remain at $118,500 for 2016. In addition:
    • The maximum Old Age, Survivor and Disability Insurance (OASDI) tax remains at $7,347 for both employers and employees.
    • Hospitalization insurance (Medicare) tax continues to apply to all wages.

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IRS Notice on Minimum Essential Coverage Reporting | Panama City Employee Benefits

October 15th, 2015 by Clemons

By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors

Minimum essential coverage or “MEC” is the type of coverage that an individual must have under the Patient Protection and Affordable Care Act (ACA). Employers that are subject to the ACA’s shared responsibility provisions Minimum essential coverage(often called play or pay) must offer MEC coverage that is affordable and provides minimum value.

The IRS has issued Notice 2015-68 stating that it intends to propose regulations relating to reporting on MEC that would:

  • Provide that health insurance issuers must report coverage in catastrophic health insurance plans, as described in section 1302(e) of the Affordable Care Act, provided through an Affordable Insurance Exchange (Exchange, also known as a Health Insurance Marketplace),
  • Allow electronic delivery of statements reporting coverage under expatriate health plans unless the recipient explicitly refuses consent or requests a paper statement,
  • Allow filers reporting on insured group health plans to use a truncated taxpayer identification number (TTIN) to identify the employer on the statement furnished to a taxpayer, and
  • Specify when a provider of minimum essential coverage is not required to report coverage of an individual who has other minimum essential coverage.

The notice also seeks comments on the issues regarding soliciting taxpayer identification numbers of covered individuals, provides information on Medicaid and CHIP reporting for governments of United States possessions and territories, and provides that states sponsoring coverage under the Basic Health Program must report on that coverage.

Download our free ACA advisor, “IRS Notice on Minimum Essential Coverage Reporting” for detailed information related to:

  • Catastrophic coverage
  • Employer EIN
  • Expatriate plans
  • Supplemental coverage
  • Penalty relief


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IRS Releases Draft 2015 Instructions for 6055/6056 Reporting | Panama City Employee Benefits

September 14th, 2015 by Clemons

By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors

Under the Patient Protection and Affordable Care Act (ACA), individuals are required to have health insurance while applicable large employers (ALEs) are required to offer health benefits to their full-time employees. In order for the Internal Revenue Service (IRS) to verify that (1) individuals have the required minimum essential coverage, (2) IRS Filingindividuals who request premium tax credits are entitled to them, and (3) ALEs are meeting their shared responsibility (play or pay) obligations, employers with 50 or more full-time or full-time equivalent employees and insurers will be required to report on the health coverage they offer. Reporting will first be due early in 2016, based on coverage in 2015. All reporting will be for the calendar year, even for non-calendar year plans. Mid-size employers (those with 50 to 99 employees) will report in 2016, despite being in a period of transition relief in regard to having to offer coverage. The reporting requirements are in Sections 6055 and 6056 of the ACA. Draft instructions for both the 1094-B and 1095-B and the 1094-C and 1095-C were released in August 2015.

Draft 2015 Instructions

Following the June release of the draft forms, the IRS has issued draft 2015 instructions, which include a variety of changes from the 2014 instructions. For the 1094-C and 1095-C forms, the following important clarifications were provided: (1) who must file, (2) information on extensions and waivers, (3) how to correct returns, (4) an example and further information on the 98% offer method, (5) information on the new plan start month box, (6) multiemployer plan reporting, (7) offers of COBRA coverage, (8) reporting on employee premiums, and (9) break in service information. For the 1094-B and 1095-B forms there were fewer updates, with information regarding penalties for not reporting and how to file for an extension.

There is no target date for the final versions of either the forms or instructions, however it is generally anticipated they will be released in the fall of 2015.

Who Must File

The draft instructions clarify that all ALEs (employers with 50 or more employees) must file one more 1094-C forms (including the designated authoritative transmittal) and a 1095-C for each employee who was a full-time employee for any month of the year.

Extensions and Waivers

The draft instructions provide information on requesting extensions and waivers. Automatic 30-day extensions will be given to entities filing Form 8809, and no signature or explanation is needed. Form 8809 must be filed by the due date of returns in order to be granted the 30-day extension. Waivers may be requested with Form 8508, and are due at least 45 days before the due date of the information returns.

Corrections to Forms 1094-C and 1095-C

The draft instructions provided detailed instructions on correcting returns. Separate instructions are given for correcting authoritative 1094-C and 1095-C forms. Steps are given for a variety of mistakes, including incorrect full time employee counts, premium amounts, and covered individual information.

Extensions to Furnish Statements to Employees

Employers may request an extension of time to furnish statements to recipients by mailing a letter to the IRS with information including the reason for the delay. If the request is granted, the maximum extension that will be given is 30 days.


The draft instructions incorporate the new penalties for failing to file information returns, which are now $250 for each return that an employer fails to file. The IRS again noted that, for 2015 reporting, penalties will not be imposed for filing incorrect or incomplete information so long as the employer can show it made a good faith effort to comply with the requirements. The “grace period” does not apply to employers who fail to file or who file late.

98 Percent Offer Method

The draft instructions provided clarification of the 98 percent offer method. This method requires employers to certify that they offered affordable health coverage providing minimum value to at least 98 percent of their employees. The instructions clarify how to report on an employee in a limited non-assessment period. The instructions make clear that an individual in a limited non-assessment period does not count against the employer’s 98 percent calculation.

Plan Start Month Box

The draft instructions provide information on the new “plan start month” box, which is optional for 2015. This box is intended to provide the IRS with information used to calculate an individual’s eligibility for premium tax credits, which is based on the employer plan’s affordability, calculated by plan year.

Multiemployer (Union) Plan Relief

The 2014 instructions had told ALEs not to enter a code in Part II, Line 14 of Form 1095-C for coverage that is not actually offered, as the information must reflect the coverage offered to the employee. In 2015 ALEs with multiemployer plans are instructed to enter code 1H on line 14 for any month in which an employer enters code 2E on line 16. Code 2E indicates an employer is required to contribute to a multiemployer plan on behalf of the employee for that month, and is eligible for multiemployer interim relief. This is intended to assist with reporting challenges for multiemployer plans.

COBRA Coverage

The draft instructions provide information on how to handle offers of COBRA coverage. If COBRA is offered to a former employee upon termination, it is only reported as an offer of coverage if the employee enrolls in coverage. If the former employee does not enroll (even if his or her spouse or dependents enroll), employers should use code 1H (no offer of coverage) for any month in which the COBRA offer applies. If an employee is offered COBRA (due to loss of eligibility), that coverage is reported in the same way and with the same code as an offer of coverage to any other active employee.

Line 15 Calculations

The draft instructions clarify how to calculate employee contributions: by dividing the total employee share of the premium for the plan year by the number of months in the plan year to determine the monthly premium.

Break in Service

The draft instructions note that in certain circumstances an employee may have a break in service (which may be due to termination) during which he or she does not earn hours of service, but upon beginning service, is treated as a continuing employee rather than a new hire. The instructions clarify that the individual should only be treated as an employee during the break in service for reporting purposes if the individual remained an employee (was not terminated). An employee on unpaid leave would be treated as an employee for reporting purposes.

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IRS Issues Second Notice to Assist in Developing Cadillac Tax Regulations | Panama City Employee Benefits

August 31st, 2015 by Clemons

Posted by: Danielle Capilla

The IRS has issued its second notice regarding the upcoming implementation of the Patient Protection and Affordable Care Act’s (ACA) excise tax on high cost employer-sponsored health coverage, also known as the “Cadillac tax.” Cadillac taxBeginning in 2018, plans that provide coverage that exceeds a threshold will owe the tax. The threshold generally will be $10,200 for single benefits and $27,500 for benefits provided to an employee, retiree or member of a bargaining unit, and dependents. The tax is 40 percent of the value of coverage provided over that threshold level.

The IRS has begun the process of writing regulations that will provide details on how this tax will operate. On February 23, 2015, the IRS issued Notice 2015-16, which provides some information on the types of benefits that will count toward the tax.

On July 30, 2015, the agency released Notice 2015-52, which addresses IRS thoughts on: (1) the definitions of applicable coverage; (2) the determination of the cost of applicable coverage; and (3) the application of the dollar limit on the cost of applicable coverage to determine any excess benefit subject to the excise tax. The IRS is seeking public comment on all of these issues.

The public comments on the two Notices will be the final steps the agency takes prior to drafting and releasing the proposed regulations. There is currently no target date set for those regulations.

UBA’s free resource, “IRS Issues Second Notice to Assist in Developing Cadillac Tax Regulations” details the issues on which the IRS is seeking public comment, including:

  • Who is liable
  • Controlled groups
  • Tax calculation
  • Exclusion amounts attributable to the excise tax
  • HSAs, Archer MSAs, FSAs, and HRAs
  • Cost of coverage under FSAs with employer flex credits
  • Inclusions of self-insured coverage includible in income
  • Age and gender adjustments
  • Notice requirements
  • Payment forms


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IRS Provides Details on Reimbursing Premiums for Individual Health Coverage or Medicare Part B, Part D, or Medigap for Active Employees | Employee Insurance Panama City

March 19th, 2015 by Clemons

By Linda Rowings, Chief Compliance Officer at United Benefit Advisors

On February 18, 2015, the Internal Revenue Service (IRS) issued Notice 2015-17. This Notice addresses employer payment or reimbursement of individual premiums in light of the requirements of the Patient Protection and Affordable Care Act (PPACA). For many years, employers were permitted to reimburse premiums paid for individual coverage on a tax-favored basis, and many smaller employers adopted this type of an arrangement instead of sponsoring a group health plan. However, these “employer payment plans” frequently are unable to meet all of the PPACA requirements that took effect in 2014, and in a series of Notices and frequently asked questions (FAQs) the IRS has made it clear that an employer may not either directly pay premiums for individual policies or handing moneyreimburse employees for individual premiums on either an after-tax or pre-tax basis. This is the case whether payment or reimbursement is done through a health reimbursement arrangement (HRA), a Section 125 plan, a Section 105 plan, or another mechanism.

The new Notice reiterates this position. It also clearly states that an employer may increase an employee’s taxable wages to help cover the cost of health coverage if it chooses not to offer coverage, but the employer may not require an employee to purchase health insurance or certify that he has coverage in order to receive the bonus or other wage increase. If the bonus or increase is specifically designated as a premium reimbursement or it must be used for premiums, this would be an impermissible employer payment plan. Under these new rules, if the employer reimburses or directly pays premiums for individual coverage, on either a pre-tax or after-tax basis, it has created a noncompliant group health plan and the $100 per day per employee penalty would apply. Reimbursement and payment of group health premiums is still allowed.

Grace period for employer payment plans sponsored by small employers: The new Notice acknowledges that this new rule may be difficult for smaller employers to adjust to, and therefore the Notice provides that employers that had 50 or fewer full-time or full-time equivalent employees for 2014 will not be penalized for non-compliant premium payment arrangements that were in effect during 2014. Employers that have 50 or fewer full-time or full-time equivalent employees for 2015 will not be subject to penalties for January 1, 2015, through June 30, 2015. In addition to waiving the penalty, these smaller employers will not be required to file the Form 8928 on which non-compliance is expected to be self-reported. (Employer size is determined the same way it is under the employer-shared responsibility rule – the number of full-time and full-time equivalent employees is averaged over the preceding calendar year, although the employer may choose to average lives over a six consecutive month period, rather than over the whole year if it wishes to. The calendar year is used even for non-calendar year plans.) This grace period is limited to HRAs that simply reimburse individual premiums – non-integrated HRAs that reimburse other types of expenses remain impermissible and subject to excise taxes as of the start of the 2014 plan year.

Rules for reimbursing Medicare premiums: The Notice also states that employer payment or reimbursement of Medicare Part B or D premiums for active employees will be considered a non-compliant group health plan, subject to the $100 per employee per day penalties, unless the employer payment plan is integrated with a group health plan. A reimbursement program will be considered integrated if:

  • The employer offered a group health plan to the employee that offers minimum value (a plan with at least 60% actuarial value that covers physician and hospital care), even if the Medicare-eligible employee declined it;
  • The employee who receives premium payments is actually enrolled in Medicare Parts A and B;
  • The program provides that premium payments are only available to employees who are enrolled in Medicare Part A and either Part B or D; and
  • Premium payment or reimbursement is only for Medicare Part B or D premiums and excepted benefits, including Medigap premiums.

This rule applies to employers of all sizes. Employers need to remember that Medicare Secondary Payer rules prohibit an employer with 20 or more employees from in any way incentivizing an active employee to elect Medicare instead of the group health plan. Reimbursing premiums is generally considered an impermissible inducement, and therefore it is unlikely that as a practical matter employers with 20 or more employees are able to reimburse an active employee for Medicare or Medigap premiums. A retiree-only plan is not subject to these PPACA requirements, and therefore reimbursing Medicare premiums for retirees generally is allowed.

Although these Medicare integration requirements apply to employers of all sizes, small employers (those with fewer than 50 employees) that have been reimbursing Medicare premiums for active employees in a way that does not meet these requirements have a grace period until June 30, 2015, during which no penalties will apply.

Rules for reimbursing TRICARE expenses: The Notice also says that employers may reimburse expenses and premiums for employees covered by TRICARE through a health reimbursement arrangement only if the HRA is integrated with a group health plan. The integration requirements are similar to those that apply to Medicare (that is, group health coverage must be available, reimbursement or payment must be limited to employees enrolled in TRICARE, and reimbursement may only be for cost-sharing and excepted benefits, including TRICARE premiums. Prohibitions on incentivizing TRICARE-eligible employees to enroll in TRICARE that are similar to the Medicare Secondary Payer rules continue to apply.)

Rules for reimbursing premiums for 2-percent shareholders: Questions have been raised about how the employer payment plan rules apply to 2-percent shareholders in S corporations. S corporation shareholders have specific requirements for deducting insurance premiums, under which the reimbursed premium is included in the 2-percent shareholder’s income, but is deductible by the shareholder. The Notice provides that, until further notice and at least through 2015, an S corporation may pay for, or reimburse, individual premiums for employees who are 2-percent shareholders without causing the employer to be treated as a sponsor of a non-compliant group health plan to which the $100 per employee per day penalty applies. However, an S corporation cannot use a premium payment arrangement of this type for employees who are not 2-percent shareholders.

The Notice also clarifies that when determining if a plan covers more than one employee (which is what brings the PPACA requirements into play), if only one person is covered as the employee (and the employee’s spouse is covered as a dependent spouse and not as an employee), the plan is considered to cover only one employee. However, if an employer has multiple premium payment arrangements, it will be considered to have a single plan with multiple participants, even though one arrangement covers a 2-percent shareholder and the other covers a non-shareholder.

The prior guidance on employer payment plans is here: January 2013September 2013November 2014, and December 2014.

For information on other new IRS rules and commenting opportunities, download UBA’s latest PPACA Advisor, “February 2015 IRS Rules and Notices.”

Topics: ACA, PPACA, IRS, employer payment plans, Medicare Part B, premium reimbursement, Medigap, Medicare Part D, two-percent shareholder, TRICARE

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IRS Requests Input on the Cadillac Tax | Panama City Benefits Broker

March 17th, 2015 by Clemons

By Linda Rowings, Chief Compliance Officer at United Benefit Advisors

Beginning in 2018, plans that provide coverage that exceeds a threshold will owe an excise tax that is frequently referred to as the “Cadillac tax.” The threshold generally will be $10,200 for single benefits and $27,500 for benefits provided to an employee, retiree, or member of a bargaining unit and dependents. The tax is 40% of the value of cadcoverage provided over that threshold level.

The IRS is beginning the process of writing regulations that will provide details on how this tax will operate. On February 23, 2015, the IRS issued Notice 2015-16, which provides some information on the types of benefits that will count toward the tax. It has requested input on how best to value some of these benefits. It also said in the Notice that as part of the process it plans to finally provide guidance on how Consolidated Omnibus Budget Reconciliation Act (COBRA) premiums should be calculated.

The types of coverage likely to be included in the taxation process include:

  • Employer or employee contributions to health flexible spending accounts;
  • Employer or pre-tax employee contributions to Archer medical savings accounts;
  • Employer or pre-tax employee contributions to health savings accounts;
  • Plans maintained for civilian employees by the federal, state, or local governments;
  • On-site medical clinics (except for clinics that provide only de minimis medical care, such as first aid, immunizations, nonprescription pain killers, or work injuries to current employees without charge);
  • Retiree coverage;
  • Multiemployer plan coverage;
  • Executive physical programs;
  • Health reimbursement arrangements; and
  • Specified disease or fixed indemnity coverage if the cost of coverage is excluded or deducted from taxes.

Likely not to be included are:

  • Other forms of excepted benefit coverage such as accident or disability income insurance, workers’ compensation, auto-medical payment coverage, or liability coverage;
  • Long-term care insurance;
  • Dental and vision insurance covered by a separate policy (including both insured and self-insured coverage);
  • Specified disease or indemnity insurance when payment is taxable;
  • Employee after-tax contributions to Archer MSAs and to HSAs; and
  • Employee assistance programs that provided limited medical benefits.

The IRS notes that valuing an HRA can be difficult. It is considering valuing HRAs based either on the amount made newly available to an employee under an HRA each year, or on the total amount spent through HRAs each year by employees divided by the number of covered employees.

Comments are due by May 15, 2015. The IRS also said it expects to request comments on other aspects of the tax. This deliberate approach means that it is not likely that proposed, much less final, regulations will be released in the near future.

For the answers to the top 5 questions about the Cadillac Tax, read our recent blog.

For more information about Cadillac Tax inclusions and exclusions, cost of coverage calculations, changes in coverage and more, download UBA’s PPACA Advisor: Highlights of the Excise Tax on High-Cost Plans (the “Cadillac Tax”).

For information on other new IRS rules and commenting opportunities download UBA’s latest PPACA Advisor, “February 2015 IRS Rules and Notices.”


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