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“CADILLAC TAX” AND HEALTH INSURANCE INDUSTRY FEE DELAYED IN SPENDING BILL
On Jan. 22, President Trump signed into law a short-term spending bill (called a Continuing Resolution or “CR”) to reopen and fund the federal government for three weeks (through Feb. 8, 2018) after it was passed by both chambers of Congress earlier in the day. Attached to the bill are delays or suspensions of three taxes under the Affordable Care Act (ACA) and a six-year extension of the Children’s Health Insurance Program (CHIP).

The 40% Excise Tax or “Cadillac Tax” implementation is delayed two additional years, with a new effective date of Jan. 1, 2022. The Health Insurance Industry Fee is suspended for one year (2019) and the Medical Device Tax is suspended for two years (2018-2019).

Cadillac Tax The Cadillac Tax imposes a 40% excise tax on coverage in excess of certain thresholds. When originally enacted with a 2018 effective date, the thresholds were $10,200 for self-only and $27,500 for family coverage. The tax has since been delayed twice (including this delay), and the thresholds will be updated prior to the new Jan. 1, 2022 effective date.

Many employers, unions, insurers and industry groups have opposed the tax based on concerns around administrative and financial burdens for employers and adverse outcomes for employees. Cigna is a founding member and on the executive committee of The Alliance to Fight the 40, a coalition of public and private sector stakeholders that seeks a full repeal of the Cadillac Tax.

Health Insurance Industry Fee (a.k.a. Health Insurer Tax) The short-term spending bill also suspends the Health Insurance Industry Fee for 2019. This fee began in 2014
and only affects insured health plans. It was previously suspended for 2017, but went back into effect on Jan. 1, 2018.

Medical Device Tax Previously suspended for 2016 and 2017, the 2.3% excise tax on U.S. medical device revenues also restarted on Jan. 1, but will now remain suspended for two years through the end of 2019.

On December 22, 2017, the IRS issued Notice 2018-06, which provides a limited extension of time for employers to provide  2017 Forms 1095-C to individuals. It also extends good-faith transition relief from certain penalties for the 2017 reporting year. The deadline to provide Forms 1094-C and 1095-C to the IRS was not extended.

Q What was Extended?
A 2017 Forms 1095-C statements must be furnished to individuals by March 2, 2018 (rather than January 31,
2018). This extension of time also applies to carriers providing Forms 1095-B to individuals in insured plans.

Q Were the deadlines for reporting to the IRS extended?
A No. The 2017 Form 1094-C and all supporting Forms 1095-C (collectively, “the return”) is due to the IRS by April 2, 2018 if filing electronically (or February 28, 2018 if filing by paper). These deadlines were not extended as part
of the relief announced in Notice 2018-06. Per the Notice, the government determined there was no similar need
for additional time for employers to file these Forms with the IRS.  As a reminder, employers that file at least 250 Forms 1095-C must file electronically. The IRS encourages all filers to submit returns electronically.

Q Is there penalty relief?
A Yes.  Notice 2018-06 extends transition relief from penalties to reporting entities that have made good-faith efforts
to comply with the information reporting requirements for the 2017 reporting year, both for furnishing the Form
1095-C to individuals and for filing with the IRS. Specifically, this relief applies to missing or inaccurate taxpayer
identification numbers and dates of birth, as well as other information required on the return or statement.
No relief is available if the reporting entity does not make a good-faith effort to comply with the regulations or for
a failure to file a return or furnish a statement by the applicable due dates.  This relief does not absolve an employer from correcting an incorrect Form if so instructed by the IRS.

Q What if the submissions are late?
A Employers that do not comply with these due dates are subject to penalties. However, employers should still
furnish and file the forms and the IRS will take such furnishing and filing into consideration when determining
whether to abate penalties.

Q What if employees do not have Forms 1096-C (or Forms 1095-B from the carrier) before they file their tax
returns?
A Some taxpayers may not receive their Form 1095-C (or 1095-B from the carrier) by the time they are ready to file
their personal tax return for 2016. Taxpayers do not need to wait until they receive their Form 1095-C (or 1095-B)
to file their annual tax return, and may rely on other information from their employer (or carrier) for purpose of
filing individual taxes. Individuals need not send this information to the IRS when filing their returns but should
keep it with their tax records.

Q Will the IRS offer this relief for 2018 reporting?
A According to the Notice, the IRS does not anticipate extending this transition relief, either with respect to the due
date for furnishing the Form 1095-C to individuals and good-faith relief from certain penalties, to 2018 reporting.

 

On October 19, 2017, the IRS released cost of living adjustments for 2018 under various provisions of the Internal Revenue Code (the Code). Some of these adjustments may affect your employee benefit plans.

Cafeteria Plans
For plan years beginning in 2018, the dollar limitation under Section 125 for voluntary employee salary reductions for contributions to health flexible spending arrangements increases to $2,650.
The Affordable Care Act (ACA) amended Section 125 to place a $2,500 limitation under Section 125(i) on voluntary
employee salary reductions for contributions to health flexible spending arrangements, subject to inflation for plan years beginning after December 31, 2013.

Qualified Transportation Fringe Benefits
For calendar year 2018, the monthly exclusion limitation for transportation in a commuter highway vehicle (vanpool) and any transit pass (under Code Section 132(f)(2)(A)) and the monthly exclusion limitation for qualified parking expenses(under Section 132(f)(2)(B)) increases to $260.
The Consolidated Appropriations Act of 2016 permanently changed the pre-tax transit and vanpool benefits to be at parity with parking benefits.

Requirement to Maintain Minimum Essential Coverage
For calendar year 2018, the applicable dollar amount used to determine the penalty under Section 5000A(c), for failure to maintain minimum essential coverage remains $695.  This is also referred to as the individual mandate under the ACA. Any assessed penalty tax is the greater of $695 or 2.5% of modified adjusted gross income in
excess of the filing threshold and capped at the average premium amount for bronze coverage available on the
health insurance exchange. The penalty is collected from an individual’s tax refund due after filing their personal
income tax return with the IRS.

Highly Compensated
The compensation threshold for a highly compensated individual or participant (as defined by Code Section 414(q)(1)(B) for purposes of Section 125 nondiscrimination testing) again remains unchanged at $120,000 for 2018.
Under the cafeteria plan rules, the term highly compensated means any individual or participant who for the preceding plan year (or the current plan year in the case of the first year of employment) had compensation in
excess of the compensation amount as specified in Code Section 414(q)(1)(B).

Key Employee
The dollar limitation under Code Section 416(i)(1)(A)(i) concerning the definition of a key employee for calendar
year 2018 remains unchanged at $175,000.  For purposes of cafeteria plan nondiscrimination testing, a key employee is a participant who is a key employee within the meaning of Code Section 416(i)(1) at any time during the preceding plan year.

Non-Grandfathered Plan Cost-Sharing Limits
The 2018 maximum annual out-of-pocket limits for all non-grandfathered plans are $7,350 for individual coverage and $14,700 for family coverage.  These limits generally apply with respect to any essential health benefits (EHBs) offered under the group health plan. The final regulations established that starting in the 2016 plan year, the self-only annual limitation on cost sharing applies to each individual, regardless of whether the individual is enrolled in other than self-only coverage, including in a family HDHP.

Qualified Small Employer Health Reimbursement Arrangements
For tax years beginning in 2018, to qualify as a qualified small employer health reimbursement arrangement
(QSEHRA) under § 9831(d), the arrangement must provide that the total amount of payments and
reimbursements for any year cannot exceed $5,050 ($10,250 for family coverage).

Health Savings Accounts
As announced in May 2017, the inflation adjustments for health savings accounts (HSAs) for 2018 were provided
by the IRS in Rev. Proc. 2017-37.

Annual contribution limitation.
For calendar year 2018, the limitation on deductions for an individual with self-only coverage under a high
deductible health plan is $3,450. For calendar year 2018, the limitation on deductions for an individual with family
coverage under a high deductible health plan is $6,900.

High deductible health plan.
For calendar year 2018, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,350 for self-only coverageor $2,700 for family coverage, and the annual out-of pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,650 for self-only coverage or $13,300 for family coverage. Non-calendar year plans: In cases where the HDHP renewal date is after the beginning of the calendar year, any required changes to the annual deductible or out of-pocket maximum may be implemented as of the next renewal date.

Catch-up contribution.
Individuals who are age 55 or older and covered by a qualified high deductible health plan may make additional
catch-up contributions each year until they enroll in Medicare. The additional contribution, as outlined in Code
223(b)(3)(B), is $1,000 for 2009 and thereafter

Education Benefits Available For ALL Morrison Insurance Services Clients and Their Employees!

In keeping with Morrison Insurance Services’ commitment to providing increased value,
benefits and development opportunities for our clients’ employees, Morrison Insurance Services has formed an education benefits partnership with Brandman University. As part of this exciting new alliance, Brandman University has approved scholarship funding exclusively for ALL Morrison Insurance Services’ clients and their employees. If you have ever been interested in earning your associate, bachelor, master or doctoral degree, Brandman University has a 50-year legacy of blending academic excellence with progressive and innovative curriculum designed for adults.

For the 2017 New Year, Morrison Insurance Services’ clients and their employees interested in enrolling in select programs and campus locations are eligible to receive:

• Up to $6000 in scholarships reduced from bachelor’s degree programs
• Up to $3000 in scholarships reduced from graduate’s degree programs
• Up to $5600 in scholarships reduced from doctoral degree program (Ed. D.)
• First 6 months free for the MyPath program (must enroll by May 31, 2017)
• 10% scholarship for Brandman Certification or Certificate Programs for entire 2017 year

If you are interested in learning more about how Morrison Insurance Services can provide higher education benefits, contact Matt Venegas / Vice Chancellor of Community and Corporate Relations at mvenegas@brandman.edu and 949-330-3225.

***Special Offering for Brandman’s MyPath Program: If you are interested in specific information about the most flexible, self-paced and cost effective option for a BA, Business Administration or BS,  Information Technology we are offering a first 6 MONTHS FREE for this revolutionary option with the MyPath Program at just $5400 per year.