|Update from The Harrison Group, Inc.
Last week the IRS released three Notices 2014-49, 2014-55 and 2014-56. Following is a brief summary of each. You will be able to read each Notice in its entirety by clicking on the Notice numbers above.
The first release, Notice 2014-49 describes a proposed approach to determining if an employee is a full-time employee for purposes of Section 4980H of the Internal Revenue Code ins situations in which the the measurement period applicable to the employee changes. The Treasury Department and the IRS have invited comments on this approved approach. In addition, taxpayers can rely on this approach until further guidance is issued or until the end of calendar year 2016, whichever occurs first.
This release adds two election changes for Section 125 plans. These changes will only affect how an employee’s premium allocation is allowed to be reduced in a Section 125 Plan. This will not allow employees to change their election for their Healthcare Flexible Spending Account.
1. During open enrollment for the marketplace, an employee can revoke employer group health insurance coverage, revoke his or her pre-tax election to pay for group medical insurance premiums, and enroll in a marketplace plan. The employee must have coverage in the marketplace the day after they revoke their group insurance coverage. (For example, if an employee revokes group insurance coverage December 31, marketplace coverage must start January 1.)
2. If an employee was full time (30 hours or more per week) and had a reduction in hours to less than 30 hours per week but they are still eligible for health insurance, they can revoke the group health insurance and their premium allocation and enroll in a marketplace plan. This must occur no later than the first day of the second month following the date coverage is revoked. (For example if an employee revokes their health insurance coverage September 1 then they must have new coverage beginning November 1)
For these changes to occur, your client’s Section 125 Plan must be amended by the end of the Plan Year that begins in 2015. For example a July 1, 2014 plan must be amended by June 30, 2016.
This release increases the Patient-Centered Outcomes Research Institute (PCORI) fee for Plan Years that end between October 1, 2014 and October 1, 2015 from $2.00 to, believe it or not, $2.08. This fee, as you will recall, is imposed on Plan Sponsors (Employers) for each employee-participant in a Health Reimbursement Arrangement, Self-Funded Medical Plan and in rare cases a Healthcare Flexible Spending Account.
Please let us know if you have any questions.
Richard H. Miller, Jr., CPA, CFP