23
About the Webinar
• Lines Are Muted
• Use Arrow To
Minimize Menu
• View Slides in Full
Screen Mode
• Enter Questions for
Q&A Session
2
Today’s Speaker
Patrick Haynes Education Temple University School of Law, LL.M. Rutgers University School of Law, J.D. Rutgers University School of Business, M.B.A. Rutgers University College of Arts & Sciences, B.A.
As Crawford Advisors’ GC and Vice President –
Compliance, Mr. Haynes advises employers and plan
sponsors in a variety of health and welfare benefit plan
compliance matters, including, but not limited to, tax
qualification and other Internal Revenue Code issues,
PPACA, ERISA, COBRA and HIPAA portability, security
and privacy issues. Mr. Haynes lectures frequently and
has published many articles on health and welfare
benefit plan compliance topics.
Practice Areas
Employee Benefits & Exec
Comp, ERISA, COBRA,
HIPAA, §125, and §§ 105,
106, 129, 132
Admitted to Practice • U.S. Supreme Court • Federal and State
Courts of • New Jersey
• Pennsylvania • Connecticut • District of Columbia
3
Topics Raised by Your Questions 1 Wellness Programs:
• EEOC Final Regulations
• Wellness penalties / rewards / maximums
2 IRS Tax Guidance
• Taxes for wellness rewards
• Taxes for gift cards, gym memberships, etc.
3 SBCs - 2017 Updates & Changes Affecting Your Next
Renewal
4 HIPAA Privacy & Security
5 HSA, FSA, HRA – best approach
6 Grab Bag
4
Wellness Changes You’ve been reading our blog updates (E.g. May
17, 2016) and have been considering what these
wellness changes mean for your next renewal (for
renewals on or after 1/1/2017).
Changes for 1/1/2017 - EEOC Final ADA Rules-
relates only to the Employee (Wellness rules)
30% differential based upon the cost of self-only
coverage
• Limit is calculated based on self-only cost
(even if enrolled in family coverage)
5
Wellness Programs – EEOC Final GINA Rules
• EE + Spouse – capped at 30% of the cost of self-only coverage times two (2)
• ER may offer incentive in return for spouse’s information if: • Part of wellness program under GHP • Questions ask only about spouse’s past or current health status
(“manifestation of disease and disorder”) • No family medical history or genetic test results • No health or genetic information about employee’s children
• Maximum incentive does not exceed 30% of total cost of self-only coverage for each employee and spouse • Total combined incentive cannot exceed twice the amount of 30% of the
cost of self-only coverage (calculated in same manner as ADA rules); no apportionment (as was proposed)
6
Use of a New Notice – Warning Style Notice
to Employee Plan Participants
NOTICE REGARDING WELLNESS PROGRAM [Name of wellness program] is a voluntary wellness program available to all
employees. The program is administered according to federal rules permitting employer-sponsored wellness programs that seek to improve employee health or prevent disease, including the Americans with Disabilities Act of 1990, the Genetic Information Nondiscrimination Act of 2008, and the Health Insurance Portability and Accountability Act, as applicable, among others. If you choose to participate in the wellness program you will be asked to complete a voluntary
health risk assessment or “HRA” that asks a series of questions about your health-related activities and behaviors and whether you have or had certain medical conditions (e.g., cancer, diabetes, or heart disease). You will also be asked to complete a biometric screening, which will include a blood test for [be specific about the conditions for which blood will be tested]. You are not required to complete the HRA or to participate in the blood test or other medical
examinations.
However, employees who choose to participate in the wellness program will receive an incentive of [indicate the incentive] for [specify criteria]. Although you are not required to complete the HRA or participate in the biometric screening, only employees who do so will receive [the incentive].
7
Incentives
Incentives to an Employee who answers disability-related questions or undergoes medical examinations as part of a wellness program in order to earn a reward or avoid a penalty, are limited to the following:
• 30% of the total cost for self only coverage • 30% of the lowest cost self only coverage plan if multiple plans
are offered • 30% of the cost that a 40-year-old non-smoker would pay for
self-only coverage under the second lowest cost Silver Plan on the State or federal health care Exchange
• Spouses participation may not exceed 30% of the total cost of self-only coverage (same for EEs)
8
Tax Treatment of Wellness Rewards –
Cash, Cash-Equivalent Reward
• Coverage such as screenings and
other medical care excluded
• De minimis fringe benefits = t-shirts,
coffee cups
• Taxable benefits = Gift cards, PTO,
gym memberships, rewards 9
Example: ER’s FAQs to taxation of wellness rewards
Q: Why do I see Weight Watchers on my paycheck if the program is free?
A; The fees ABC-Employer pays to Weight Watchers on your behalf are considered taxable income
and, to offset these taxes, ABC-Employer provides you with additional income. You see this as a
separate line item on your paycheck stub. Your net pay isn’t affected.
Q: What **Wellness*** rewards are considered taxable?
A: The cumulative value of items purchased on **Wellness-Platform** with Wellness-Bucks, gym
subsidies and gym rebates is considered taxable.
Q: Do I pay taxes on **Wellness** rewards?
A: No. ABC-Employer pays the taxes for all *Wellness* rewards by adding money (gross up) to your
paycheck. Each month, ABC processes a gross up record (including rewards received by your
spouse/domestic partner) for *Wellness* rewards you received in the previous month. This ensures
that all taxes are properly reported and reflected on your paycheck.
Q: How is this reflected on my paycheck?
A: Taxable reward earnings are shown in the box Taxable Benefits under a description of *Wellness-
Earned-Points. This amount shows the taxable reward value. Under Hours and Earnings, an item with
the description of Gross Up *Wellness* Points lists the amount that offsets the taxes. This amount is 63%
of the taxable reward value listed in Taxable Benefits.
For example, Laura receives a gym subsidy of $35 each month. Her Taxable Benefit (*Wellness-Earned-
Points) is $35, and her Gross Up in Hours and Earnings is shown too. (Example: We’ll gross Laura up with
an additional $22.05 to account for the tax on $35 and the tax on the gross-up too, ensuring her “net”
pay isn’t affected).
10
QUIZ….
11
A. T-shirts
B. Screenings
C. Gift cards
D. Gym memberships
E. C and D
Which of the following are taxable to
your employees?
• IRS Chief Counsel Advice (CCA) memo confirms
taxability in 3 scenarios
• CCA 201622031 (April 14, 2016)
1. Cash wellness rewards are always taxable
• No de minimis exception
• Includes gift cards
2. Gym fees and other non-excludable wellness
rewards
• Payment of EE’s gym membership fees is a non-
excludable cash benefit that must be included in
income and subject to employment taxes
• Contrast with example of de minimis reward: T-shirt
Wellness Programs: Taxation of Rewards
12
3. No double-dipping • Imagine - salary reductions taken pre-tax as
“wellness program premiums,” and then returned to the EE as a “premium reimbursement” or “reward”
under the wellness program (e.g., for completing a health risk assessment) • CCA memo confirms that the return of these
amounts to the EE (even if called a wellness
program reward) is taxable income • IRS notes that Rev. Rul. 2002-3 previously
addressed the reimbursement of pretax
premiums, and applies here as well
Wellness Programs: Taxation of Rewards
Tip: There are still fly-by-night brokers/agents selling these plans today. Be careful! 13
• Final SBC template and related materials • Released April 2016; use for first open enrollment period
beginning on or after 4/1/2017
• Changes include: • Streamlined content, E.g., the removal of Q&A about
Coverage Examples, which reduced the template to five (5)
pages (SBC limit remains 8 pages/4 double-sided pages)
• An additional cost example for a foot fracture treated in an
emergency room.
• Updated claims/pricing data for the coverage example
calculator
• Adding disclosures about MEC and MV, including specific
language explaining significance
• Rewording part of the “Important Questions” section
• Underlining any uniform glossary terms used in SBC (may use
hyperlinks in electronic SBCs)
2017 Updates/Changes #3
14
• May 2016 FAQ clarifies flat-fee for electronic copies of
PHI
• Flat fee of up to $6.50 fee is one method for assessing
fees for electronic copies; it is not a limit on
calculating actual cost or average cost under the
other two permitted methods
• Can use different methods for different requests
• Remember (from March 2016 Q&A guidance):
• Costs are limited to: (1) labor to create and deliver
copies; (2) supplies; (3) labor for explanation or
summary (if agreed); and (4) postage
• Always must inform requestor in advance of
approximate fee for requested copies
HIPAA Privacy & Security: HHS FAQ
15
• Resolution agreements continue, including:
• Improper disclosure/disposal of x-rays, PHI: $750,000
• Provider sent x-rays to vendor without BAA
• Disclosure of patient PHI during TV filming: $2.2 million
• Hospital allowed TV crew “virtually unfettered”
access, filming patients without authorization
• Phase 2 audits have begun
• Phase 2 audit protocol released in April
• Updates to audit webpage, including link to pre-
screening questionnaire: http://www.hhs.gov/hipaa/for-
professionals/compliance-enforcement/audit/index.html
• Protocol topics include risk analyses, BAAs, access to
PHI, and periodic security updates
HIPAA Privacy & Security: Enforcement
16
• Written Risk Assessment? • Track all PHI created, received, stored, exchanged?
• HIPAA BAA with all vendors, carriers, claims payers,
consultants?
• HR or IT policies? HIPAA? GLBA? Other privacy regs? • Personnel Files
• Evidence of Insurability
• STD/FMLA paperwork
• Emails / Faxes from EEs, Spouses, Dependents • Payroll software
• Access to HR records
• HR-offices, PCs, printers, faxes – building and electronic
access? • Record retention (onsite & offsite and cloud-based)
HIPAA Privacy & Security: Preparation
17
http://www.crawfordadvisors.com/wp-content/uploads/2016/05/2017_HSA_limits.pdf
HSA, HCFSA, HRA – best approach?
18
2016: $2,600
For 2017, Non-ALEs (smaller
than 50 FTEs) – can offer a
stand-alone-HRA. See the new
21st Century Cures Act.
• Mental health parity
• DOL released non-exhaustive list of NQTLs (Non-
Quantitative Treatment Limitations) that could
violate MHPA/ MHPAEA provisions (if plan does not
impose similar limits on medical and surgical benefits)
• Examples • Preauthorization and pre-service notification
requirements • Fail-first, probability of improvement, and patient
noncompliance provisions
• Written treatment plan
• Residential, geographical, and licensure requirements
Grab Bag – including other Federal Mandates for GHPs
19
• Agency FAQs: Mental health parity; WHCRA
• Mental health parity (3 FAQs) • Parity in quantitative limitations and financial requirements
cannot be calculated across insurer’s book of business; must
be as plan-specific as possible (given available data)
• Explains plan documents that individuals can request (under
ERISA and MHPAEA disclosure rules) to assess a plan’s
MHPAEA compliance for NQTLs
• Confirms MHPAEA applies to medication-assisted treatment
for opioid use disorder
• WHCRA (1 FAQ)
• Clarifies scope of reconstructive surgery coverage • DOL Checklist for Mental Health Parity
• Warning Signs- Plan or Policy Non-Quantitative Treatment Limitations (NQTLs) that Require Additional Analysis to Determine Mental Health Parity Compliance
• https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/laws/mental-health-parity/warning-signs-plan-or-policy-nqtls-that-require-additional-analysis-to-determine-mhpaea-compliance.pdf
Other Federal Mandates for GHPs
20
• Code §4980H
• IRS announces 2017 indexed “affordability” percentage
• Rev. Proc. 2016-24 (Apr. 11, 2016)
• Increases to 9.69% for 2017 (statutory 9.5% was indexed
to 9.56% for 2015 and 9.66% for 2016) • Consider wellness rewards, smoking penalities, and opt-
out credits in your affordability math
• Estimator tools available for individuals and ERs - including
an ER-shared responsibility estimator • For 2016 and forward (does not reflect 2015 transition relief)
• Enables estimates of: ALE determination; maximum potential
penalties under subsections (a) and (b); and full-time EE status
under monthly and look-back methods
• Tool gives only an estimate (and isn’t perfect)
Grab bag…continued 2017 Updates/Changes
21
• Cafeteria plans: 3 letters affirm existing tax rules
• Health care FSAs cannot reimburse insurance
premiums
• No income exclusion for reimbursements to EE of
health premiums paid pre-tax by EE’s spouse
• Substantiation is required before HCFSA reimburses
expenses, and TPA’s request was reasonable
• Domestic partner benefits: Affirms existing tax rules
• Federal tax treatment has not changed
• Domestic partner is not treated as EE’s spouse
• Coverage provided to EE’s domestic partner is not
excludable from EE’s income unless partner qualifies
as EE’s tax dependent
IRS Information Letters (Federal Tax Rules)
22
If you have any further questions about the information discussed in this
webinar please feel free to contact us at:
Crawford Advisors, LLC
• HQ: 200 International Circle | Suite 4500 | Hunt Valley, MD 21031
• 1813 Sweetbay Drive | Suite 10 | Salisbury, MD 21804
• 201 King of Prussia Road | Suite 650 | Radnor, PA 19087
• 280 Granite Run Drive | Suite 250 | Lancaster, PA 17601
• 2975 W. Executive Parkway | Lehi, UT 84043
(800) 451-8519 | www.crawfordadvisors.com
Download Slides – www.crawfordadvisors.com/webinars/
Questions & Requests – [email protected]
Questions…
23
