From ChamberChoice

Information letters are furnished by the Internal Revenue Service’s (IRS) National Office in response to requests for general information by taxpayers, by congresspersons on behalf of constituents, or by congress-persons on their own behalf. The release of information letters has increased and is intended to increase public confidence that the tax system operates fairly and in an even-handed manner with respect to all taxpayers.

A recently released information letter addresses the interaction of COBRA and Medicare. Specifically, the information letter addressed the circumstances under which a covered spouse is entitled to extended COBRA continuation due to the covered employee’s Medicare entitlement prior to termination of employment. The letter provides that a covered employee becomes “entitled to Medicare benefits upon the effective date of enrollment in either part A or B, whichever occurs earlier.”

Background
Under the Consolidated Omnibus Budget Reconciliation Act (COBRA) a qualified beneficiary who loses group health plan coverage due to a qualifying event can be eligible to continue that coverage for a specific period of time.

A qualified beneficiary is an employee, the employee’s spouse and/or dependent. There are six events that if their occurrence causes a loss of coverage will trigger COBRA continuation. They are: termination of employment, a reduction in hours, death, divorce, loss of dependent status, and entitlement to Medicare. The general rule is that continuation coverage, which is paid for by the qualified beneficiary, is available for a period of 18 months. However, there are limited situations where coverage may be extended for up to 29 or 36 months.

Medicare and COBRA
Even though the rules provide that “entitlement to Medicare” is a reason for continuation coverage, this language often causes confusion. As a reminder, the Medicare entitlement must cause a loss of coverage. An employer that is subject to COBRA continuation, i.e. one that has 20 or more employees in the current or preceding calendar year, is also subject to another federal law governing a health care plan, and that is the Medicare Secondary Payer rules (MSP). The MSP rules provide that an employee (or spouse) that becomes entitled to Medicare cannot be terminated from the plan due to that entitlement. Therefore, just becoming Medicare eligible, such as by turning 65 years old, is not a reason for terminating an employee’s or spouse’s health care coverage.

However, Medicare entitlement will become an issue if there is a loss of coverage for an employee due to the qualifying event of a reduction in hours or termination of employment. The issue will be whether the employee becomes Medicare entitled before the qualifying event or after the qualifying event.

The information letter explains that the covered spouse of an employee can receive COBRA continuation coverage for 36 months if that employee became entitled to Medicare benefits before termination of employment or a reduction in hours. The 36-month period begins to run after the date the covered employee became entitled to Medicare coverage. If the employee becomes entitled to Medicare after the termination of employment or reduction in hours, then the spouse will be limited to a maximum COBRA continuation period of 18 months.

As a reminder, an employee who experiences a loss of coverage due to a qualifying event is always limited to a maximum COBRA continuation period of 18 months.

Conclusion
The information letter is not breaking new ground but serves as a reminder of one of the ways the maximum period of COBRA continuation coverage can be affected by a covered employee’s Medicare entitlement. As noted, information letters are often released relating to requests on general information. As always, an employer should consult with its counsel and trusted advisors to ensure that it is complying with the various laws when providing employee benefits.

From PA Chamber of Business & Industry

With 2017 drawing to a close and the legislature recessed until after the New Year, now is a great time for the PA Chamber to assess our accomplishments on behalf of our membership this year and look toward our ongoing goals for 2018.

We were happy to see a lot get accomplished in 2017 that will help to bolster business investment and job growth and move our economy forward – including a budget that didn’t impose the up to $1 billion in new tax hikes that were proposed during a months-long impasse. One of the PA Chamber’s top priorities also got addressed this year, with a public pension reform law that is a great first step to putting the state and public school employees’ retirement plans back on the track to sustainability. And we’ve seen success on the education front, too – first, with a new law that replaces an antiquated, seniority-based system for teacher furloughs with a performance-based model in order to keep the highest quality educators in the classroom; and second, with a $10 million boost to the popular and effective Educational Improvement Tax Credit program that allows businesses to contribute toward scholarships to help students in low-performing school districts attend schools that better suit their academic needs.

As much as we have to celebrate, a lot of work still lies ahead. One of our major goals in 2018 will be implementing a workers’ compensation drug formulary, in which doctors writing prescriptions that are not FDA-approved or otherwise demonstrated to be effective must at least explain why the prescription is needed for the patient. This legislative action is especially necessary as the state finds itself in the middle of an opioid abuse crisis. In fact, in a recent 25-state study, Pennsylvania ranked third compared to other states for opioid use among injured workers between the years 2012-2014, measuring 78 percent higher than the median study state. Formularies are a proven way to combat this problem. For example, in the three years after Ohio implemented its formulary in 2011, the number of opioid prescriptions declined by 38 percent and the number of workers’ compensation patients considered opioid dependent was reduced by half. The bottom line is this – Pennsylvania needs a drug formulary to help combat opioid abuse among injured workers and get them healthy and back to work as soon as we can (Note: The Columbia Montour Chamber formally supports this proposed legislation).

We also continue to monitor ongoing calls from some legislators to enforce an additional tax on the natural gas industry. This issue, which we continue to lead a coalition against because another severance tax would hurt Pennsylvania’s business climate and drive jobs and economic opportunities to other states in the shale play, was a major point of contention in the House in the waning days of 2017. It’s an issue we expect to be hotly debated as 2018 – a gubernatorial election year – approaches. Voters will see a marked difference between Gov. Wolf’s stance on this issue (he’s been calling for a severance tax since he first campaigned in 2014) and the four Republican gubernatorial candidates, one of whom he’ll ultimately face off against in the fall. There’s no doubt that the governor will call for a severance tax yet again when he gives his budget address in February, and rest assured that we’ll stay vigilant in our efforts to fight against it.

We will also be continuing our workforce efforts to address the growing jobs skills gap in the Commonwealth. In 2018, we are pleased to feature several workforce related events – including three new webinars that will take a deeper look at programs offered by the state; as well as innovative solutions created by various private sector companies to ensure there is a pipeline of qualified candidates ready for the in-demand jobs across the Commonwealth (Note: The Columbia Montour Chamber is also planning to roll out several workforce development initiatives in 2018).

These are just a few of the many issues we will be closely monitoring over the next year. For more information on our legislative agenda and our workforce efforts, visit our website at www.PAChamber.org.

From ChamberChoice and Small Business Pittsburgh

There are numerous employee benefits laws requiring compliance. Staying on top of compliance can be daunting, and it’s easy for something to fall through the cracks.

As you gear up for the New Year, take some time to review the pitfalls of employee benefits plan administration.

Smart Business spoke with Frances Horn, employee benefits compliance officer at JRG Advisors, about what to watch for with employee benefits compliance.

What’s the first step to compliance?
As employers gear up for 2018, they need to set some time aside to review their employee benefits plan administration. An employer may not be subject to every law, due to size or type of benefit offered, but no employer is not subject to any of the laws.

The major laws are the Employee Retirement Income Security Act of 1974 (ERISA), Consolidated Omnibus Budget Reconciliation Act (COBRA), Health Insurance Portability and Accountability Act of 1996 (HIPAA), Internal Revenue Code (IRC) Section 125, Family and Medical Leave Act of 1993, Medicare and the Affordable Care Act, with many having several compliance provisions.

How is failing to properly communicate with the plan participants a pitfall?
Under ERISA, plan administrators have disclosure and reporting requirements. Every plan may not be subject to these requirements, due to size or type of plan funding, but every plan subject to ERISA has disclosure or communicating requirements, such as distribution of a Summary Plan Description, Summary of Benefits and Coverage and numerous other notices.

Under COBRA, many administrators don’t recognize that there are several more notices required than just an election notice. These include, but are not limited to, an initial notice, notice of early termination and notice of unavailability of COBRA coverage. 

Other communications that remain the plan administrator’s responsibility are the Medicare Part D notice, HIPAA Special Enrollment Rights, Women’s Health and Cancer Rights Act notice and the Children’s Health Insurance Program Reauthorization Act of 2009 notice.

Where else do employers go wrong with plan administration?
Understanding who is actually the plan administrator can be another pitfall. With most laws governing employee benefits plans, the responsibility for compliance rests with the plan administrator, which is the person usually designated in the plan documents. If no such designation exists, the administrator role defaults to the plan sponsor, i.e. the employer.

While the plan administrator is responsible for disclosures to participants, plan document preparation and penalties for any noncompliance, many employers incorrectly feel these requirements fall with either the insurer or the insurance broker. Even for a self-insured plan, the third party administrator rarely agrees to be the plan administrator, but may assist with an employer’s documentation responsibility.

The pre-taxing of an employee’s premium contribution share is another pitfall. Many employers require that employees pay a portion of the premiums, particularly medical, dental and vision insurance coverage. To assist employees with these contributions, an employer will take the premium out of an employee’s compensation before applying taxes, thus the term pretax. An employee’s taxable wages for the Federal Insurance Contributions Act, federal withholding and state withholding are then reduced. This practice is often referred to as being a tax-favored treatment for employees.

The capability to pre-tax benefits comes under Section 125 of the IRC. The code requires that an employer establish its pretax plan, often referred to as a cafeteria plan, Section 125 plan or a premium-only-plan, in writing. Not meeting this requirement means a Section 125 plan doesn’t exist and that the employer is more than likely improperly taxing its employees’ benefits.

Numerous laws govern employee benefit plans. Ultimately the employer is responsible for complying with these laws and can be subject to costly penalties for noncompliance. As the year draws to a close, employers should review the governance of their benefits plans and determine if they need assistance to climb out of any pitfalls.